GABELLI ASSET MANAGEMENT INC, S-1/A, 1999-02-10

GABELLI ASSET MANAGEMENT INC
S-1/A, 1999-02-10
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1999.

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

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

AMENDMENT NO. 4

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

GABELLI ASSET MANAGEMENT INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

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

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

COPIES TO:

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

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

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

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

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

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

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

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

CALCULATION OF FILING FEE

<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE(1)(2)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock, par value $.001 per share...... $131,100,000 $38,401
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</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.

(2) Of the total registration fee, $33,925 was paid with the original filing of
the Registration Statement on April 24, 1998 covering $115,000,000 of
registered securities (based on a filing fee of $295 per $1,000,000 of
registered securities)and $4,476 was paid in connection with the filing of
this Amendment No. 4 covering an additional $16,100,000 of registered
securities (based on a filing fee of $278 per $1,000,000 of registered
securities).

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

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<PAGE> 2

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

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED FEBRUARY 10, 1999

PROSPECTUS

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

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

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

Prior to the Offering, there has been no public market for the Class A
Common Stock. It is currently estimated that the initial public offering price
per share of Class A Common Stock will be between $16.00 and $19.00. For a
discussion of the factors to be considered in determining the initial public
offering price, see "Underwriting." The Class A Common Stock has been approved
for listing, subject to official notice of issuance, on the New York Stock
Exchange under the symbol "GBL."

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

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

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

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

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

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

GABELLI & COMPANY, INC.
------------------------
The date of this Prospectus is , 1999.
<PAGE> 3

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

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

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

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

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

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

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

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

2
<PAGE> 4

PROSPECTUS SUMMARY

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

THE COMPANY

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

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

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

3
<PAGE> 5

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

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

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

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

ASSETS UNDER MANAGEMENT

BY PRODUCT TYPE
(DOLLARS IN MILLIONS)

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

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

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

4
<PAGE> 6

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

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

BUSINESS DESCRIPTION

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

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

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

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

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

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

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

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

5
<PAGE> 7

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

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

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

BUSINESS STRATEGY

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

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

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

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

6
<PAGE> 8

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

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

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

7
<PAGE> 9

THE OFFERING

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

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

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

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

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

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

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

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

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

RISK FACTORS

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

8
<PAGE> 10

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

General

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

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

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

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

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

9
<PAGE> 11

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

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

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

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

10
<PAGE> 12

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

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

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

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

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

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

11
<PAGE> 13

RISK FACTORS

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

CONTROL BY MR. GABELLI; CONFLICTS OF INTEREST

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

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

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

12
<PAGE> 14

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

DEPENDENCE ON MARIO J. GABELLI AND OTHER KEY PERSONNEL

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

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

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

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

13
<PAGE> 15

FUTURE INVESTMENT PERFORMANCE COULD REDUCE REVENUES AND OTHER INCOME

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

LOSS OF SIGNIFICANT SEPARATE ACCOUNTS COULD AFFECT REVENUES

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

COMPLIANCE FAILURES AND CHANGES IN REGULATION COULD ADVERSELY AFFECT THE COMPANY

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

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

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

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

14
<PAGE> 16

COMPETITION AND COMPETITORS WITH GREATER RESOURCES

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

RELIANCE ON THIRD-PARTY DISTRIBUTION PROGRAMS

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

FEE PRESSURES COULD REDUCE PROFIT MARGINS

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

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

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

DEPENDENCE ON INFORMATION SYSTEMS

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

15
<PAGE> 17

FAILURE TO ACHIEVE YEAR 2000 COMPATIBILITY WOULD CAUSE SIGNIFICANT LOSSES

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

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

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

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

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

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

16
<PAGE> 18

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

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

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

NO SPECIFIC USE OF PROCEEDS

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

IMMEDIATE AND SUBSTANTIAL DILUTION

Purchasers of Class A Common Stock in the Offering will experience
immediate dilution in net tangible book value of $13.83 per share, based on an
assumed initial public offering price of $17.50 per share. To the extent that
any options to be granted with respect to Class A Common Stock are exercised
after the vesting period expires, purchasers of Class A Common Stock will
experience additional dilution. See "Dilution" and "Management -- 1999 Stock
Award and Incentive Plan."

SHARES AVAILABLE FOR FUTURE SALE OR DISTRIBUTION

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

17
<PAGE> 19

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

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

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

18
<PAGE> 20

THE COMPANY

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

19
<PAGE> 21

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

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

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

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

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

20
<PAGE> 22

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the shares
of Class A Common Stock in the Offering at an assumed public offering price of
$17.50 per share (the midpoint of the range set forth on the cover page of this
Prospectus) after deducting underwriting commissions and discounts and the
estimated expenses of the Offering, are expected to be approximately $97 million
($112 million if the Underwriters' over-allotment option is exercised in full).
The Company intends to use the net proceeds from the Offering for general
corporate purposes, including working capital and the expansion of its business
through new investment product offerings, enhanced distribution and marketing of
existing investment products, upgraded management information systems and
strategic acquisitions as opportunities arise. At present, the Company has no
plans, arrangements or understandings relating to any specific acquisitions or
alliances. The Company currently does not intend to use any of the net proceeds
from the Offering to pay debt service on the $50 million payable to Mr. Gabelli
under the terms of his Employment Agreement.

DIVIDEND POLICY

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

21
<PAGE> 23

DILUTION

The pro forma net tangible book value of the Common Stock at September 30,
1998 after giving effect to the Formation Transactions, but before adjustment
for the Offering, was $13.1 million, or $0.54 per share. Net tangible book value
per share represents the amount of total tangible assets less total liabilities,
divided by the number of shares of Common Stock outstanding. After giving effect
to the sale of the 6,000,000 shares of Class A Common Stock in the Offering (at
an assumed initial public offering price of $17.50 per share (the midpoint of
the range set forth on the cover page of this Prospectus)), and applying the
estimated net proceeds therefrom as set forth in "Use of Proceeds," the pro
forma net tangible book value of the Company at September 30, 1998 would have
been $110.1 million, or $3.67 per share, calculated as follows:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share (1)................. $17.50
------
Pro forma net tangible book value per share before the
Offering............................................... $ 0.54
------
Increase in pro forma net tangible book value per share
attributable to the Offering........................... 3.13
------
As adjusted pro forma net tangible book value per share after the
Offering.......................................................... 3.67
------
Dilution in pro forma net tangible book value per share to new
investors (2)(3).................................................. $13.83
======
</TABLE>

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

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

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

Assuming the Underwriters' over-allotment option is exercised in full, the
pro forma net tangible book value at September 30, 1998 would be $124.9 million
or $4.04 per share, the immediate increase in pro forma net tangible book value
of shares owned by existing shareholders would be $3.50 per share, and the
immediate dilution to purchasers of shares of Class A Common Stock in the
Offering would be $13.46 per share.

The following table summarizes at September 30, 1998, after giving effect
to the sale of the shares of Class A Common Stock in the Offering at an assumed
initial public offering of $17.50 per share (the midpoint of the range set forth
on the cover page of this Prospectus), (i) the number and percentage of shares
of Common Stock issued by the Company, (ii) the total cash consideration paid
for the Common Stock, and (iii) the average price per share of Common Stock paid
by GFI prior to the Offering and by the public shareholders of Class A Common
Stock in the Offering:

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

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

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

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

22
<PAGE> 24

CAPITALIZATION

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

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-----------------------
GFI COMPANY
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Payable to related party.................................. $ -- $ 50,000
Notes payable............................................. 5,876 --
Payable to Sub-S shareholders............................. 14,642 --
Capital lease obligation.................................. 3,621 3,621
-------- --------
Total debt............................................. 24,139 53,621
Minority Interest........................................... 11,754 11,754
Stockholders' Equity:
Preferred Stock, $.001 par value; authorized 10,000,000
shares; none issued.................................... -- --
Common Stock $.01 par value; authorized 1,000,000 Shares;
issued and outstanding 196,537 shares.................. 2 --
Class A Common Stock, $.001 par value; authorized
100,000,000 shares; issued and outstanding 6,000,000
shares, as adjusted.................................... -- 6
Class B Common Stock, $.001 par value; authorized
100,000,000 shares; issued and outstanding 24,000,000
shares, as adjusted.................................... -- 24
Additional paid-in capital................................ 21,471 120,166
Retained earnings (accumulated deficit)................... 169,252 (8,366)
Notes receivable.......................................... (10,623) --
-------- --------
Total stockholders' equity............................. 180,102 111,830
-------- --------
Total capitalization.............................. $215,995 $177,205
======== ========
</TABLE>

23
<PAGE> 25

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

General

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

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

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

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

24
<PAGE> 26

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

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

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

25
<PAGE> 27

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

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

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

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

26
<PAGE> 28

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

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

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

OVERVIEW

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

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

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

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

27
<PAGE> 29

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

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

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

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

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

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

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

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

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

28
<PAGE> 30

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

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

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

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

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

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

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

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

29
<PAGE> 31

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

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

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

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

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

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

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

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

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

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<PAGE> 32

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

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

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

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

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

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

The net proceeds of the Offering to be received by the Company, which are
expected to be approximately $97 million ($112 million if the Underwriters'
overallotment option is exercised in full), will be used for general corporate
purposes, including working capital and the expansion of its business through
new
31
<PAGE> 33

investment product offerings, enhanced distribution and marketing of existing
investment products, upgraded management information systems and strategic
acquisitions as opportunities arise. At present, the Company has no plans,
arrangements or understandings relating to any specific acquisitions or
alliances. The Company currently does not intend to use any of the net proceeds
from the Offering to pay debt service on the $50 million payable to Mr. Gabelli
under the terms of his Employment Agreement.

RECENT ACCOUNTING DEVELOPMENTS

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

SEASONALITY AND INFLATION

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

YEAR 2000 PROGRAM

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<PAGE> 34

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

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

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

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

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

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<PAGE> 35

BUSINESS

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

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

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

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

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<PAGE> 36

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

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

ASSETS UNDER MANAGEMENT

BY PRODUCT TYPE
(Dollars in millions)

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

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

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

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<PAGE> 37

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

SUMMARY OF INVESTMENT PRODUCTS AND STRATEGIES

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

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

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

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

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<PAGE> 38

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

BUSINESS STRATEGY

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

37
<PAGE> 39

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

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

MUTUAL FUNDS

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

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

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

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

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

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<PAGE> 40

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

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

39
<PAGE> 41

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

40
<PAGE> 42

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

41
<PAGE> 43

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

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

42
<PAGE> 44

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

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

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

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

43
<PAGE> 45

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

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

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

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

SEPARATE ACCOUNTS

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

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

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

44
<PAGE> 46

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

PARTNERSHIPS

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

BROKERAGE AND MUTUAL FUND DISTRIBUTION

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

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

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

45
<PAGE> 47

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

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

COMPETITION

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

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

INTELLECTUAL PROPERTY

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

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<PAGE> 48

STAFF

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

PROPERTIES

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

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

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

REGULATION

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

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

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

47
<PAGE> 49

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

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

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

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

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

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

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

LEGAL MATTERS

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

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<PAGE> 50

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

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

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Mario J. Gabelli..... 56 Chairman of the Board, Chief Executive Officer and Chief
Investment Officer, Director
Stephen G. Bondi..... 40 Executive Vice President -- Finance and Administration
James E. McKee....... 35 Vice President, General Counsel and Secretary
Robert S. Zuccaro.... 42 Vice President and Chief Financial Officer
Douglas R.
Jamieson........... 44 Executive Vice President and Chief Operating Officer of
GAMCO
Bruce N. Alpert...... 47 Executive Vice President and Chief Operating Officer of
Funds Adviser
Charles C. Baum...... 57 Director
Richard B. Black..... 65 Director
Eamon M. Kelly....... 62 Director
Karl Otto Pohl....... 69 Director
</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 Funds Adviser and as the primary Portfolio
Manager for a significant majority of the Company's assets under management. Mr.
Gabelli also serves as a Governor of the American Stock Exchange, Chairman and
Chief Executive Officer of Lynch Corporation, a public company engaged in
multimedia, specialized transportation and manufacturing and as a director of
East/West Communications, Inc., a publicly-held communications services company.
In addition, Mr. Gabelli is the sole employee of MJG Associates, Inc., which
acts as a general partner of an equity fund, Gabelli Performance Partnership
L.P., and investment manager of various offshore investment companies and other
accounts. Prior to founding the Company, Mr. Gabelli served as a research
analyst at William D. Witter from 1975 through 1977 and as a Vice President of
Loeb, Rhoades & Co. from 1967 through 1975. Mr. Gabelli received a B.S. from
Fordham University and an M.B.A. from Columbia University Graduate School of
Business.

