GABELLI ASSET MANAGEMENT INC, 10-K, 2000-03-30

GABELLI ASSET MANAGEMENT INC
10-K, 2000-03-30
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ______ to ______

Commission file number 1-14761
Gabelli Asset Management Inc.
(Exact name of registrant as specified in its charter)

New York 13-4007862
- ------------------------------ ------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization

One Corporate Center, Rye, NY 10580
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (914) 921-3700
--------------

Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered:
Class A Common Stock, $ .001 Par Value New York Stock Exchange

Securities pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No _____.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ].

As of March 1, 2000, 5,615,200 shares of Class A common stock and 24,000,000
shares of Class B common stock were outstanding. All of the shares of Class B
common stock were held by Gabelli Group Capital Partners, Inc. and two of its
subsidiaries. The aggregate market value of the common stock held by
non-affiliates of the registrant as of March 1, 2000 was $ 91,719,000.

DOCUMENTS INCORPORATED BY REFERENCE: NONE.

1
<PAGE>

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

Certain statements under "Business," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and elsewhere in this
document 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. As a
result of the foregoing and other factors, no assurance can be given as to
future results, levels or activity or achievements, and neither the Company nor
any other person assumes responsibility for the accuracy and completeness of
such statements.
Part I

Item 1: Business
Overview

Gabelli Asset Management Inc. (the "Company"; and where the context
requires, the "Company" includes its predecessors and/or its unconsolidated
subsidiaries) is a 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. Unlike many of its competitors, the Company's business is
focused principally on investment management. As such, the Company's revenues
are largely based on the level of assets under management in its business and
the level of fees associated with its various investment products rather than
total assets of the Company. As of December 31, 1999, the Company had
approximately $21.9 billion of assets under management, 90% of which were
invested in equity securities.

Organization and Formation Transactions

The Company was incorporated in April 1998 as "Alpha G, Inc." under the
laws of the state of New York and renamed "Gabelli Asset Management Inc." in
February 1999. The Company is a holding company formed in connection with the
reorganization (the "Reorganization") of Gabelli Funds, Inc. ("GFI") and the
Company's subsequent initial public offering ("Offering"). On February 9, 1999,
in connection with the Reorganization, the Company issued 24 million shares of
Class B Common Stock, representing all of its then issued and outstanding common
stock to GFI and two of GFI's subsidiaries for substantially all of the
operating assets and liabilities of GFI relating to its institutional and retail
asset management, mutual fund advisory, underwriting and brokerage business. GFI
was later renamed "Gabelli Group Capital Partners, Inc." ("GGCP").

On February 11, 1999, the Company sold 6 million shares of its Class A
Common Stock in the Offering to the public at a price of $17.50 per share,
receiving approximately $96 million after fees and expenses through an
underwriting led by Merrill Lynch & Co., Salomon Smith Barney and Gabelli &
Company.

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

GFI, predecessor to 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. Its initial money management activities
centered on the Company's value-oriented investment philosophy. 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 estate oriented product
offerings. Throughout its 23-year history, the Company has marketed most of its
products under the "Gabelli" brand name.

2
<PAGE>

The Company's assets under management are organized principally in three
groups: Mutual Funds, Separate Accounts and Partnerships.

o Mutual Funds: At December 31, 1999, the Company had $11.6 billion of assets
under management in open-end mutual funds and closed-end funds,
representing approximately 53% of the Company's total assets under
management. The Company currently provides advisory services to (i) the
Gabelli family of funds, which consists of 17 open-end mutual funds and 4
closed-end funds; (ii) The Treasurer's Fund, consisting of 3 open-end money
market funds (the "Treasurer's Funds"); and (iii) the Gabelli Westwood
family of funds, consisting of 6 open-end mutual funds, 5 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,
1999, 97% 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 49% of such
assets in open-end Mutual Funds ranked "five stars" and 43% 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. 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. At December 31,
1999, approximately 50% 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 No-Transaction Fee ("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. Net cash flows from Third Party
Distribution Programs accounted for 79% of all cash flows into open-end
equity funds during 1999 and represented nearly 50% of all assets in these
funds at December 31, 1999.

o Separate Accounts: At December 31, 1999, the Company had $10.1 billion of
assets in approximately 1,100 separate accounts, representing approximately
46% 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, 1999, 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, 1999, over 95% of the
Company's assets in Separate Accounts (excluding subadvisory assets) had
been obtained through direct sales relationships.

o 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 (collectively, the "Partnerships").
The Partnerships had $230 million of assets, or approximately 1% of total
assets under management, at December 31, 1999.

Investment advisory and incentive fees relating to the Mutual Funds, the
Separate Accounts, and the Partnerships generated approximately 84% of the
Company's total revenues for each of the years ended December 31, 1998 and
December 31, 1999.