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

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

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

49
<PAGE> 51

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

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

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

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

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

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

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

50
<PAGE> 52

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

COMMITTEES OF THE BOARD OF DIRECTORS

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

COMPENSATION OF DIRECTORS

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

EXECUTIVE COMPENSATION

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

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<PAGE> 53

SUMMARY COMPENSATION TABLE

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

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

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

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

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

EMPLOYMENT AGREEMENTS

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

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

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

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<PAGE> 54

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

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

1999 STOCK AWARD AND INCENTIVE PLAN

In General

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

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

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

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

Stock Options and Appreciation Rights

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

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<PAGE> 55

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

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

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

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

Restricted Stock and Restricted Stock Units

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

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

Other Awards

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

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<PAGE> 56

Transferability

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

Amendment and Termination

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

Outstanding Awards

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

ANNUAL PERFORMANCE INCENTIVE PLAN

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

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

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

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

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

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

OWNERSHIP OF THE COMMON STOCK

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

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

THE FORMATION TRANSACTIONS

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

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

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

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

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

TRANSACTIONS WITH MR. GABELLI AND AFFILIATES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TRANSACTIONS WITH OTHER RELATED PARTIES

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

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

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

DESCRIPTION OF CAPITAL STOCK

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

COMMON STOCK

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

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

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

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

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

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

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

BUSINESS COMBINATION STATUTE

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

CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS

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

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

Number of Directors; Removal; Filling Vacancies

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

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

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<PAGE> 64

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

Special Meetings

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

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

Liability of Directors; Indemnification

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

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

Overview of Corporate Opportunity and Conflict of Interest Policies

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

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<PAGE> 65

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

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

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

Corporate Opportunity Policy

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

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

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

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

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

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<PAGE> 66

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

Conflict of Interests Policy

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

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

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

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

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

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

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<PAGE> 67

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

LISTING

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

TRANSFER AGENT AND REGISTRAR

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

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<PAGE> 68

SHARES ELIGIBLE FOR FUTURE SALE

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

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

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

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

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

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<PAGE> 69

UNDERWRITING

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

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

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

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

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

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

In connection with the Offering, the Underwriters may purchase and sell the
Class A Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Class A Common Stock; and
syndicate short positions involve the sale by the Underwriters of a greater
number of

68
<PAGE> 70

shares of Class A Common Stock than they are required to purchase from the
Company in the Offering. The Underwriters also may impose a penalty bid, whereby
selling concessions allowed to syndicate members or other broker-dealers in
respect of the Class A Common Stock sold in the Offering for their account may
be reclaimed by the syndicate if such Class A Common Stock is repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Class A Common
Stock, which may be higher than the price that might otherwise prevail in the
open market, and these activities, if commenced, may be discontinued at any
time. These transactions may be effected on the NYSE, in the over-the-counter
market or otherwise.

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

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

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

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

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

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

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<PAGE> 71

LEGAL MATTERS

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

EXPERTS

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

AVAILABLE INFORMATION

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

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

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

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<PAGE> 72

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

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

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

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

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

F-1
<PAGE> 73

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

F-2
<PAGE> 74

GABELLI FUNDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1995 1996 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Investment advisory and incentive fees..................... $ 77,302 $ 84,244 $ 89,684
Commission revenue......................................... 5,706 6,667 7,496
Distribution fees and other income......................... 6,302 7,257 8,096
-------- -------- --------
Total revenues........................................ 89,310 98,168 105,276
-------- -------- --------
EXPENSES
Compensation costs......................................... 39,384 41,814 45,260
Management fee............................................. 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>

See accompanying notes.
F-3
<PAGE> 75

GABELLI FUNDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

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

See accompanying notes.
F-4
<PAGE> 76

GABELLI FUNDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(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> 77

GABELLI FUNDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

See accompanying notes.
F-6
<PAGE> 78

GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997

A. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

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

Use of Estimates

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

Nature of Operations

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

Cash Equivalents

Cash equivalents consist of investments in money market mutual funds.

Investments in Securities

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

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

F-7
<PAGE> 79
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.

Intangible Assets

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

Minority Interest

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

Earnings Per Share

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

Business Segments

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

Distribution Costs

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

Comprehensive Income

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

F-8
<PAGE> 80
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

B. INVESTMENTS IN SECURITIES

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

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

C. INVESTMENTS IN PARTNERSHIPS AND AFFILIATES

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

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Total assets........................................... $125,059 $131,281
Total liabilities...................................... 16,630 1,458
Equity................................................. 108,429 129,823
Net earnings........................................... 8,364 12,073
Company's carrying value............................... 11,613 14,479
Company's income....................................... 1,944 3,065
</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 based
on a percentage of each partnership's net assets, excluding the capital accounts
of the general partners and related parties. For the years ended December 31,
1995, 1996 and 1997, the Company earned administrative fees of approximately
$836,000, $820,000 and $1,085,000, respectively.

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

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

F-9
<PAGE> 81
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

D. NOTES RECEIVABLE

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

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

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

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

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

E. INCOME TAXES

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

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

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

F-10
<PAGE> 82
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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

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

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

F. BANK LOAN AND NOTES PAYABLE

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

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

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

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

G. STOCKHOLDERS' EQUITY

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

F-11
<PAGE> 83
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

H. CAPITAL LEASE

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

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

<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.

I. COMMITMENTS

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

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

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

J. RELATED PARTY TRANSACTIONS

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

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

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

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

F-12
<PAGE> 84
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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

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

K. FINANCIAL REQUIREMENTS

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

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

L. ADMINISTRATION FEES

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

M. PROFIT SHARING PLAN AND INCENTIVE SAVINGS PLAN

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

N. DERIVATIVE FINANCIAL INSTRUMENTS

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

<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>

F-13
<PAGE> 85
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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

O. PCS LICENSES

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

P. SUBSEQUENT EVENTS (UNAUDITED)

Loan Guarantee

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

Sale of PCS Licenses

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

Reorganization and Initial Public Offering (Formation Transactions)

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

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

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

Stock Award and Incentive Plan

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

F-14
<PAGE> 86
GABELLI FUNDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

restricted stock units, stock awards, dividend equivalents and other stock or
cash based awards. A maximum of 1,500,000 shares Class A Common Stock has been
reserved for issuance and the Plan provides that the terms and conditions of
each award are to be determined by a committee of the Board of Directors charged
with administering the Plan. Under the Plan, the committee may grant either
incentive or nonqualified stock options with a term not to exceed ten years from
the grant date and at an exercise price that the committee may determine.
Options granted under the Plan vest three years from the date of grant and
expire after ten years.

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

F-15
<PAGE> 87

GABELLI FUNDS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

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

See accompanying notes.
F-16
<PAGE> 88

GABELLI FUNDS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION

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

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

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

See accompanying notes.
F-17
<PAGE> 89

GABELLI FUNDS, INC. AND SUBSIDIARIES

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

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

See accompanying notes.
F-18
<PAGE> 90

GABELLI FUNDS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

F-19
<PAGE> 91

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

A. BASIS OF PRESENTATION

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

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

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

B. NOTES RECEIVABLE

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

F-20
<PAGE> 92

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

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

F-21
<PAGE> 93

GABELLI FUNDS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31, 1997

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

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

F-22
<PAGE> 94

GABELLI FUNDS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME

NINE MONTHS ENDED SEPTEMBER 30, 1998

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

F-23
<PAGE> 95

GABELLI FUNDS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

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

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

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

(c) To record additional taxes related to conversion from an "S" corporation to
a "C" corporation and the effect of other pro forma adjustments.
F-24
<PAGE> 96

GABELLI FUNDS, INC. AND SUBSIDIARIES

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

A. REORGANIZATION AND INITIAL PUBLIC OFFERING

Reorganization and Initial Public Offering

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

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

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

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

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

B. STOCK AWARD AND INCENTIVE PLAN

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

F-25
<PAGE> 97
GABELLI FUNDS, INC. AND SUBSIDIARIES

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

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

<TABLE>
<S> <C>
Risk-free interest rate..................................... 5%
Dividend yield.............................................. 0%
Volatility.................................................. 30%
Weighted average expected life.............................. 8 year
</TABLE>

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

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

C. EARNINGS PER SHARE

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

F-26
<PAGE> 98

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

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 12
Special Note Regarding Forward-Looking
Information......................... 18
The Company........................... 19
Use of Proceeds....................... 21
Dividend Policy....................... 21
Dilution.............................. 22
Capitalization........................ 23
Selected Historical and Pro Forma
Financial Data...................... 24
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 27
Business.............................. 34
Management............................ 49
Ownership of the Common Stock......... 56
Certain Relationships and Related
Transactions........................ 56
Description of Capital Stock.......... 60
Shares Eligible for Future Sale....... 67
Underwriting.......................... 68
Legal Matters......................... 70
Experts............................... 70
Available Information................. 70
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

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

6,000,000 SHARES

[GABELLI LOGO]

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

PROSPECTUS

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

MERRILL LYNCH & CO.

SALOMON SMITH BARNEY

GABELLI & COMPANY, INC.

, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 99

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........................................ $ 38,401
NASD fee.................................................... 13,610
Listing fee................................................. 115,000
Accounting fees and expenses................................ 750,000
Legal fees and expenses..................................... 400,000
Printing and engraving...................................... 375,000
Transfer Agent's fees....................................... 25,000
Blue Sky fees and expenses (including counsel fees)......... 10,000
Miscellaneous expenses...................................... 22,989
----------
Total............................................. $1,750,000
==========
</TABLE>

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.

The form of Underwriting Agreement 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

II-1
<PAGE> 100

the Securities Act, or will contribute to payments which the Underwriters or any
such controlling persons may be required to make in respect thereof.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Immediately prior to the closing of the Offering, the Company will issue
24,000,000 shares of its Class B Common Stock to GFI and two of GFI's
subsidiaries in exchange for substantially all of the operating assets and
liabilities of GFI relating to its institutional and retail asset management,
mutual fund advisory, underwriting and brokerage business. Such transaction will
not be registered in reliance upon the exemption provided by Section 4(2) under
the Securities Act of 1933.

ITEMS 16. EXHIBITS

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>

+1.1 -- Form of Purchase Agreement.

+3.1 -- Certificate of Incorporation of the Company.

+3.2 -- Bylaws of the Company.
3.3 -- Restated Certificate of Incorporation of the Company.
3.4 -- Amended Bylaws of the Company.

+4.1 -- Specimen of Class A Common Stock Certificate.
5.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP,
regarding legality of securities being registered.
10.1 -- Management Services Agreement between the Company and GFI
dated as of February 9, 1999.

+10.2 -- Form of Tax Indemnification Agreement between the Company
and GFI.
10.3 -- Form of Lock-Up Agreement between the Company and GFI.

+10.4 -- Form of Gabelli Asset Management Inc. 1999 Stock Award and
Incentive Plan.

+10.5 -- Form of Gabelli Asset Management Inc. 1999 Annual
Performance Incentive Plan.
10.6 -- Employment Agreement between the Company and Mario J.
Gabelli.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP.

+24.1 -- Powers of Attorney (included on page II-4 of this
Registration Statement).

+27.1 -- Financial Data Schedule.
</TABLE>

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

+ Previously filed.

(b) Financial Statement Schedules:

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

ITEM 17. UNDERTAKINGS.

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

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

II-2
<PAGE> 101

incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any 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> 102

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 4 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Rye,
State of New York, on February 9, 1999.

Gabelli Asset Management Inc.

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

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

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

* Chairman of the Board, February 9, 1999
- --------------------------------------------------- Chief Executive Officer
Mario J. Gabelli and Chief Investment Officer
(Principal Executive Officer)

/s/ Robert S. Zuccaro Vice President and Chief February 9, 1999
- --------------------------------------------------- Financial Officer (Principal
Robert S. Zuccaro Financial Officer and
Principal Accounting Officer)

* Director February 9, 1999
- ---------------------------------------------------
Charles C. Baum

* Director February 9, 1999
- ---------------------------------------------------
Richard B. Black

* Director February 9, 1999
- ---------------------------------------------------
Eamon M. Kelly

Director February 9, 1999
- ---------------------------------------------------
Karl Otto Pohl
</TABLE>

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

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

II-4
<PAGE> 103

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ------- DESCRIPTION OF EXHIBIT
<C> <C> <S>

+1.1 -- Form of Purchase Agreement.

+3.1 -- Certificate of Incorporation of the Company.

+3.2 -- Bylaws of the Company.
3.3 -- Restated Certificate of Incorporation of the Company.
3.4 -- Amended Bylaws of the Company.

+10.2 -- Form of Tax Indemnification Agreement between the Company
and GFI.
10.3 -- Form of Lock-Up Agreement between the Company and GFI.

+10.4 -- Form of Gabelli Asset Management Inc. 1999 Stock Award and
Incentive Plan.

+24.1 -- Powers of Attorney (included on page II-4 of this
Registration Statement).

+27.1 -- Financial Data Schedule.
</TABLE>

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

+ Previously filed.

<PAGE> 1
Exhibit 3.3

RESTATED CERTIFICATE OF INCORPORATION

ALPHA G, INC.

Under Section 807 of the Business Corporation
Law of the State of New York (the "BCL")

The undersigned corporation certifies that:

(1) The name of the corporation is Alpha G, Inc. (hereinafter
sometimes called the "Corporation").

(2) The Corporation's certificate of incorporation (the "Certificate
of Incorporation") was originally filed with the Department of State of the
State of New York on April 22, 1998.

(3) The text of the Certificate of Incorporation is hereby amended as
follows:

(A) Article 1 of the Certificate of Incorporation is amended to
change the name of the Corporation to Gabelli Asset Management Inc.

(B) Article 4 of the Certificate of Incorporation is amended to
change the number and kind of authorized shares of common stock of the
Corporation from 1,000 shares of common stock, par value $.001 per share, to
200,000,000 shares of common stock, par value $.001, consisting of the
following: (i) 100,000,000 shares of such common stock will be designated as
Class A Common Stock, par value $.001 per share, with the Class A Common Stock
having one vote per share in all matters on which the common stock is entitled
to vote and (ii) 100,000,000 shares of such common stock will be designated as
Class B Common Stock, par value $.001 per share, with the Class B Common Stock
having ten votes per share in all matters on which the common stock is entitled
to vote. The 1,000 shares of common stock issued and outstanding as of the date
of this Restated Certificate of Incorporation will change from 1,000 shares of
common stock to 1,000 shares of Class B Common Stock, which change shall become
effective at the time when this Restated Certificate of Incorporation becomes
effective.
<PAGE> 2
(C) Article 5 of the Certificate of Incorporation is amended to
change the number of authorized shares of preferred stock of the Corporation
from 1,000 shares to 10,000,000 shares. Article 5 is also amended to authorize
the Board of Directors of the Corporation to (i) establish and designate series
of preferred stock, (ii) issue shares of preferred stock in a series, and (iii)
fix the number of shares of preferred stock in a series and the relative rights,
preferences and limitations thereof, as well as the variations in the relative
rights, preferences and limitations among different series of the preferred
stock.

(D) Article 7 of the Certificate of Incorporation is amended to
provide that any vacancies in the Board of Directors will be filled only by an
affirmative vote of the majority of the remaining directors and that after the
occurrence of certain triggering events, a director may be removed only for
cause and with the affirmative vote of the holders of at least 80% of the voting
power of the Voting Stock (as defined herein).

(E) A new Article 9 is added to the Certificate of Incorporation
to establish the corporate opportunity and conflicts of interest policies of the
Corporation.

(4) The text of the Certificate of Incorporation, as amended as
described in Paragraph (3) above, is restated to read in its entirety as
follows:

1. The name of the corporation is Gabelli Asset Management Inc.
(hereinafter sometimes called the "Corporation").

2. The purposes for which it is formed are to engage in any lawful
act or activity for which corporations may be organized under the
Business Corporation Law of the State of New York ("BCL") provided that
the Corporation is not formed to engage in any act or activity which
requires the consent or approval of any state official, department,
board, agency or other body, without such consent or approval first
being obtained.

It is hereby expressly provided that the foregoing shall not be
held to limit or restrict in any manner the powers of this Corporation;
and that this Corporation may do all and every thing necessary,
suitable and appropriate for the exercise of any of its general powers.

2
<PAGE> 3
3. The office of the Corporation in the State of New York shall be
located in the County of Westchester.

4. The aggregate number of shares of common stock which the
Corporation shall have authority to issue is 200,000,000 shares, each
share having a par value of $.001 per share, of which 100,000,000
shares shall be designated as "Class A Common Stock" (the "Class A
Common Stock") and 100,000,000 shares shall be designated as "Class B
Common Stock" (the "Class B Common Stock"). The holders of the Class A
and Class B Common Stock shall have no preemptive rights to subscribe
for any shares of any class of stock of the Corporation whether now or
hereafter authorized.

The powers, preferences and rights, and the qualifications,
limitations and restrictions of each class of the common stock are as
follows:

(a) Voting. (1) At each annual or special meeting of
shareholders, in the case of any written consent of shareholders
in lieu of a meeting and for all other purposes, each holder of
record of shares of Class A Common Stock on the relevant record
date shall be entitled to one (1) vote for each share of Class A
Common Stock standing in such person's name on the stock transfer
records of the Corporation, and each holder of record of Class B
Common Stock on the relevant record date shall be entitled to ten
(10) votes for each share of Class B Common Stock standing in such
person's name on the stock transfer records of the Corporation.
Except as otherwise required by law and subject to the rights of
holders of any series of Preferred Stock of the Corporation that
may be issued from time to time, the holders of shares of Class A
Common Stock and of shares of Class B Common Stock shall vote as a
single class on all matters with respect to which a vote of the
shareholders of the Corporation is required under applicable law,
the Certificate of Incorporation, or the By-Laws of the
Corporation, or on which a vote of shareholders is otherwise duly
called for by the Corporation, including, but not limited to, the
election of directors, matters concerning the sale, lease or
exchange of all or substantially all of the property and assets of
the Corporation, mergers or consolidations with another entity or
entities, dissolution of the

3
<PAGE> 4
Corporation and amendments to the Certificate of Incorporation
of the Corporation. Except as provided in this Article 4 or by
applicable law, whenever applicable law, the Certificate of
Incorporation of the Corporation or the By-Laws of the
Corporation provide for the necessity of an affirmative vote
of the shareholders entitled to cast at least a "majority (or
any other greater percentage) of the votes which all
shareholders are entitled to cast thereon," or a "majority (or
any other greater percentage) of the Voting Stock," or
language of similar effect, any and all such language shall
mean that the holders of shares of Class A Common Stock and
the holders of shares of Class B Common Stock shall vote as
one class and that such majority (or any other greater
percentage) consists of a majority (or such other greater
percentage) of the total number of votes entitled to be cast
in accordance with the provisions of this Article 4.

(2) Neither the holders of shares of Class A Common
Stock nor the holders of shares of Class B Common Stock shall have
cumulative voting rights.

(b) Dividends; Stock Splits. Subject to the rights of the
holders of shares of any series of Preferred Stock, and subject to
any other provisions of the Certificate of Incorporation of the
Corporation, holders of shares of Class A Common Stock and shares
of Class B Common Stock shall be entitled to receive such
dividends and other distributions in cash, stock or property of
the Corporation as may be declared thereon by the Board of
Directors of the Corporation (the "Board of Directors") from time
to time out of assets or funds of the Corporation legally
available therefor. If at any time a dividend or other
distribution in cash or other property (other than dividends or
other distributions payable in shares of common stock or other
voting securities or options or warrants to purchase shares of
common stock or other voting securities or securities convertible
into or exchangeable for shares of common stock or other voting
securities) is paid on the shares of Class A Common Stock or
shares of Class B Common Stock, a like dividend or other
distribution in cash or other property shall also be paid on
shares of Class B

4
<PAGE> 5
Common Stock or shares of Class A Common Stock, as the case may
be, in an equal amount per share. If at any time a dividend or
other distribution payable in shares of common stock or options or
warrants to purchase shares of common stock or securities
convertible into or exchangeable for shares of common stock is
paid on shares of Class A Common Stock or Class B Common Stock, a
like dividend or other distribution shall also be paid on shares
of Class B Common Stock or Class A Common Stock, as the case may
be, in an equal amount per share; provided that, for this purpose,
if shares of Class A Common Stock or other voting securities, or
options or warrants to purchase shares of Class A Common Stock or
other voting securities or securities convertible into or
exchangeable for shares of Class A Common Stock or other voting
securities, are paid on shares of Class A Common Stock and shares
of Class B Common Stock or voting securities identical to the
other securities paid on the shares of Class A Common Stock
(except that the voting securities paid on the Class B Common
Stock may have up to ten (10) times the number of votes per share
as the other voting securities to be received by the holders of
the Class A Common Stock) or options or warrants to purchase
shares of Class B Common Stock or such other voting securities or
securities convertible into or exchangeable for shares of Class B
Common Stock or such other voting securities, are paid on shares
of Class B Common Stock, in an equal amount per share of Class A
Common Stock and Class B Common Stock, such dividend or other
distribution shall be deemed to be a like dividend or other
distribution. In the case of any split, subdivision, combination
or reclassification of shares of Class A Common Stock or Class B
Common Stock, the shares of Class B Common Stock or Class A Common
Stock, as the case may be, shall also be split, subdivided,
combined or reclassified so that the number of shares of Class A
Common Stock and Class B Common Stock outstanding immediately
following such split, subdivision, combination or reclassification
shall bear the same relationship to each other as did the number
of shares of Class A Common Stock and Class B Common Stock
outstanding immediately prior to such split, subdivision,
combination or reclassification.

5
<PAGE> 6
(c) Liquidation, Dissolution, etc. In the event of any
liquidation, dissolution or winding up (either voluntary or
involuntary) of the Corporation, the holders of shares of Class A
Common Stock and the holders of shares of Class B Common Stock
shall be entitled to receive the assets and funds of the
Corporation available for distribution, after payments to
creditors and to the holders of any Preferred Stock of the
Corporation that may at the time be outstanding, in proportion to
the number of shares held by them, respectively, without regard to
class.

(d) Mergers, etc. 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 shares of Class A Common Stock or the holders of
shares of Class B Common Stock, the holders of shares of Class A
Common Stock and the holders of shares of Class B Common Stock
shall receive the same consideration on a per share basis;
provided 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 shares of Class B Common Stock may
receive, on a per share basis, voting securities with up to ten
(10) times the number of votes per share as those voting
securities to be received by the holders of shares of Class A
Common Stock (or options or warrants to purchase, or securities
convertible into or exchangeable for, voting securities with up to
ten (10) times the number of votes per share as the voting
securities issuable upon exercise of the options or warrants to be
received by the holders of the shares of Class A Common Stock, or
into which the convertible or exchangeable securities to be
received by the holders of the shares of Class A Common Stock may
be converted or exchanged).