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

3
<PAGE>

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

Assets Under Management
By Product Type
(Dollars in millions)
<TABLE>
<CAPTION>
December 31,
1995 to
December 31,
At December 31, 1999
--------------------------------------------------------
1995 1996 1997 1998 1999 CAGR(a)
-------------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Equity:
Mutual Funds................................ $ 3,875 $ 3,969 $ 5,313 $ 7,159 $10,459 28.2 %
Separate Accounts........................... 5,051 5,200 6,085 7,133 9,370 16.7
------ ------- ------- ------- -------
Total Equity.............................. 8,926 9,169 11,398 14,292 19,829 22.1
------ ------- ------- ------- -------
Fixed Income:
Money Market Mutual Funds................... 236 235 827 1,030 1,175 49.4
Bond Mutual Funds........................... 5 5 6 8 6 4.7
Separate Accounts........................... -- -- 928 824 694
------ ------- ------- ------- -------
Total Fixed Income........................ 241 240 1,761 1,862 1,875 67.0
------ ------- ------- ------- -------
Partnerships:
Partnerships................................ 112 116 138 146 230 19.7
------ ------- ------- ------- -------
Total Assets Under Management(b).......... $9,279 $ 9,525 $13,297 $16,300 $21,934 24.0
====== ======= ======= ======= =======
Breakdown of Total Assets Under Management:
Mutual Funds................................ $4,116 $ 4,209 $ 6,146 $ 8,197 $11,640 29.7
Separate Accounts........................... 5,051 5,200 7,013 7,957 10,064 18.8
Partnerships................................ 112 116 138 146 230 19.7
------ ------- ------- ------- -------
Total Assets Under Management(b).......... $9,279 $ 9,525 $13,297 $16,300 $21,934 24.0
====== ======= ======= ======= =======
- ----------
</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 $10,793 and $11,082 at
December 31, 1995 and 1996, respectively, and the CAGR for total assets
would have been 19.4%.

4
<PAGE>

Summary of Investment Products

The Company manages assets in the following wide spectrum of investment
products and strategies, many of which are focused on fast-growing areas:
<TABLE>
<CAPTION>
<S> <C> <C>
U.S. Equities: Global and International Equities: Alternative Products:
------------- --------------------------------- --------------------
All Cap Value International Growth Risk Arbitrage
Large Cap Value Global Growth Merchant Banking
Large Cap Growth Global Telecommunications
Mid Cap Value Global Multimedia
Small Cap Value Gold(b)
Small Cap Growth
Micro Cap
Real Estate(a)
Utilities
Non market correlated

Convertible Securities: U.S. Balanced: U.S. Fixed Income:
---------------------- ------------- -----------------
U.S. Convertible Securities Balanced Growth Corporate
Global Convertible Securities Balanced Value Government
Municipals
Asset-backed
Intermediate
Short-term

</TABLE>

- ----------

(a) Invested primarily in publicly-traded real estate investment trusts and
sub-advised by Westwood Management.

(b) Invested primarily in publicly-traded equities of U.S. and international
gold companies.

5
<PAGE>

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

o 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.

o 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 also underwrites publications
written by its investment professionals, including the recently completed
"Deals...Deals ...and More Deals" which examines the practice of merger
arbitrage. 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.

o 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.

o 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 continuing to leverage 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:

o 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
further plans to expand its geographic presence and has, in January 2000,
opened an office in London and hired personnel living and working in Europe
to develop and launch European private fund and mutual fund products. The
Company believes that with its brand name recognition, it has the capacity
to create new products and services around the Gabelli brand to complement
its existing product offerings. New product offerings in 1999 include two
open end mutual funds, the Gabelli Blue Chip Value Fund and the Gabelli
Utilities Fund; a closed end fund, the Gabelli Utility Trust; a private
limited partnership, Gabelli Global Partners, L.P. and an offshore fund,
Gabelli Global Partners, Ltd.

6
<PAGE>

o 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, 1999, the Company was participating in 78
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 now
offers 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.

o 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 23-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.

o 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.

o Attracting and Retaining Experienced Professionals. 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. 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. The
availability of publicly traded Class A Common Stock enhances the Company's
ability to attract and retain top performing investment professionals.
During 1999, two highly regarded investment professionals, Barbara Marcin
and Timothy O'Brien joined the Company. Ms. Marcin and Mr. O'Brien
currently manage the Gabelli Blue Chip Value Fund and the Gabelli Utilities
Fund, respectively, as well as certain private accounts. In addition,
joining us from the Mathers Fund and heading up the newly formed
Non-Market-Correlated group is portfolio manager Henry Van der Eb.

o 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. On
October 1, 1999 the Company completed its alliance with Mathers and
Company, Inc. and now acts as investment advisor to the Mathers Fund
(renamed Gabelli Mathers Fund). The Gabelli Mathers Fund has over $100
million in assets under management and approximately 5,000 shareholders.
Further, in December 1999 the Company announced that it plans to add
Comstock Partners Funds, Inc. to the Gabelli Mathers mutual fund product
line. The Comstock Partners Funds are comprised of the Comstock Partners
Capital Value Fund, a specialty diversified equity fund, and Comstock
Partners Strategy Fund, a flexible income fund. These funds are positioned
to take advantage of a sustained stock market decline. The funds will add
over $85 million and 20,000 new investors to the Gabelli mutual fund
family. The Company believes that it is well positioned to pursue
acquisitions and alliances because it is one of relatively few
publicly-traded investment management firms.