(e) Power to Sell and Purchase Shares. Subject to applicable
law, the Corporation shall have the power to issue and sell all or
any part of any shares of any class of stock herein or hereafter
authorized to such persons, and for such consideration, as the
Board of Directors shall from time to time, in its discretion,
de-

6
<PAGE> 7
termine, whether or not greater consideration could be received
upon the issue or sale of the same number of shares of another
class, and as otherwise permitted by law. Subject to the
requirements of applicable law, the Corporation shall have the
power to purchase any shares of any class of stock herein or
hereafter authorized from such persons, and for such
consideration, as the Board of Directors shall from time to time,
in its discretion, determine, whether or not less consideration
could be paid upon the purchase of the same number of shares of
another class, and as otherwise permitted by law.

(f) Rights Otherwise Identical. Except as otherwise expressly
set in this Article 4, the rights of the holders of Class A Common
Stock and the rights of the holders of Class B Common Stock shall
be in all respects identical.

5. The aggregate number of shares of preferred stock which the
Corporation shall have authority to issue is 10,000,000 shares, each
share having a par value of $.001 per share (the "Preferred Stock").
The holders of the Preferred Stock shall have no preemptive rights to
subscribe for any shares of any class of stock of the Corporation
whether now or hereafter authorized.

The Board of Directors is authorized to establish and designate
series of the Preferred Stock, to issue shares of the Preferred Stock
in series and to fix the number of shares in a series, the rights,
preferences and limitations of each series and the variations in the
relative rights, preferences and limitations as between series. The
Board of Directors may determine for each series:

(a) the number of shares constituting that series and the
distinctive designation of that series;

(b) the dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of payments of
dividends on shares of that series;

7
<PAGE> 8
by law, and, if so, the terms of such voting rights;

(d) whether that series shall have conversion or exchange
privileges or be subject to conversion or exchange obligations,
and, if so, the terms and conditions of such conversion or
exchange, including provision for adjustment of the conversion or
exchange rate in such events as the Board of Directors shall
determine;

(e) whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the manner of selecting shares for
redemption if less than all shares are to be redeemed, the date or
dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;

(f) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the
terms and amount of such sinking fund;

(g) the right of the shares of that series to the benefit of
conditions and restrictions upon the creation of indebtedness of
the Corporation or any subsidiary, upon the issue of any
additional shares (including additional shares of such series or
any other series) and upon the payment of dividends or the making
of other distributions on, and the purchase, redemption or other
acquisition by the Corporation or any subsidiary of any
outstanding shares of the Corporation;

(h) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, and the relative rights of priority, if any, of
payment of shares of that series;

(i) any restrictions on transfers of shares of that series;
and

(j) any other relative, participating, optional or other
special rights, qualifications, limitations or restrictions of
that series.

8
<PAGE> 9
6. The Secretary of State of the State of New York is hereby
designated as the agent of the Corporation upon whom any process may in
any action or proceeding against it be served. The post office address
to which the Secretary of State shall mail a copy of any process in any
action or proceeding against the Corporation which may be served upon
it is: One Corporate Center, Rye, New York 10580; Attention: General
Counsel.

7. The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the
Corporation and of its Board of Directors and shareholders:

(a) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.

(b) The Board of Directors shall have concurrent power with
the shareholders to make, alter, amend, change, add to or repeal
the By-Laws of the Corporation.

(c) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the
By-Laws of the Corporation. Election of directors need not be by
written ballot unless the By-Laws so provide.

(d) In addition to the powers and authority hereinbefore or
by statute expressly conferred upon them, the Board of Directors
are hereby empowered to exercise all such powers and do all such
acts and things as may be exercised or done by the Corporation,
subject, nevertheless, to the provisions of the BCL, this
Certificate of Incorporation, and any By-Laws adopted by the
shareholders; provided, however, that no By-Laws hereafter adopted
by the shareholders shall invalidate any prior act of the Board of
Directors which would have been valid if such By-Laws had not been
adopted.

(e) Prior to the Trigger Date (as defined in paragraph (g) of
this Article 7), any member of the Board of Directors may be
removed, with or without cause, at any time prior to the
expira-

9
<PAGE> 10
tion of his term by a majority vote of the outstanding shares.

(f) 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.

(g) Subject to the rights of holders of Preferred Stock to
elect directors under specified circumstances, effective as of the
date on which Mario J. Gabelli (hereinafter, "Mr. Gabelli")
"beneficially" owns (within the meaning of Section 13(d) of the of
the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, as in effect on the effective
date of this Restated Certificate of Incorporation) less than a
majority of the voting power of the Voting Stock (as defined
below) (the "Trigger Date"), a director may be removed only for
cause and only upon the affirmative vote of holders of at least
80% of the voting power of all the then outstanding shares of
capital 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.

8. The personal liability of the Board of Directors of the
Corporation is hereby eliminated to the fullest extent permitted by the
provisions of paragraph (b) of Section 402 of the BCL, as the same may
be amended and supplemented.

9. In anticipation and recognition that (i) the Corporation will
cease to be a wholly-owned subsidiary of Gabelli Funds, Inc. (to be
renamed Gabelli Group Capital Partners, Inc., "GFI") but that GFI (and,
therefore, Mr. Gabelli beneficially) is expected to remain a
substantial shareholder of the Corporation, (ii) the Corporation, GFI
and other Gabellis (as defined below) may engage in the same areas of
corporate opportunities, and (iii) benefits will be derived by the
Corporation through its continued contractual,

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<PAGE> 11
corporate and business relations with GFI and other Gabellis (including
possible service of officers and directors of GFI, or any other
Gabelli, as officers and directors of the Corporation), the provisions
of this Article 9 are set forth to regulate and define the conduct of
certain affairs of the Corporation as they may involve a Gabelli
(including GFI) and their officers and directors, and the powers,
rights, duties and liabilities of the Corporation and its officers,
directors and shareholders in connection therewith.

(a) Definitions. For purposes of this Article 9:

(1) the "Corporation" includes its subsidiaries and
other entities in which it beneficially owns, directly or
indirectly, 50% or more of the outstanding voting securities or
comparable interests;

(2) a "Gabelli" includes (i) Mr. Mario J. Gabelli, so
long as he is an officer or director of the Corporation or
beneficially owns a controlling interest in the Corporation, (ii)
any member of his "immediate family" (which shall include Mr.
Gabelli's spouse, parents, children and siblings) who is at the
time an officer or director of the Corporation and (iii) any
entity in which the persons qualifying as Gabellis pursuant to
clauses (i) and (ii) above beneficially own a controlling interest
of the outstanding voting securities or comparable interests;

(3) "Permissible Accounts" mean (i) those investment
funds and accounts currently managed by Mr. Gabelli outside the
Corporation under performance fee arrangements but only to the
extent, in the case of an investment fund, such fund's investors
consist solely of one or more of the persons who were investors as
of the date of the initial issuance of the Corporation's Class A
Common Stock in the public offering contemplated by the
Corporation's Registration Statement on Form S-1 (File No.
333-51023) (the "IPO Consummation Date") and the successors,

11
<PAGE> 12
heirs, donees or immediate families thereof and, in the case of an
investment account, the parties to such account are solely one or
more of the persons who were parties to such account as of the IPO
Consummation Date and the successors, heirs, donees or immediate
families thereof (collectively, "Qualifying Persons") and (ii)
successor funds and accounts which serve no persons other than the
Qualifying Persons referred to in clause (i), which funds and
accounts operate according to an investment style similar to such
other accounts or funds and which style is not used at the
Corporation as of the IPO Consummation Date and which are subject
to performance fee arrangements; and

(4) "corporate opportunities" potentially allocable to
the Corporation consist of business opportunities that (i) the
Corporation is financially able to undertake; (ii) are, from their
nature, in the Corporation's actual line or lines of business and
are of practical advantage to the Corporation; and (iii) are ones
in which the Corporation has an interest or reasonable expectancy.

However, "corporate opportunities" do not include
transactions in which the Corporation or a Gabelli is permitted to
participate pursuant to any agreement between the Corporation and
such Gabelli that is in effect as of the time any equity security
of the Corporation is held of record by any person other than a
Gabelli or is subsequently entered into with the approval of the
members of the Board of Directors and do not include passive
investments.

(b) Corporate Opportunities Policy. (1) Except with respect
to opportunities that involve Permissible Accounts, if a Gabelli
acquires knowledge of a potential transaction on a matter that is
a corporate opportunity for both any Gabelli and the Corporation,
such Gabelli will have a duty to communicate that opportunity to
the Corporation and may not pursue that opportunity or direct it
to another person unless the Corporation declines such opportunity
or fails to pursue it.

(2) If a director or officer of the Corporation other
than a Gabelli acquires knowledge of a potential transaction or
matter that may be a corporate opportunity for both the
Corporation and a Gabelli, such director or officer

12
<PAGE> 13
must act in good faith in accordance with the following two-part
policy.

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

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

A director or officer of the Corporation (other than a
Gabelli) who acts in accordance with the foregoing two-part policy
(i) will be deemed fully to have satisfied his or her fiduciary
duties to the Corporation and its shareholders with respect to
such corporate opportunity, (ii) will not be liable to the
Corporation or its shareholders for any breach of fiduciary duty
by reason of the fact that a Gabelli pursues or acquires such
opportunity or directs such corporate opportunity to another
person or entity or does not communicate information regarding
such opportunity to the Corporation, (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 Corporation, and (iv) will be
deemed not to have

13
<PAGE> 14
breached his or her duty of loyalty to the Corporation or its
shareholders and not to have derived an improper benefit
therefrom.

(3) Any corporate opportunity that belongs to a Gabelli
or to the Corporation pursuant to the foregoing paragraphs shall
not be pursued by the other (or directed by the other to another
person or entity) unless and until such Gabelli or the
Corporation, 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).

(c) Conflict of Interest Policy. (1) No contract, agreement,
arrangement, or transaction between the Corporation and a Gabelli
or any customer or supplier or any entity in which a director of
the Corporation has a financial interest (a "Related Entity"), or
one or more of the directors or officers of the Corporation, or
any Related Entity, any amendment, modification, or termination
thereof, or any waiver of any right thereunder, will be voidable
solely because a Gabelli or such customer or supplier, any Related
Entity, or any one or more of the officers or directors of the
Corporation 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 any of the following four requirements are met:

(A) 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

14
<PAGE> 15
committee, even if the disinterested directors are less than
a quorum;

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

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

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

(2) If the requirements of (A), (B), (C) or (D) of
paragraph (1) above are met, such Gabelli, the Related Entity, and
the directors and officers of the Corporation, 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 Corporation and
its shareholders with respect to such Transaction.

(3) Any Transaction authorized, approved, or effected,
and each of such guidelines so authorized or approved, as
described in (A), (B), or (C) above, will be deemed to be entirely
fair to the Corporation 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 Cor-

15
<PAGE> 16
poration and its shareholders. A Gabelli will not be liable to the
Corporation or its shareholders for breach of any fiduciary duty
that a Gabelli may have as a shareholder of the Corporation by
reason of the fact that a Gabelli takes any action in connection
with any transaction between such Gabelli and the Corporation.

For purposes of the provisions contained in this Article
9, a "disinterested director" shall mean a director that is not a
Gabelli and who does not have a financial interest in the
Transaction. Interests in an entity that are not equity or
ownership interests or that constitute less than 10% of the equity
or ownership interests of such entity will not be considered to
confer a financial interest on any person who beneficially owns
such interests.

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 contained in this Article 9 in a manner adverse to the
interests of any Gabelli. After the Trigger Date, such required
vote will be increased to 80% to alter, amend, repeal or replace
any of the conflict of interest and corporate opportunity
provisions contained herein.