7
<PAGE>

Mutual Funds

The Mutual Funds include 26 open-end mutual funds and 4 closed-end funds
which had total assets as of December 31, 1999 of $11.6 billion. The open-end
Mutual Funds are available to individuals and institutions primarily on a
no-load basis, while the closed-end funds are listed and traded on the New York
Stock Exchange ("NYSE"). At December 31, 1999, the open-end funds had total
assets of $9.7 billion and the closed-end funds had total assets of $1.9
billion. The assets managed in the closed-end funds represent approximately 17%
of the assets in the Mutual Funds and 9% of the total assets under management of
the Company at December 31, 1999. 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 December 31, 1999, approximately 50% 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 for 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.

Gabelli Funds, L.L.C. ("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 MitesSM 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. The Company plans to further increase and
diversify the number of fixed income products offered by Gabelli Fixed Income
L.L.C. with two limited term fixed income portfolios to be offered in the second
quarter 2000. Certain members of senior management of Gabelli Fixed Income
L.L.C. own a 19.9% equity interest in Gabelli Fixed Income L.L.C.

8
<PAGE>

The following table lists the Mutual Funds, together with the December 31,
1999 Morningstar overall rating, where rated (ratings are not available for the
money-market Mutual Funds and other Mutual Funds, which collectively represent
13% 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 December 31,
1999.
<TABLE>
<CAPTION>
Fund Net Assets as of
(Morningstar Overall Advisory 12b-1 Initial December 31,
Rating)(1) Primary Investment Fund Fees Fees Offer 1999
Portfolio Manager(s) Objective Characteristics (%) (%) Date ($ in millions)
- ------------------------- ------------------------- ---------------- --------- ------- ---------- ---------------

<S> <C> <C> <C> <C> <C> <C>
GABELLI OPEN-END FUNDS:

The Gabelli Growth Capital appreciation No-load, 1.00 .25 04/10/87 $3,155.2
Fund from companies that Open-end,
(5 stars) have favorable, yet Diversified
undervalued,
prospects for
Howard F. Ward, CFA 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 02/07/94 445.5
Growth Fund appreciation through Open-end,
(5 stars) investment in a Non-diversified
portfolio of equity
securities focused on
the entertainment,
Marc J. Gabelli media and
communications
sectors.

The Gabelli Global High level of capital No-load, 1.00 .25 11/01/93 459.3
Telecommunications appreciation through Open-end,
Fund worldwide investments Non-diversified
(5 stars) in equity securities,
including the U.S.,
primarily in the
Mario J. Gabelli, CFA telecommunications
Marc J. Gabelli industry.
Ivan Arteaga, CFA

The Gabelli Asset Growth of capital as No-load, 1.00 .25 03/03/86 1,994.0
Fund a primary investment Open-end,
(4 stars) objective, with Diversified
current income as a
secondary investment
Mario J. Gabelli, CFA objective. Invests in equity
securities of companies
selling at a significant
discount to their private
market value.

Gabelli International Capital appreciation No-load, 1.00 .25 06/30/95 46.7
Growth Fund by investing Open-end,
(4 stars) primarily in equity Diversified
securities of foreign
companies with rapid
Caesar M.P. Bryan growth in revenues and
earnings.

The Gabelli Value High level of capital Load, 1.00 .25 09/29/89 1,204.4
Fund appreciation from Open-end
(4 stars) undervalued equity Non-diversified
securities that are
held in a concentrated
Mario J. Gabelli, CFA portfolio.

9
<PAGE>

Fund Net Assets as of
(Morningstar Overall Advisory 12b-1 Initial December 31,
Rating)(1) Primary Investment Fund Fees Fees Offer 1999
Portfolio Manager(s) Objective Characteristics (%) (%) Date ($ in millions)
- ------------------------- ------------------------- --------------- --------- ------- ---------- ------------------

The Gabelli Equity High level of total No-load, 1.00 .25 01/02/92 88.9
Income Fund return with an Open-end,
(3 stars) emphasis on income Diversified
producing equities
with yields greater
Mario J. Gabelli, CFA than the S&P 500
average.

The Gabelli Small Cap High level of capital No-load, 1.00 .25 10/22/91 338
Growth Fund appreciation from Open-end,
(3 stars) equity securities of Diversified
smaller companies
with market
Mario J. Gabelli, CFA capitalization of
$500 million or less.

The Gabelli ABC Fund Total returns from No-load, 1.00 .25 05/14/93 42.8
(3 stars) equity and debt Open-end,
securities that are Non-diversified
attractive to
Mario J. Gabelli, CFA 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 17.6
Convertible return through a Open-end,
Securities Fund combination of Non-diversified
(2 stars) current income and
capital appreciation
through investment in
A. Hartswell convertible
Woodson, III securities of U.S.
and non-U.S. issuers.