(5) This amendment and restatement of the Certificate of Incorporation
was authorized by:

(A) the written consent of the Board of Directors of the
Corporation pursuant to Sections 803 and 708 of the BCL, and

(B) the written consent of the sole holder of all of the shares
of the Corporation entitled to vote thereon pursuant to Sections 803 and 615 of
the BCL.

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<PAGE> 17
This Restated Certificate of Incorporation is dated February 9,
1999 and is affirmed by Alpha G, Inc. as true under the penalties of perjury.

ALPHA G, INC.

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

By: /s/ James E. McKee
_______________________________
Name: James E. McKee
Title: Vice President, General
Counsel and Secretary

<PAGE> 1

Exhibit 3.4

AMENDED AND RESTATED

BYLAWS

GABELLI ASSET MANAGEMENT INC.

ARTICLE I

OFFICES

Section 1. Registered Office. The registered office of Gabelli Asset
Management Inc. (hereinafter, the "Corporation") shall be located in the County
of Westchester.

Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of New York as the Board of
Directors may from time to time determine or the business of the Corporation may
require.

ARTICLE II

MEETINGS OF SHAREHOLDERS

Section 1. Definitions. For purposes of these Amended and Restated
Bylaws (the "Bylaws"), "Trigger Date" shall mean the date Mr. Gabelli (as
defined below) owns a "beneficial" interest (within the meaning of Section 13(d)
of the of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, as in effect on the effective date of these
Amended and Restated Bylaws) of less than a majority of the outstanding voting
power of the then outstanding shares of stock entitled to vote generally in the
election of directors (the "Voting Stock"). The term "Mr. Gabelli" refers to
Mario J. Gabelli and also includes members of his "immediate family" (which
shall include Mr. Gabelli's spouse, parents, children, sib-

<PAGE> 2

lings, mothers and fathers-in-law, sons and daughters-in-law, and brothers and
sisters-in-law) and any subsidiaries and other entities in which Mr. Gabelli and
members of his immediate family beneficially own a controlling interest of the
outstanding voting securities or interests.

Section 2. Annual Meetings. Annual meetings of shareholders for the
election of directors and for such other business as may be stated in the notice
of the meeting given by the Corporation, shall, commencing in the year 1999, be
held at such place, either within or without the State of New York, and at such
time and date as the Board of Directors, by resolution, shall determine and as
set forth in the notice of the meeting.

If the date of the annual meeting shall fall upon a legal holiday,
the meeting shall be held on the next succeeding business day. At each annual
meeting, the shareholders entitled to vote shall elect members of the Board of
Directors, and they may transact such other corporate business as may properly
come before the meeting.

Section 3. Voting and Proxies. In accordance with the terms of the
Corporation's Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and in accordance with the provisions of these
Bylaws, each holder of the Corporation's Class A common stock, par value $.001
per share (the "Class A Common Stock"), shall be entitled to one vote, in person
or by proxy, per share and each holder of the Corporation's Class B common
stock, par value $.001 per share (the "Class B Common Stock"), shall be entitled
to ten votes, in person or by proxy, per share. Holders of Class A Common Stock
shall not be eligible to vote on any alteration or change in the powers,
preferences, or special rights of the Class B Common Stock that would not
adversely affect the rights of Class A Common Stock and holders of Class B
Common Stock shall not be eligible to vote on any alteration or change in the
powers, preferences or special rights of Class A Common Stock that would not
adversely affect the rights of Class B Common Stock. No proxy shall be voted
after eleven (11) months from its date unless such proxy provides for a longer
period. Such proxy shall be filed with the Secretary of the Corporation before
or at the time of the meeting.

2
<PAGE> 3

Upon the demand of any shareholder, the vote for directors and the vote upon any
question before the meeting shall be by ballot. All elections for directors
shall be decided by a plurality vote; all other questions shall be decided by a
majority vote except as otherwise provided by these Bylaws, the Certificate of
Incorporation or the laws of the State of New York.

Section 4. Quorum. A majority of the voting power of the outstanding
shares of the Corporation's capital stock entitled to vote thereat, represented
in person or by proxy, shall constitute a quorum at meetings of shareholders. In
determining whether a quorum is present treasury shares shall not be counted. If
less than a majority of the voting power of the outstanding shares are
represented, a majority of the voting power of the shares so represented may
adjourn the meeting from time to time without further notice, but until a quorum
is secured no other business may be transacted. The shareholders present at a
duly organized meeting may continue to transact business until an adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. At any duly organized meeting, except as otherwise provided by these
Bylaws or in the Certificate of Incorporation, a vote of a majority of the
voting power of the stock represented thereat shall decide any question brought
before the meeting.

Section 5. Notice of Meetings. Written notice, stating the place,
date and time of the annual or special meeting, and the general nature of the
business to be considered, shall be given to each shareholder entitled to vote
thereat at such shareholder's address as it appears on the records of the
Corporation, not less than ten nor more than fifty days before the date of the
meeting. No business other than that stated in the notice shall be transacted at
any special meeting or any annual meeting; provided, business not stated in the
notice of an annual meeting may be transacted at such annual meeting with the
unanimous consent of all the shareholders entitled to vote thereat.

Section 6. Special Meetings. Special meetings of shareholders may be
held at such time and place within or without the State of New York as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.

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<PAGE> 4

Subject to the rights of holders of any series of preferred stock to
elect additional directors under specified circumstances and the rights of
shareholders to call a special meeting to elect a sufficient number of directors
to conduct the business of the Corporation 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 (as defined
herein) or the Chairman of the Board, upon not less than ten nor more than fifty
days' written notice, 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.

ARTICLE III

DIRECTORS

Section 1. General. The business affairs of the Corporation shall be
managed by its Board of Directors, which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Certificate of Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders. The Board of Directors shall consist of
not less than three nor more than twelve persons. Subject to any rights of
holders of preferred stock to elect directors under specified circumstances, the
exact number of directors within the minimum and maximum limitations specified
in the preceding sentence shall be fixed from time to time by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
directors which the Corporation would have if there were no vacancies (the
"Whole Board"). As of the effective date of these Amended Bylaws, the number of
directors shall be five (5) directors. Directors shall be at least eighteen
years of age and need not be residents of the State of New York nor shareholders
of the Corporation. The directors, other than the first Board of Directors,
shall be elected at the annual meeting of the shareholders, except as
hereinafter provided, and each director elected shall serve until the next
succeeding annual meeting and until his successor shall have been elected and
qualified. The first Board of Directors

4
<PAGE> 5

shall hold office until the first annual meeting of shareholders.

Section 2. Removal. Before the Trigger Date, any or all of the
directors may be removed, with or without cause, at any time by 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. Subject to the
rights of holders of preferred stock to elect directors under specified
circumstances, on or after 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 the then outstanding Voting Stock, voting together as a single
class. Any director may be removed for cause by the action of a majority of the
directors at a special meeting called for that purpose.

Section 3. Newly Created Directorships and Vacancies. 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 new directorships and
vacancies will be filled only by the affirmative vote of a majority of the
remaining directors, even if less than a quorum. A director elected to fill a
vacancy shall be elected for the unexpired portion of the term of his
predecessor in office. A director elected to fill a newly created directorship
shall serve until the next succeeding annual meeting of shareholders and until
his successor shall have been elected and qualified.

Section 4. Books and Records. The Board of Directors may keep the
books of the Corporation, except such as are required by law to be kept within
the state, outside of the State of New York, at such place or places as they may
from time to time determine.

Section 5. Compensation. The Board of Directors, or any committee
thereof, and irrespective of any personal interest of any of its members, shall
have authority to establish reasonable compensation of all directors for
services to the Corporation as directors, officers or otherwise.

5
<PAGE> 6

ARTICLE IV

MEETINGS OF THE BOARD OF DIRECTORS

Section 1. Time and Place. Meetings of the Board of Directors,
regular or special, may be held either within or without the State of New York.
Regular meetings of the Board of Directors may be held upon such notice, or
without notice, and at such time and at such place as shall from time to time be
determined by the Board of Directors.

Section 2. Special Meetings. Special meetings of the Board of
Directors may be called by the Chief Executive Officer on two days' notice to
each director, either personally or by mail or by telegram, or on such shorter
notice as the person calling such meeting may deem necessary or appropriate in
the circumstances; special meetings shall be called by the Chief Executive
Officer or Secretary in like manner and on like notice on the written request of
two directors.

Section 3. Notice. Notice of a meeting need not be given to any
director who submits a signed waiver of notice whether before or after the
meeting, or who at tends the meeting without protesting, prior thereto or at its
commencement, the lack of notice. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.

Section 4. Quorum. A majority of the Whole Board shall constitute a
quorum for the transaction of business unless a greater or lesser number is
required by law or by the Certificate of Incorporation. The vote of a majority
of the directors present at any meeting at which a quorum is present shall be
the act of the Board of Directors, unless the vote of a greater number is
required by law or by the Certificate of Incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.

6
<PAGE> 7

Section 5. Telephonic Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or any committee, by means of conference
telephone or similar communications by means of which all persons participating
in the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.

Section 6. Meetings by Written Consent. Unless the Certificate of
Incorporation provides otherwise, any action required or permitted to be taken
at a meeting of the Board of Directors or a committee thereof may be taken
without a meeting if a consent in writing to the adoption of a resolution
authorizing the action so taken, shall be signed by all of the directors
entitled to vote with respect to the subject matter thereof.

ARTICLE V

COMMITTEES

Section 1. General. The Board of Directors, by resolution adopted by
a majority of the entire Board of Directors, may designate, from among its
members, committees, each consisting of two or more directors, and each of
which, to the extent provided in the resolution, shall have all the authority of
the Board of Directors, except as otherwise required by law. Vacancies in the
membership of any committee shall be filled by the Board of Directors at a
regular or special meeting of the Board of Directors.

7
<PAGE> 8
Section 2. Compensation Committee. The compensation committee shall
consist of not less than two nor more than eight members whose chairman shall
also be named by the Board of Directors. The compensation committee shall
prescribe the compensation of the Chief Executive Officer and such other
officers as such committee deems necessary.
Section 3. Audit Committee. The audit committee shall consist of not
less than two nor more than eight members elected by the Board of Directors from
among their own number; provided, however, that all of the members of the
committee shall be independent directors. The chairman of the committee shall
also be selected by the Board of Directors. The audit committee shall recommend
to the Board of Directors the firm to be employed by the Corporation as its
external auditor; shall consult with the persons chosen to be the external
auditors with regard to the plan of audit; shall review the fees of the external
auditors for audit and non-audit services; shall review, in consultation with
the external auditors, their report of audit, or proposed report of audit, and
the accompanying management letter, if any; shall review with management and the
external auditor before publication or issuance, the annual financial statement,
and any annual reports to be filed with the Securities and Exchange Commission;
shall consult with the external auditors (periodically, as appropriate, out of
the presence of management) with regard to the adequacy of the internal auditing
and general accounting functions of the Corporation; shall consult with the
internal auditors (periodically, as appropriate, out of the presence of
management) with regard to cooperation of corporate divisions with the internal
auditing and accounting departments and the adequacy of corporate systems of
accounting and controls; shall serve as a communications liaison between the
Board of Directors, the external auditors, and the internal auditors; and shall
perform such other duties not inconsistent with the spirit and purpose of the
committee as are delegated to it by the Board of Directors.

8
<PAGE> 9

Section 4. Nominating Committee. The Board of Directors may elect
from its membership a nominating committee of not less than two nor more than
eight members elected by the Board of Directors from among their own number. The
nominating committee shall meet periodically to review the qualifications of
potential Board of Directors candidates from whatever source received; shall
report its findings to the Board of Directors and propose nominations for Board
of Directors membership for approval by the Board of Directors and for
submission to shareholders for approval; and shall review and make
recommendations to the Board of Directors, where appropriate, concerning the
size of the Board of Directors and the frequency of meetings. The nominating
committee shall have and exercise all such power as it shall deem necessary for
the performance of its duties.