The Gabelli Mathers Long-term capital No-load, 1.00 .25 10/01/99 104.7
Fund appreciation in various Open-end,
(2 stars) market conditions without Non-diversified
excess risk of capital loss.
Henry Van der Eb, CFA

Gabelli Gold Seeks capital No-load, 1.00 .25 07/11/94 14.1
Fund appreciation and Open-end,
(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 10/01/92 527.2
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.

Gabelli Capital Asset Capital appreciation No-load, .75 n/a 05/01/95 176.1
Fund from equity Open-end,
(Not rated) securities of Diversified,
companies selling at Variable Annuity
Mario J. Gabelli, CFA a significant
discount to their
private market value.

10
<PAGE>

The Gabelli Global High level of capital No-load, 1.00 .25 05/11/98 26.7
Opportunity Fund appreciation through Open-end,
(Not rated) worldwide investments Non-diversified
in equity securities.
Caesar M.P. Bryan
Marc J. Gabelli

The Gabelli Blue Chip Capital appreciation No-load, 1.00 .25 08/26/99 7.2
Value Fund through investments in Open-end,
(Not rated) equity securities of well Diversified
established, high
quality companies with
Barbara Marcin, CFA market capitalizations in
excess of $5 billion.

The Gabelli Utilities High level of return No-load, 1.00 .25 08/31/99 3.7
Fund through a combination of Open-end,
(Not rated) capital appreciation and Diversified
current income.
Timothy O'Brien, CFA

GABELLI WESTWOOD OPEN-END
FUNDS:

Gabelli Westwood Capital appreciation Class AAA: 1.00 .25 01/02/87 169.5
Equity Fund through a diversified No-load,
(4 stars) portfolio of equity Open-end,
securities using a Diversified
top- down approach
Susan M. Byrne that begins with an Class A: 1.00 .50 01/28/94 2.3
analysis of the Load,
broad, long-term Open-end,
trends in the economy Diversified
and an assessment of
the business cycle
which identifies
sectors that will
benefit from that
environment.

Gabelli Westwood Both capital Class AAA (4 stars): .75 .25 10/01/91 160.0
Balanced Fund appreciation and No-load,
(4 stars) current income using Open-end,
portfolios containing Diversified
stocks, bonds, and
Susan M. Byrne cash as appropriate in Class A (3 stars): .75 .50 04/06/93 9.3
Patricia K. Fraze light of current economic Load,
and business conditions. Open-end,
Diversified

Gabelli Westwood Total return and No-load, .60 .25 04/06/93 5.8
Intermediate Bond current income, while Open-end,
Fund limiting risk to Diversified
(3 stars) principal. Pursues
higher yields than
shorter maturity funds,
Patricia K. Fraze and has more price stability
than generally higher
yielding long-term funds.

Gabelli Westwood Long-term capital No-load, 1.00 .25 04/15/97 28.4
SmallCap appreciation, Open-end,
Equity Fund investing at least Diversified
(Not rated) 65% of its assets in
equity securities of
Lynda Calkin, CFA companies with market
capitalizations of $1
billion or less.

11
<PAGE>

Gabelli Westwood Long-term capital No-load, 1.00 .25 05/11/98 12.8
Mighty MitesSM Fund appreciation by Open-end,
(Not rated) investing primarily Diversified
in equity securities
Mario J. Gabelli, CFA with market
Marc J. Gabelli capitalizations of
Laura S. Linehan, CFA $300 million or less.
Walter K. Walsh

Gabelli Westwood Long-term capital No-load, 1.00 .25 09/30/97 1.6
Realty Fund appreciation as well Open-end,
(Not rated) as current income, Diversified
investing in equity
Susan M. Byrne securities that are
Timothy Ognisty, CFA primarily engaged in
or related to the
real estate industry.

THE TREASURER'S OPEN-END
MONEY MARKET FUNDS:

The Treasurer's Fund, Current income with No-load, .30 n/a 01/01/88 373.4
Inc.-- Domestic preservation of Open-end,
Prime Money Market principal and Diversified
Portfolio liquidity through
(Not rated) investment in U.S.
Treasury securities
Judith A. Raneri and corporate bonds.

The Treasurer's Current income with No-load, .30 n/a 12/18/87 182.4
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 91.8
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

GABELLI CLOSED-END FUNDS:

The Gabelli Global Long-term capital Closed-end, 1.00 n/a 11/15/94 246.5
Multimedia Trust Inc. (2) appreciation from Non-diversified
(5 stars) equity investments in NYSE Symbol: GGT
global telecommunica-
tions, media,
Mario J. Gabelli, CFA publishing and
entertainment
holdings.

The Gabelli Equity Long-term growth of Closed-end, 1.00 n/a 08/14/86 1,500.2
Trust Inc. capital by investing Non-diversified
(3 stars) in equity securities. NYSE Symbol: GAB

Mario J. Gabelli, CFA

The Gabelli High total return Closed-end, 1.00 n/a 07/03/89 120.2
Convertible from investing Diversified
Securities Fund, Inc. (3) primarily in NYSE Symbol: GCV
(3 stars) convertible
instruments.
Mario J. Gabelli, CFA

12
<PAGE>

The Gabelli High total return from Closed-end, 1.00 n/a 07/09/99 83.3
Utility Trust (2) investments primarily in Diversified
(not rated) securities of companies NYSE Symbol: GUT
involved in gas,
electricity
and water industries.
Mario J. Gabelli, CFA
Timothy O'Brien, CFA

</TABLE>

- ----------

(1) Morningstar proprietary ratings reflect historical risk-adjusted performance
as of December 31, 1999 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.