Section 5. Meetings. Meetings of the executive committee, the
nominating committee, the compensation committee, and the audit committee shall
be held on call of the Chairman of the Board or any committee member. Meetings
may be held informally, by telephone, or by mail, and it is not necessary that
members of the committee be physically present together in order for a meeting
to be held. Two or more members of a committee shall constitute a quorum.

ARTICLE VI

NOTICES

Section 1. General. Whenever, under the provisions of the statutes
or of the Certificate of Incorporation or of these Bylaws, notice is required to
be given to any director or shareholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or shareholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.

Section 2. Waiver. Whenever any notice of a meeting is required to
be given under the provisions of the statutes or under the provisions of the
Certificate

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<PAGE> 10

of Incorporation or these Bylaws, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.

ARTICLE VII

OFFICERS

Section 1. General. The officers of the Corporation shall be chosen
by the Board of Directors and shall consist of a Chairman of the Board, a Chief
Executive Officer, such Vice Presidents as shall from time to time be deemed
necessary, a Secretary, such Assistant Secretaries as shall from time to time be
deemed necessary, and a Chief Financial Officer. The Board of Directors may
appoint such other officers and agents as it shall deem necessary who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors. Any
two or more offices may be held by the same person, except the offices of Chief
Executive Officer and Secretary.

Section 2. Term; Removal and Vacancies. The officers of the
Corporation shall hold office until their successors are chosen and qualify. Any
officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors.

Section 3. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the shareholders and the Board of Directors and shall
perform such other duties and possess such powers as are customarily vested in
such office or as may be vested in the Chairman of the Board by the Board of
Directors, the Certificate of Incorporation or these Bylaws.

Section 4. Chief Executive Officer. The Chief Executive Officer of
the Corporation shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.

10
<PAGE> 11

Section 5. Vice President. The Vice President, or if there shall be
more than one, the Vice Presidents in the order determined by the Board of
Directors, shall, in the absence or disability of the Chief Executive Officer,
perform the duties and exercise the powers of the chief executive officer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.

Section 6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He or she shall give, or cause to be given,
notice of all meetings of the shareholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or chief executive officer, under whose supervision he or she shall
be. He or she shall have custody of the corporate seal of the Corporation and
he, or an Assistant Secretary, shall have authority to affix the same to any
instrument requiring it and, when so affixed, it may be attested by his or her
signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature.

Section 7. Assistant Secretary. The Assistant Secretary, or if there
be more than one, the Assistant Secretaries in the order determined by the Board
of Directors, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.

11
<PAGE> 12

Section 8. Chief Financial Officer. The Chief Financial Officer
shall have the custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors.

He or she shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and the Board of
Directors at its regular meetings, or when the Board of Directors so requires,
an account of all his or her transactions as Chief Financial Officer and of the
financial condition of the Corporation.

If required by the Board of Directors, he or she shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his or her office and for the restoration to the Corporation, in case
of his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his or her control belonging to the Corporation.

ARTICLE VIII

INDEMNIFICATION

Section 1. Power to Indemnify in Actions, Suits or Proceedings Other
Than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or

12
<PAGE> 13

other enterprise, or as a trustee, fiduciary or administrator of any pension,
profit sharing or other benefit plan for any of the corporation's employees,
against expenses (including attorneys' fees), judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
such person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's conduct was unlawful.

Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys, fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation; provided, however, that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and

13
<PAGE> 14

reasonably entitled to indemnity for such expenses which such court shall deem
proper.

Section 3. Authorization of Indemnification. Any indemnification
under this Article VIII (unless ordered by a court) shall be made by the
Corporation unless in the specific case a determination is made that
indemnification of the director, officer, employee or agent is not proper in the
circumstances because such person has not met the applicable standard of conduct
set forth in Section 1 or Section 2 of this Article VIII, as the case may be.
Such determination may be made (i) by the Board of Directors by a majority vote
of directors who were not parties to such action, suit or proceeding (whether or
not such disinterested directors constitute a quorum), (ii) by independent legal
counsel in a written opinion, or (iii) by the shareholders. To the extent,
however, that a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith, without
the necessity of authorization in the specific case.

Section 4. Good Faith Defined. For purposes of any determination
under Section 3 of this Article VIII, a person shall be deemed to have acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, or, with respect to any
criminal action or proceeding, to have had no reasonable cause to believe such
person's conduct was unlawful, if such person's action is based on the records
or books of account of the corporation or another enterprise, or on information
supplied to such person by the officers of the Corporation or another enterprise
in the course of their duties, or on the advice of legal counsel for the
Corporation or another enterprise or on information or records given or reports
made to the Corporation or another enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Corporation or another enterprise. The term "another enterprise" as used in
this Section shall mean any other corporation or any partnership, joint venture,

14
<PAGE> 15

trust or other enterprise of which such person is or was serving at the request
of the Corporation as a director, officer, employee or agent. The provisions of
this Section shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article VIII, as the
case may be.

Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction in
the State of New York for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VIII. The basis of such indemnification
by a court shall be a determination by such court that indemnification of the
director, officer, employee or agent is proper in the circumstances because such
person has met the applicable standards of conduct set forth in Sections 1 or 2
of this Article VIII, as the case may be. Notice of any application for
indemnification pursuant to this Section 5 shall be given to the Corporation
promptly upon the filing of such application.

Section 6. Expenses Payable in Advance. Expenses incurred in
defending a civil or criminal action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the Corporation
as authorized in this Article VIII.

Section 7. Non-Exclusivity and Survival of Indemnification. The
indemnification and advancement of expenses provided by or granted pursuant to
this Article VIII shall not be deemed exclusive of any other rights to which
those seeking indemnification and advancement of expenses may be entitled under
any Bylaw, agreement, contract, vote of shareholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in such person's official capacity
and as to

15
<PAGE> 16

action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in Sections 1 and 2 of
this Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the Business Corporation Law of the State of New York
(the "NYBCL") or otherwise.

Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, office, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the Corporation would have the
power or the obligation to indemnify such person against such liability under
the provisions of this Article VIII.

Section 9. Meaning of "Corporation" for Purposes of Article VIII.
For purposes of this Article VIII, references to the "Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article VIII with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.

Section 10. Term of Indemnification. The indemnification and
advancement of expenses provided by or granted pursuant to this Article VIII
shall, unless

16
<PAGE> 17

otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent, and shall inure to the
benefit of the heirs, executors and administrators of such person.

Section 11. Severability. If any word, clause or provision of this
Article VIII or any award made hereunder shall for any reason be determined to
be invalid, the provisions hereof shall not otherwise be affected thereby but
shall remain in full force and effect.

Section 12. Intent of Article. The intent of this Article VIII is to
provide for indemnification to the fullest extent permitted by the NYBCL. To the
extent that such Section or any successor section may be amended or supplemented
from time to time, this Article VIII shall be amended automatically and
construed so as to permit indemnification to the fullest extent from time to
time permitted by law.

ARTICLE IX

BUSINESS COMBINATION STATUTE

The Corporation hereby elects not to be governed by Section 912 of
the NYBCL ("Section 912"), in accordance with the provisions of paragraph (d)(3)
of such Section 912. In accordance with Section 912, this election shall not be
effective until August 6, 2000 (eighteen months after the approval of this
amendment by a majority of the voting power of the then outstanding Voting
Stock).

ARTICLE X

CERTIFICATES FOR SHARES

Section 1. General. The shares of the Corporation shall be
represented by certificates or shall be uncertified. Certificates shall be
signed by the Chairman of the Board or the Chief Executive Officer or a
Vice President and the Secretary or an Assistant Secretary or the Chief
Financial Officer of the Corporation

17
<PAGE> 18

and may be sealed with the seal of the Corporation or a facsimile thereof.

When the Corporation is authorized to issue shares of more than one
class, there shall be set forth upon the face or back of the certificate, or the
certificate shall have a statement that the Corporation will furnish to any
shareholder upon request and without charge, a full statement of the
designation, relative rights, preferences, and limitations of the shares of each
class authorized to be issued and, if the Corporation is authorized to issue any
class of preferred shares in series, the designation, relative rights,
preferences and limitations of each such series so far as the same have been
fixed and the authority of the Board of Directors to designate and fix the
relative rights, preferences and limitations of other series.

Within a reasonable time after the issuance or transfer of any
uncertificated shares there shall be sent to the registered owner thereof a
written notice containing the information required to be set forth or stated on
certificates pursuant to paragraphs (b) and (c) of Section 508 of the NYBCL.

Section 2. Signatures. The signatures of the officers of the
Corporation upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation itself or an employee of the Corporation. In case any officer who
has signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of issue.

Section 3. Replacement Certificates. The Board of Directors may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost or destroyed. When
authorizing such issue of a new certificate, the Board of Directors, in its
discretion and as a condition precedent to the issuance thereof, may prescribe
such terms and conditions as it deems expedient, and may require such
indemnities as it deems adequate, to protect the Corporation from any claim that
may be made against

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<PAGE> 19

it with respect to any such certificate alleged to have been lost or destroyed.

Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto, and the old
certificate shall be cancelled and the transaction shall be recorded upon the
books of the Corporation.

Section 4. Shareholders of Record. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of shareholders. Such date shall
not be more than fifty nor less than ten days before the date of any meeting nor
more than fifty days prior to any other action. When a determination of
shareholders of record entitled to notice of or to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, unless the Board of Directors fixes a new
record date for the adjourned meeting.

The Corporation shall be entitled to recognize the exclusive right
of a person registered on its books as the owner of shares to receive dividends,
and to vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of New
York.

Section 5. Shareholder List. A list of shareholders as of the record
date, certified by the corporate officer responsible for its preparation or by a
transfer agent, shall be produced at any meeting upon the request thereat or
prior thereto of any shareholder. If the

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<PAGE> 20

right to vote at any meeting is challenged, the inspectors of election, or
person presiding thereat, shall require such list of shareholders to be produced
as evidence of the right of the persons challenged to vote at such meeting and
all persons who appear from such list to be shareholders entitled to vote
thereat may vote at such meeting.

ARTICLE XI

GENERAL PROVISIONS

Section 1. Dividends. Subject to the provisions of the Certificate
of Incorporation relating thereto, if any, dividends may be declared by the
Board of Directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in shares of the capital stock or in the Corporation's
bonds or its property, including the shares or bonds of other corporations
subject to any provisions of law and of the Certificate of Incorporation.

Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors from time to time, in its absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may modify or abolish any such reserve
in the manner in which it was created.

Section 2. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.

Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.

Section 4. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal,

20
<PAGE> 21

New York". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.

ARTICLE XII

AMENDMENTS

These Bylaws may be amended or repealed or new bylaws may be adopted
at any regular or special meeting of shareholders at which a quorum is present
or represented, by the vote of the holders of shares entitled to vote in the
election of any directors, provided notice of the proposed alteration, amendment
or repeal be contained in the notice of such meeting. These Bylaws may also be
amended or repealed or new bylaws may be adopted by the affirmative vote of a
majority of the Board of Directors at any regular or special meeting of the
Board of Directors. If any bylaw regulating an impending election of directors
is adopted, amended or repealed by the Board of Directors, there shall be set
forth in the notice of the next meeting of shareholders for the election of
directors the bylaw so adopted, amended or repealed, together with precise
statement of the changes made. Bylaws adopted by the Board of Directors may be
amended or repealed by the shareholders.