(2) The Gabelli Global Multimedia Trust was formed, in 1994, through a spin-off
of assets previously held in the Gabelli Equity Trust.

(3) The Gabelli Convertible Securities Fund was originally formed, in 1989, as
an open end investment company and was converted to a closed end investment
company in 1995.

13
<PAGE>

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 1998 and 1999, the Company further expanded these efforts to include
substantially all of its open-end Mutual Funds in over Seventy Third-Party
Distribution Programs. Although 50% 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 $8.5 billion of assets under management in the open-end equity Mutual Funds
as of December 31, 1999, approximately 28% were generated from 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. The introduction of multi-class shares will initially be done using the
global series of Gabelli mutual funds and the Gabelli Westwood funds. The use of
multi-class share products will be a major step towards expanding the
distribution of all Gabelli Fund products into the advised sector of the mutual
fund investment community. In 1999 approximately 79% of all mutual fund inflows
came through this sector. The multi-class shares, which are expected to be
launched in March 2000, will add Class A shares with a front end sales charge;
Class B shares which will be subject to a back end contingent deferred sales
charge and Class C shares which will be level load. The existing class of
no-load shares will be designated as Class AAA shares. The no-load option will
continue to be available for new and current investors. 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 of
1940 as amended (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
Company may terminate an investment management agreement without penalty on 60
days' written notice.

14
<PAGE>

Separate Accounts

Since 1977, the Company has provided investment management services through
its subsidiary GAMCO Investors, Inc. ("GAMCO") to a broad spectrum of
institutional and high net worth investors. As of December 31, 1999, the Company
had approximately 1,100 Separate Accounts with an aggregate of approximately
$10.1 billion of assets, which represent approximately 46% of the total assets
under management of the Company. 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 December 31, 1999. The
Separate Accounts are invested in U.S. and international equity securities, U.S.
fixed-income securities and convertible securities. At December 31, 1999, high
net worth accounts (accounts of individuals and related parties in general
having a minimum account balance of $1 million) comprised approximately 79% of
the number of Separate Accounts and approximately 25% of the assets, with
institutional investors accounting for the balance.

Each Separate Account portfolio is managed to meet the specific needs and
objectives of the particular client by utilizing investment strategies and
techniques within the Company's areas of expertise. Members of the sales and
marketing staff for the Separate Accounts business have an average of
approximately 10 years of experience with the Company and focus on developing
and maintaining long-term relationships with their Separate Account clients in
order to be able to understand and meet their individual 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 December 31, 1999, over 95% of
the Company's assets in Separate Accounts (excluding subadvisory assets) were
obtained through direct sales relationships. Sales efforts are conducted on a
regional and product specialist basis. Clients are generally serviced by a team
of individuals, the core of which remain assigned to a specific client from the
onset of the client relationship. The Company's sales force maintains direct
relationships with corporate pension and profit sharing plans, foundations,
endowment funds, jointly trusted plans, municipalities and high net worth
individuals that comprise the Company's Separate Accounts business.

Partnerships

The Company offers alternative investment products principally 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 $230 million of assets at December 31,
1999. Gabelli Associates Fund had $142 million of assets under management as of
December 31, 1999 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 December 31, 1999
were approximately $10 million and $6 million, respectively. Gabelli Associates
Limited, which had approximately $53 million of assets as of December 31, 1999,
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. Two new funds were
introduced during 1999, Global Partners, L.P. and Global Partners, Ltd., with
assets of $13 million and $6 million, respectively, at December 31, 1999. The
Company also manages the Gabelli International Gold Fund Limited, which as of
December 31, 1999 had less than $1 million of assets. The Company's alternative
investment products are marketed primarily through its direct sales force. The
Company intends to expand product offerings, both domestic and international,
and the geographic composition of its customer base in the Partnerships and
other alternative investment products and expects that the assets invested in
these products will provide a growing source of revenues in the future.

Brokerage and Mutual Fund Distribution

The Company offers underwriting, execution and trading services through its
majority owned 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.

15
<PAGE>

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, 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 ("12b-1") of the
Investment Company Act. Distribution fees from the open-end Mutual Funds
amounted to $7.5 million, $11.9 million and $16.2 million for the years ended
December 31, 1997, 1998 and 1999, 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 and, beginning in March 2000,
the multi class shares added to the global and international series of Gabelli
mutual funds.

Under the distribution agreements, the open-end no load (Class AAA shares)
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. Class B and Class C shares, launched in March 2000 as part of the
multi-class option for certain mutual funds, have a 12b-1 distribution plan with
a service and distribution fee totaling 1%. 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 defined in 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. In 1999, Gabelli & Company participated as an underwriter in 35
syndicated underwritings with commitments totaling $64.2 million for public
equity and debt offerings managed by major investment banks. In 1998, Gabelli &
Company participated as an underwriter in 32 syndicated underwritings with
commitments totaling $104 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 that 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 taken steps over the past two years to 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 over the past year and the
Company's strategy is to continue to devote additional resources to its sales
and marketing efforts.

16
<PAGE>

The market for providing investment management services to institutional and
high net worth Separate Accounts is also highly competitive. Approximately 40%
of the Company's investment management fee revenues for the year ended December
31, 1999 were derived from its Separate Accounts. Selection of investment
advisers by U.S. institutional investors is often subject to a screening process
and to favorable recommendation by investment industry consultants. Many of
these investors require their investment advisers to have a successful and
sustained performance record, often five years or longer, and also focus on one
and three year performance records. The Company has significantly increased its
assets under management on behalf of U.S. institutional investors since its
entry into the institutional asset management business in 1977. At the current
time, the Company believes that its investment performance record would be
attractive to potential new institutional and high net worth clients and the
Company has determined to devote additional resources to the institutional and
high net worth investor markets. However, no assurance can be given that the
Company's efforts to obtain new business will be successful.

Intellectual Property

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

17
<PAGE>

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.

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
December 31, 1999, the Company had five percent or more beneficial ownership
with respect to more than 100 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.

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.
The Company's opening of an office in London and its plans to market certain
products in Europe will also require the Company to comply with the laws of the
United Kingdom and other European countries regarding these activities.

Staff

At March 1, 2000, the Company had a full-time staff of approximately 153
individuals, of whom 56 served in the portfolio management, research and trading
areas, 55 served in the marketing and shareholder servicing areas and 42 served
in the administrative area. As part of its staff, the Company employs eleven
portfolio managers for the Mutual Funds, Separate Accounts and Partnerships.
Additionally, Westwood Management employs four portfolio managers who advise
five of the six portfolios of the Gabelli Westwood family of funds.

18
<PAGE>

Item 2: Properties

As of December 31, 1999, the principal properties leased by the Company for
use in its business were as follows:

Location Lease Expiration Square Footage
-------- ---------------- --------------
One Corporate Center December 11, 2001 24,555
Rye, New York 10580

401 Theodore Fremd Avenue April 30, 2013 60,055
Rye, New York 10580

165 West Liberty Street month-to-month
Reno, Nevada 89501 1,599
Plaza Center, Suite 503 May 31, 2004
249 Royal Palm Way 1,149
Palm Beach, FL 33480

100 Corporate North November 30, 2000 3,435
Suite 201
Bannockburn, IL 60015

1354 Hancock Street April 30, 2000 225
Suite 208
Quincy, MA 02169

124 West Putnam Avenue December 27, 2001 1,625
Suite 300
Greenwich, CT 06830

4/5 Princes Gate January 20, 2005 1,700
London, SW7
United Kingdom

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
40,000 square feet are currently subleased to other tenants. The Company
receives rental payments under the sublease aggreements which totaled
approximatly $688,000 in 1999 and were used to offset operating expenses
incurred for the property. The lease provides that all operating expenses
related to the property are to be paid by the Company. 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.

Item 3: Legal Proceedings

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.

Item 4: Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 1999.

19
<PAGE>

PART II

Item 5: Market for the Registrant's Common Equity and Related Stockholder
Matters

The Company's shares of Class A common stock have been traded on the New
York Stock Exchange (NYSE) under the symbol GBL since its initial public
offering on February 11, 1999. There were no publicly traded shares of the
Company's common stock prior to that date.

As of March 1, 2000 there were approximately 32 Class A common stockholders
of record and three Class B common stockholders of record (GGCP and two
wholly-owned subsidiaries). These figures do not include stockholders with
shares held under beneficial ownership in nominee name which are estimated to be
in excess of 3,000.

The following table sets forth the high and low prices of the Company's
Class A common stock for each quarter of 1999 commencing with its initial public
offering, as reported by the New York Stock Exchange.

Quarter Ended High Low

March 31, 1999 $ 18.75 $ 13.06
June 30, 1999 $ 17.25 $ 13.25
September 30, 1999 $ 17.38 $ 15.13
December 31, 1999 $ 18.00 $ 14.19

The Company has not paid any dividends since its inception and does not
presently anticipate paying dividends in the foreseeable future.

20
<PAGE>

Item 6: Selected Financial Data

General

The selected historical financial data presented below has been derived in
part from, and should be read in conjunction with Management's Discussion and
Analysis included in Item 7 and the audited Consolidated Financial Statements of
Gabelli Asset Management Inc. and subsidiaries and related notes included in
Item 8 of this report.