February 9, 1999

<PAGE> 1
Exhibit 5.1

February 9, 1999

Gabelli Asset Management Inc.
One Corporate Center
Rye, New York 10580

Re: Gabelli Asset Management Inc.
Registration Statement on Form S-1

Ladies and Gentlemen:

We have acted as special counsel to Gabelli Asset Management Inc.
(formerly known as Alpha G, Inc.), a New York corporation (the "Company"), in
connection with the initial public offering by the Company of up to 6,900,000
shares (including 900,000 shares subject to an over-allotment option) (the
"Shares") of the Company's Class A Common Stock, par value $.001 per share (the
"Class A Common Stock").

This opinion is being furnished in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of
1933, as amended (the "Act").

In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Registration Statement on Form S-1 (File No. 333-51023) as filed with the
Securities and Exchange Commission (the "Commission") on April 24, 1998 under
the Act, Amendment No. 1 to the Registration Statement as filed with the
Commission on October 7, 1998, Amendment No. 2 to the Registration Statement as
filed with the Commission on November 24, 1998, Amendment No. 3 to the
Registration Statement as filed with the Commission on January 29, 1999, and
Amendment No. 4 to the Registration Statement to be filed with

<PAGE> 2
Gabelli Asset Management Inc.
February 9, 1999
Page 2

the Commission on the date hereof (such Registration Statement, as so amended,
being hereinafter referred to as the "Registration Statement"); (ii) the form of
the Purchase Agreement (the "Purchase Agreement") proposed to be entered into
between the Company, as issuer, and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Salomon Smith Barney Inc. and Gabelli & Company, as
representatives of the several underwriters named therein (the "Underwriters"),
filed as an exhibit to the Registration Statement; (iii) a specimen certificate
representing the Class A Common Stock; (iv) the Restated Certificate of
Incorporation of the Company, as presently in effect; (v) the Amended and
Restated By-Laws of the Company, as presently in effect; (vi) certain
resolutions of the sole shareholder of the Company and the Board of Directors of
the Company relating to the adoption of the Restated Certificate of
Incorporation of the Company and the Amended and Restated By-Laws of the
Company; and (vii) certain resolutions of the Board of Directors of the Company
and drafts of certain resolutions (the "Draft Resolutions") of the Pricing
Committee of the Board of Directors of the Company (the "Pricing Committee")
relating to the issuance and sale of the Shares and related matters. We have
also examined originals or copies, certified or otherwise identified to our
satisfaction, of such records of the Company and such agreements, certificates
of public officials, certificates of officers or other representatives of the
Company and others, and such other documents, certificates and records as we
have deemed necessary or appropriate as a basis for the opinions set forth
herein.

In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. In making our
examination of documents executed or to be executed by parties other than the
Company, we have assumed that such parties had or will have the power, corporate
or other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such
<PAGE> 3
Gabelli Asset Management Inc.
February 9, 1999
Page 3

parties of such documents and the validity and binding effect thereof. As to any
facts material to the opinions expressed herein which we have not independently
established or verified, we have relied upon statements and representations of
officers and other representatives of the Company and others.

Members of our firm are admitted to the bar in the State of New
York, and we do not express any opinion as to the laws of any other
jurisdiction.

Based upon and subject to the foregoing, we are of the opinion
that when (i) the Registration Statement becomes effective; (ii) the Draft
Resolutions have been adopted by the Pricing Committee; (iii) the price at which
the Shares are to be sold to the Underwriters pursuant to the Purchase Agreement
and other matters relating to the issuance and sale of the Shares have been
approved by the Pricing Committee in accordance with the Draft Resolutions; (iv)
the Purchase Agreement has been duly executed and delivered; and (v)
certificates representing the Shares in the form of the specimen certificates
examined by us have been manually signed by an authorized officer of the
transfer agent and registrar for the Class A Common Stock and registered by such
transfer agent and registrar, and delivered to and paid for by the Underwriters
at a price per share not less than the per share par value of the Class A Common
Stock as contemplated by the Purchase Agreement, the issuance and sale of the
Shares will have been duly authorized, and the Shares will be validly issued,
fully paid and nonassessable.

We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. We also consent to the
reference to our firm under the caption "Legal Matters" in the Registration
Statement. In giving this consent, we do not thereby admit that we are included
in the category of persons whose consent is required under Section 7 of the Act
or the rules and regulations of the Commission.

Very truly yours,

/s/ Skadden, Arps, Slate, Meagher & Flom LLP

<PAGE> 1
MANAGEMENT SERVICES AGREEMENT

THIS AGREEMENT by and between Gabelli Funds, Inc., to be renamed
Gabelli Group Capital Partners, Inc. (the "Parent") and Gabelli Asset Management
Inc. (the "Subsidiary") is made as of this 9th day of February, 1999.

WHEREAS, the Parent desires to retain the Subsidiary to provide the
services described herein and the Subsidiary is willing to provide such services
under the terms and conditions set forth herein.

WHEREAS, the Subsidiary desires to be reimbursed for the costs of
providing the services hereunder and the Parent is willing to reimburse the
Subsidiary for such costs.

NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Parent and the Subsidiary agree as follows:

1. The Parent hereby retains the Subsidiary to (a) furnish office space
and facilities, utilities and office equipment as are adequate for the Parent's
needs, (b) oversee the administration of all aspects of the Parent's business
and affairs, including accounting, budgeting, tax planning, securities trading
and compliance matters, (c) provide personnel which it believes are competent to
(i) maintain the Parent's books and records in accordance with applicable laws
and regulations, (ii) arrange for the purchase and sale of securities and other
assets in the Parent's investment portfolio, (iii) prepare notices and agendas
for meetings of the Parent's shareholders and Board of Directors as well as
minutes of such meetings, and (d) provide reasonable levels of liability,
directors' and officers' and errors and omissions insurance coverage, which
coverage may be in the form of combined policies with the Subsidiary and its
subsidiaries, subject to the approval of the Parent's Board of Directors.

2. The Parent shall be responsible for the payment of its other
expenses not specified in Paragraph 1 above, including (a) brokerage fees and
commissions, (b) taxes, (c) interest charges on borrowings, (d) third-party
legal, auditing and accounting fees and expenses, (e) the compensation of any of
the Parent's directors, officers or employees who are not affiliated persons of
the Subsidiary, and (f) litigation and other extraordinary or non-recurring
expenses properly payable by the Parent. Nothing contained herein shall be
construed to restrict the Parent's right to hire its own employees or to
contract for administrative services to be performed by third parties.

3. The Subsidiary undertakes and agrees to perform its duties under
this Agreement in a manner consistent with this Agreement and any instructions
which may from time to time be given to it by the Parent, and in a manner
consistent with the provisions of applicable laws and regulations.
<PAGE> 2
Management Services Agreement
February 9, 1999
Page 2

4. The Subsidiary shall give the Parent the benefit of its best
judgment and effort in rendering services hereunder, but neither the Subsidiary
nor any of its officers, directors, employees or agents shall be liable for any
act or omission or for any loss sustained by the Parent in connection with the
matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties under
this Agreement.

5. The Parent agrees to pay the Subsidiary for its services an annual
reimbursement charge of $200,000, which is the Subsidiary's estimated annual
cost of providing these services. To the extent that the Parent requests the
Subsidiary to provide services or incur expenses beyond those specified in
Paragraph 1 above, the Parent agrees to pay additional charges based on the
actual time and expenses incurred. The reimbursement charge and any additional
charges are payable quarterly in arrears.

6. This Agreement shall become effective on the date first written
above and shall continue in effect for one year and thereafter from year to
year, but only so long as such continuation is specifically approved by the
independent directors of the Subsidiary or a committee or subcommittee comprised
solely of such independent directors. Either party may terminate this Agreement
by giving the other party sixty days written notice.

7. This Agreement (a) represents the entire understanding between the
parties concerning these matters, (b) may not be amended or modified except in
writing signed by each of the parties, and (c) shall be governed by and
construed and enforced in accordance with the laws of the State of New York.

IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.

GABELLI FUNDS, INC.

By: /s/ James E. McKee
---------------------------------------------
James E. McKee
Vice President, General Counsel and Secretary

GABELLI ASSET MANAGEMENT INC.

By: /s/ Robert S. Zuccaro
---------------------------------------------
Robert S. Zuccaro
Vice President and Chief Financial Office

<PAGE> 1
Exhibit 10.3

LOCK-UP AGREEMENT

THIS AGREEMENT, dated as of February 10, 1999, is by and among
Gabelli Asset Management Inc. (formerly known as Alpha G, Inc.), a New York
corporation (the "Company"), Gabelli Funds, Inc. (to be renamed Gabelli Group
Capital Partners, Inc.), a New York corporation ("GFI"), Rye Holdings, Inc., a
New York Corporation ("Rye Holdings"), and Rye Capital Partners, Inc., a
Delaware corporation ("Rye Capital," and together with GFI and Rye Holdings, the
"Class B Shareholders").

RECITALS

WHEREAS, GFI is currently the sole shareholder of the Company; and

WHEREAS, the Company proposes to effectuate a reclassification of
its outstanding shares of common stock into Class A Common Stock, par value
$.001 per share (the "Class A Common Stock"), and Class B Common Stock, par
value $.001 per share (the "Class B Common Stock"), and to raise additional
capital by selling an aggregate of 6,000,000 shares of Class A Common Stock
(plus an additional 900,000 shares to cover over-allotments, if any) in an
underwritten public offering (the "Offering"); and

WHEREAS, immediately prior to the consummation of the Offering,
and following the transfer of assets pursuant to an Asset Transfer and
Assumption Agreement, dated as of February 9, 1999, between the Company and GFI,
GFI is the holder of 15,360,000 shares of Class B Common Stock of the Company;
and

WHEREAS, immediately prior to the consummation of the Offering,
and following the transfer of assets pursuant to an Asset Transfer and
Assumption Agreement, dated as of February 9, 1999, among the Company, Rye
Holdings and New Institutional Services, Inc., a wholly owned subsidiary of the
Company, Rye Holdings is the holder of 8,400,000 shares of Class B Common Stock
of the Company; and

WHEREAS, immediately prior to the consummation of the Offering,
and following the transfer of assets pursuant to an Asset Transfer and
Assumption
<PAGE> 2

Agreement, dated as of February 9, 1999, among the Company, Rye Capital
and New Fixed Income, Inc., a wholly owned subsidiary of the Company, Rye
Capital is the holder of 240,000 shares of Class B Common Stock of the
Company; and

WHEREAS, Rye Holdings and Rye Capital are wholly owned
subsidiaries of GFI; and

WHEREAS, the Company proposes to enter into a purchase agreement
(the "Purchase Agreement") with Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Salomon Smith Barney Inc. and Gabelli & Company, Inc., as
representatives of the several underwriters named therein (the "Underwriters"),
in connection with the Offering, which Purchase Agreement will provide for the
purchase by the Underwriters of the shares Class A Common Stock from the Company
and the resale by the Underwriters of such shares to the public; and

WHEREAS, each of the parties recognizes that the raising of
capital in the Offering will benefit the Company and the Class B Shareholders.

NOW, THEREFORE, in consideration of the foregoing, the agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

AGREEMENT

1. Upon the terms and subject to the conditions set forth in this
Agreement, the parties hereby agree that without the prior written consent of
the Company, the Class B Shareholders will not sell, offer to sell, solicit an
offer to buy, contract to sell, grant any option to purchase, or otherwise
transfer or dispose of, any shares of Class B Common Stock of the Company, or
any securities convertible into or exercisable or exchangeable for such shares,
for a period of three years after the date of the final Prospectus relating to
the public offering of the Class A Common Stock of the Company (the "Lock-Up
Termination Date"). The foregoing restrictions shall not apply to transfers from
one Class B Shareholder to another Class B Shareholder.

2. In furtherance of the foregoing, the Company and State Street
Bank and Trust Company, its Transfer Agent, are hereby authorized to decline to

2
<PAGE> 3
make any transfer of securities if such transfer would constitute a violation or
breach of this Agreement.

3. This Agreement will terminate upon the earlier of (i) the
Lock-Up Termination Date or (ii) if the Purchase Agreement does not become
effective or if the Purchase Agreement (other than provisions thereof which
survive termination) is terminated, on February 26, 1999.