The Company has not presented historical earnings per share for periods
prior to 1999 due to the significant changes in its operations that are not
reflected in those historical financial statements (see Note A to the
Consolidated Financial Statements).
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands)
1995 1996 1997 1998 1999
---------- ---------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
Income Statement Data
Revenues:
Investment advisory and
incentive fees............................... $ 77,302 $ 84,244 $ 89,684 $ 116,358 $ 147,414
Commission revenue............................. 5,706 6,667 7,496 8,673 11,856
Distribution fees and other income............. 6,302 7,257 8,096 13,156 16,992
------- -------- --------- --------- ---------
Total revenues............................... 89,310 98,168 105,276 138,187 176,262
------- -------- --------- --------- ---------
Expenses:
Compensation costs............................. 39,384 41,814 45,260 56,046 71,860
Management fee................................. 9,423 10,192 10,580 12,246 10,153
Other operating expenses....................... 18,709 19,274 18,690 24,883 28,917
Non-recurring charge, net...................... - - - - 50,725
------- -------- --------- --------- ---------
Total expenses............................... 67,516 71,280 74,530 93,175 161,655
------- -------- --------- --------- ---------
Operating income................................. 21,794 26,888 30,746 45,012 14,607
------- ------- --------- --------- ---------
Other income:
Net gain (loss) from investments............... 10,105 8,783 7,888 (1,103) 14,253
Gain on sale of PCS licenses, net............. - - - 17,614 -
Interest and dividend income................... 5,853 5,406 4,634 5,117 6,850
Interest expense............................... (679) (879) (1,876) (2,212) (3,438)
Other.......................................... 147 331 (109) - -
------- ------- --------- --------- ---------
Total other income, net...................... 15,426 13,641 10,537 19,416 17,665
------- ------- --------- --------- ---------
Income before income taxes
and minority interest.......................... 37,220 40,529 41,283 64,428 32,272
Income taxes................................... 7,769 7,631 3,077 5,451 10,467
Minority interest.............................. 2,555 2,727 1,529 1,710 3,270
------- ------- --------- --------- ---------
Net income....................................... $ 26,896 $ 30,171 $ 36,677 $ 57,267 $ 18,535
======= ======= ========= ========= =========

Net income per share:
Basic and diluted.............................. $ 0.64
=========
Weighted average shares outstanding:
Basic and diluted.............................. 29,117
=========
</TABLE>

21
<PAGE>

December 31,
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- --------
(In thousands, except assets under management)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data
Total assets............. $155,541 $182,524 $232,736 $254,675 $243,062
Total liabilities and
minority interest.... 39,470 43,991 69,117 59,775 95,486
-------- -------- -------- -------- --------
Total stockholders' equity $116,071 $138,533 $163,619 $194,900 $147,576
======== ======== ======== ======== ========

Assets Under Management (unaudited)
(at period end, in millions):
Mutual Funds......... $ 4,116 $ 4,209 $ 6,146 $ 8,197 $ 11,640
Separate Accounts.... 5,051 5,200 7,013 7,957 10,064
Partnerships......... 112 116 138 146 230
-------- -------- -------- -------- --------
Total (1)......... $ 9,279 $ 9,525 $ 13,297 $ 16,300 $ 21,934
======== ======== ======== ======== ========

</TABLE>
<TABLE>
<CAPTION>

Year Ended December 31, 1999
(In thousands, except per share data)
Unaudited Pro Forma Income Statement Data
<S> <C>
Revenues:
Investment advisory and incentive fees...................... $ 147,414
Commission revenue.......................................... 11,856
Distribution fees and other income.......................... 16,992
---------
Total revenues.......................................... 176,262
---------
Expenses:
Compensation costs.......................................... 71,860
Management fee.............................................. 9,057
Other operating expenses.................................... 28,894
Non-recurring charge........................................ 50,725
---------
Total expenses.......................................... 160,536
---------

Operating income............................................ 15,726
---------
Other income:
Net gain from investments................................... 12,350
Interest and dividend income................................ 6,374
Interest expense............................................ (3,653)
---------
Total other income, net................................. 15,071
---------
Income before income taxes and minority interest............... 30,797
Income taxes................................................ 12,728
Minority interest........................................... 3,270
---------
Net income..................................................... $ 14,799 (2)
=========

Net income per share:
Basic and diluted........................................... $ 0.50 (2)
=========

Weighted average shares outstanding:
Basic and diluted........................................... 29,890
=========
</TABLE>

22
<PAGE>

The foregoing unaudited pro forma income statement data gives effect to (i)
the Reorganization, including the 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 J to the Consolidated
Financial Statements) had been in effect for the full year ended December 31,
1999 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. The unaudited pro forma data does not give effect to the use of proceeds
received from the Offering for the period prior to the Offering.

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 Reorganization 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.

(1) 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 1995 and
1996 would have been approximately $10,793 and $11,082, respectively.

(2) Excluding the non recurring charge related to the note payable ($30.9
million, net of tax benefit of $19.8 million, or $1.03 per share) net
income and net income per share were $45.7 million and $1.53, respectively.

Item 7: 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 and the notes thereto included in Item 8 to this report.

Basis of Presentation

Gabelli Asset Management Inc. (the "Company"), incorporated in April 1998,
had no significant assets or liabilities and did not engage in any substantial
business activities prior to the public offering ("Offering") of its shares. On
February 9, 1999, the Company exchanged 24 million shares of its Class B Common
Stock, representing all of its then issued and outstanding common stock, to
Gabelli Funds, Inc. ("GFI") and two of its subsidiaries in consideration for
substantially all of the operating assets and liabilities of GFI related to its
institutional and retail asset management, mutual fund advisory, underwriting
and brokerage business (the "Reorganization"). GFI was subsequently renamed
Gabelli Group Capital Partners, Inc. ("GGCP").