4. This Agreement shall be binding also upon the successors,
assigns, heirs and personal representatives of the Class B Shareholders.

5. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.

6. This Agreement may be executed in one or more counterparts,
each of which shall be an original and all of which when taken together shall
constitute one instrument.

3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.

GABELLI ASSET MANAGEMENT INC.

By:______________________________________
Name:
Title:

GABELLI FUNDS, INC.

By:______________________________________
Name:
Title:

RYE HOLDINGS, INC.

By:______________________________________
Name:
Title:

RYE CAPITAL PARTNERS, INC.

By:______________________________________
Name:
Title:

<PAGE> 1
EMPLOYMENT AGREEMENT

AGREEMENT made this 9th day of February, 1999 (the "Effective
Date") by and between Gabelli Asset Management Inc. (the "Company"), a New York
corporation, and Mario J. Gabelli (the "Executive").

WHEREAS, the Executive has served as an executive of the
Company since the inception of the Company and its predecessors in 1976.

WHEREAS, the Executive's skills, position, knowledge and
expertise in the management of portfolios such as those managed by the Company
are unique.

WHEREAS, the Company is dependent upon the efforts of the
Executive, in the capacities described herein in which he serves, and as the
primary portfolio manager for a significant majority of the Company's assets
under management.

WHEREAS, the loss of the Executive's services would have a
material adverse effect on the Company.

WHEREAS, since the inception of the Company and its
predecessors in 1976, the Executive has received an incentive-based management
fee of twenty percent (20%) of the pre-tax profits, if any, as computed for
financial reporting purposes in accordance with generally accepted accounting
principles as applied by the Company and its subsidiaries and consolidated
affiliates for financial reporting purposes (together, "Subsidiaries") from time
to time, for each fiscal year of each of the operating divisions of the Company
and each of its Subsidiaries before consideration of this fee, less applicable
payroll and tax deductions, accrued monthly and payable at least annually.

WHEREAS, the Company desires that the Executive continue to
serve as an executive of the Company and the Executive is willing to continue to
serve as an executive under the terms and conditions set forth herein.

WHEREAS, the Company desires that the Executive receive a
management fee to provide an incentive for the achievement of the Company's
performance goals and the enhancement of shareholder value.

NOW THEREFORE, in consideration of the foregoing and of the
mutual promises hereinafter set forth, the parties hereto agree as follows:

1. EMPLOYMENT.

The Company hires and employs the Executive, and the Executive agrees
to work for the Company, under the terms and conditions set forth herein.
<PAGE> 2
2. DUTIES.

The Executive shall serve as Chairman of the Board, Chief Executive
Officer and Chief Investment Officer of the Company, as an executive in various
capacities for certain of the Company's Subsidiaries as determined by the
Executive, and as Portfolio Manager for certain investment companies and
separate accounts managed by the Company and its Subsidiaries as determined by
the Executive. The Executive or the Company may at any time limit or terminate
the Executive's service in one or more of the capacities referred to above.

3. TERM.

The term of this Agreement shall commence on the Effective Date. This
Agreement shall continue so long as the Executive is performing any of the
services described in Paragraph 2 above.

4. FEES FROM REVENUE GENERATING ACTIVITIES (REVENUE FEES).

For managing or overseeing the management of investment companies or
partnerships, attracting mutual fund accounts or partnership investments,
attracting or managing separate accounts, providing investment banking services,
acting as a broker or otherwise generating revenues for the Company or its
Subsidiaries, the Executive will be paid a percentage of the revenues or net
profits related to or generated by such business activities, in a manner and at
payment rates as agreed to from time to time by the Executive and the Company or
the affected Subsidiaries, which rates have been and generally will be the same
as those received by other professionals in the Company or the affected
Subsidiaries performing similar services.

5. INCENTIVE-BASED MANAGEMENT FEE (THE MANAGEMENT FEE).

Commencing on the Effective Date, the Executive will be entitled to
receive an incentive-based management fee in the amount of ten percent (10%) of
the aggregate annual pre-tax profits, if any, as computed for financial
reporting purposes in accordance with generally accepted accounting principles
as applied by the Company and its Subsidiaries from time to time, of the Company
and each of its Subsidiaries before consideration of this fee or the deferred
payment pursuant to Paragraph 6 below or any employment taxes thereon, less
applicable payroll and tax deductions, accrued monthly and payable at least
annually (the "Management Fee"). A committee or subcommittee (comprised solely
of independent directors) of the Board of Directors of the Company will review
at least annually all Management Fee payments for compliance with the terms
hereof. In the event that the Executive is no longer an executive of the Company
or is no longer devoting the substantial majority of his working time to the
business of the Company and its Subsidiaries, the Executive's right to accrue
any additional Management Fee payments will terminate. The Management Fee is
separate and distinct from the Executive's

2
<PAGE> 3
revenue fees pursuant to Paragraph 4 above.

6. DEFERRED PAYMENT.

The Company shall pay the Executive the amount of fifty million dollars
($50,000,000) on January 2, 2002 (the "Payment Date"), and shall pay the
Executive interest on such amount quarterly from the Effective Date to the
Payment Date at the annual rate of six percent (6%). The Company's obligation to
make this deferred payment is not contingent in any respect, including on the
Executive's continued employment status or affiliation with the Company.

7. EXTENT OF SERVICE-RESTRICTIVE COVENANT.

During the term of this Agreement, the Executive shall not provide
investment management services for compensation other than in his capacity as an
officer or employee of the Company or its Subsidiaries, except to (a) the funds
(which serve no investors other than those as of the date of the initial
offering to the public of shares of Class A Common Stock of the Company which
offering is registered with the Securities and Exchange Commission under the
Securities Act of 1933 (the "IPO Date") or their successors, heirs, donees or
immediate family) and accounts managed by the Executive outside the Company
under performance fee arrangements as of the IPO Date, and (b) successor funds
and accounts ("New Outside Accounts") which funds serve no investors other than
those in the funds referred to in clause (a) or their successors, heirs, donees
or immediate family and which accounts are for no investors other than those
having an interest in the accounts referred to in clause (a) or their
successors, heirs, donees or immediate family, which funds and accounts operate
according to an investment style similar to such other funds or accounts, which
style is not used at the Company as of the IPO Date, and which are subject to
performance fee arrangements (collectively, "Permissible Accounts"). Prior to
providing investment management services for compensation to any New Outside
Accounts during the term hereof, the Executive agrees to have a committee or
subcommittee (comprised solely of independent directors) of the Board of
Directors of the Company review any proposed New Outside Accounts for compliance
with the terms hereof and accept the determination of such committee or
subcommittee as final. The Company understands that Mario J. Gabelli intends to
serve as a director, Chairman of the Board, Chief Executive Officer and Chief
Investment Officer of Gabelli Group Capital Partners, Inc. and be compensated
for such service, and the Company agrees that such service and compensation is
permissible under this Agreement.

8. NON-COMPETE AGREEMENT.

The Company has undertaken its activities with the expectation that the
Executive will continue to be available to it, and shall not compete with it,
including but not limited to taking necessary and appropriate steps to issue
securities of the Company to the public. In this regard, the Company and the
Executive agree that the Executive's skills, position,

3
<PAGE> 4
knowledge and expertise in the offices and positions entrusted to him by the
Company are unique and of high value to the Company, that he excels at his work,
that the loss of the Executive's services would have a material adverse effect
upon the Company, and that the replacement of the Executive would be impossible.
Accordingly, for five years from the IPO Date, whether or not the Executive
remains employed by the Company during this period, the Executive shall not
provide investment management services for compensation other than in his
capacity as an officer or employee of the Company or its Subsidiaries, except to
Permissible Accounts. Prior to providing investment management services for
compensation to any New Outside Accounts during this five-year period, the
Executive agrees to have a committee or subcommittee (comprised solely of
independent directors) of the Board of Directors of the Company review any
proposed New Outside Accounts for compliance with the terms hereof and accept
the determination of such committee or subcommittee as final.

The Executive and the Company agree that the covenants contained in
this Paragraph 8 are reasonable under the circumstances, and further agree that
if in the opinion of any court of competent jurisdiction such restraints are not
reasonable in any respect, such court shall have the right, power and authority
to excuse or modify such provision or provisions thereof as to the court shall
not appear reasonable and to enforce the remainder of the covenant as so
amended. The Executive acknowledges that any breach of the covenants contained
herein would irreparably injure the Company. Accordingly, the Company may, in
addition to pursuing any other remedies it may have in law or in equity, obtain
an injunction against the Executive from any court having jurisdiction over the
matter, restraining any further violation of this Agreement by the Executive.

9. BENEFITS.

The Executive shall be entitled to participate in all group health and
insurance programs and all other fringe benefit or retirement plans which the
Company may, in its sole and absolute discretion, elect to make available to its
senior executives generally, provided that the Executive meets the
qualifications therefor.

10. REIMBURSEMENT OF EXPENSES.

The Company shall reimburse the Executive for all reasonable and
legitimate business expenses incurred after the date of employment by the
Executive while conducting business, provided that the Executive submits
vouchers for such expenses in a manner and form prescribed from time to time by
the Company, except that up to $50,000 per year of such expenses may be
non-accountable.

11. ASSIGNABILITY CLAUSE.

This Agreement is binding upon the Company, its successors and assigns,
but this Agreement may not be assigned by the Executive.

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<PAGE> 5
12. GOVERNING LAW.

This Agreement shall be governed by the law of the State of New York,
without giving effect to the principles of conflicts of laws thereof. The
Executive and the Company agree that any claim arising hereunder shall be
brought before the state or federal courts sitting in New York, New York, and
the Executive and the Company each consent to jurisdiction and venue in New
York, New York, as being proper and appropriate for the resolution of any such
claim.

13. ENTIRE AGREEMENT; MODIFICATION.

This Agreement supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, written or oral, of the parties
hereto, relating to the matters covered by this Agreement. This Agreement may
not be modified or amended except by a further written instrument duly executed
by the Executive and the Company with the approval of a committee or
subcommittee (comprised solely of independent directors) of the Board of
Directors of the Company.

IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written above.

___________________________________________
Mario J. Gabelli

GABELLI ASSET MANAGEMENT INC.

By:________________________________________

<PAGE> 1

EXHIBIT 21.1

Subsidiaries of Gabelli Asset Management Inc.

The following table lists the direct and indirect subsidiaries of Gabelli Asset
Management Inc. (the "Company") immediately following the consummation of the
Formation Transactions that are described in the Registration Statement on Form
S-1. In accordance with Item 601(21) of Regulation S-K, the omitted subsidiaries
considered in the aggregate as a single subsidiary would not constitute a
"significant subsidiary" as defined under Rule 1-02(w) of Regulation S-X.

Name Jurisdiction of
---- Incorporation or
Organization
------------

o Gabelli Funds, LLC New York
(100%-owned by the Company)

o GAMCO Investors, Inc. New York
(100%-owned by the Company)

o Gabelli Fixed Income, Inc. New York
(100%-owned by the Company)

o Gabelli Securities, Inc. Delaware
(76.6%-owned by the Company)

o Gabelli Advisers, Inc. Delaware
(40.9%-owned by the Company)

o Gabelli & Company, Inc. New York
(100%-owned by Gabelli
Securities, Inc.)

o Gabelli Fixed Income L.L.C. Delaware
(80.1%-owned by Gabelli
Fixed Income, Inc.)

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report on the Consolidated Financial Statements of Gabelli Funds,
Inc. and subsidiaries dated March 11, 1998, in Amendment No. 4 of this
Registration Statement on Form S-1 (No. 333-51023) and the related Prospectus of
Gabelli Asset Management Inc. to be filed on or about February 9, 1999.

/s/ Ernst & Young LLP

New York, New York

February 9, 1999