Immediately following the Reorganization, the Company sold 6 million shares
of its Class A Common Stock in an initial public offering. On February 17, 1999
the Offering was completed and the Company received proceeds, net of fees and
expenses, of approximately $96 million. Following the Offering, GFI owned 80% of
the outstanding common stock of the Company. For periods 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 financial statements.

23
<PAGE>

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 reimbursed 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.

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

Interest and dividend income, interest expense and net gain (loss) from
investments (which includes both realized and unrealized gains) is derived from
proprietary investments of the Company's capital in various public and private
investments. Prior to the date of the Reorganization, net gain (loss) from
investments was derived primarily from the assets that were distributed to GFI
and also included 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 represented future commitments to sell an underlying index for
specified amounts at specified future dates. In connection with the Formation
Transactions, the Company distributed most of the proprietary investment
portfolio (which included the hedging activities) to GFI.

24
<PAGE>

As a result of the Offering, the Company became taxable as a "C" corporation
for Federal and state income tax purposes and will pay taxes at an effective
rate considerably higher than when Gabelli Asset Management Inc. 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 the Company's
consolidated majority-owned subsidiaries.

Operating Results for the Year Ended December 31, 1999 as Compared to the Year
Ended December 31, 1998

Total revenues for the year ended December 31, 1999 were $176.3 million, an
increase of $38.1 million, or 28%, compared to $138.2 million for the year ended
December 31, 1998. Investment advisory and incentive fees, comprising 84% of
total revenues, increased $31.1 million, or 27%, to $147.4 million, as the
Company experienced strong growth in the level of average assets under
management in both its Mutual Funds and Separate Accounts businesses. Total
average assets under management, which is the basis for investment advisory and
incentive fees, were $18.5 billion in 1999, an increase of $3.7 billion, or 25%,
compared to average assets under management of $14.8 billion in 1998. Total
assets under management at December 31, 1999 were $21.9 billion, an increase of
$5.6 billion or 35% from assets under management of $16.3 billion at December
31, 1998. Assets under management in Mutual Funds were $11.6 billion at December
31, 1999, an increase of approximately $3.4 billion, or 42%, from December 31,
1998. This increase represents approximately $1.0 billion in net cash inflows,
$2.3 billion from market-related appreciation, and $0.1 billion in assets
acquired. Assets under management in Separate Accounts were $10.1 billion at
December 31, 1999, an increase of $2.1 billion or 26% from $8.0 billion at
December 31, 1998. This increase represents approximately $0.1 billion in net
cash inflows and $2.0 billion from market related appreciation.

Commission revenues in 1999 were $11.9 million, an increase of $3.2 million,
or 37%, from commission revenues of $8.7 million in 1998. The increase 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 $9.4 million, or approximately 80%
of total commission revenues in 1999.

Distribution fees and other income increased more than 29% to $17.0 million
in 1999 from $13.2 million in 1998. Increased 12b-1 fees, resulting from the
growth in assets under management in our open end equity mutual funds, of $4.2
million were partially offset by lower revenues from syndicate activities and
other income.

Total expenses, excluding a $50.7 million non recurring charge, were $110.9
million in 1999, an increase of $17.8 million, or 19%, from $93.2 million in
1998. Total expenses as a percentage of, excluding the non recurring charge,
total revenues declined to 63% in 1999 from 67% in the prior year largely
resulting from the reduction in the management fee rate and the benefit from
spreading fixed costs over a larger revenue base. Compensation costs, which are
largely variable in nature and increase or decrease as revenues grow or decline,
rose approximately $15.8 million, or 28%, to $71.9 million in 1999 from $56.0
million in 1998. Management fee expense, which is totally variable and increases
or decreases as operating profits grow or decline, was $10.2 million in 1999, a
decline of $2.0 million, or 17%, from $12.2 million for the year ended December
31, 1998 as the result of the reduced management fee rate effective at the close
of the Offering. Other operating expenses, which include general operating
expenses, as well as marketing, promotion and distribution costs, were $28.9
million in 1999, an increase of approximately $4.0 million, or 16%, from $24.9
million in 1998. Mutual fund administration and distribution expenses accounted
for more than $3.1 million, or 78%, of this increase.

The Company recorded a $50.7 million non recurring charge in the first
quarter of 1999 resulting from a note payable to the Company's Chairman under
the terms of an Employment Agreement executed in conjunction with the
Reorganization.

25
<PAGE>

Net gain from investments, which is derived from the Company's proprietary
investment portfolio, was approximately $14.3 million for the year ended
December 31, 1999 compared to a net gain of $16.5 million for 1998, which
included a net gain of approximately $17.6 million from the sale of certain
Personal Communications Services ("PCS") licenses. Interest and dividend income
was $6.9 million in 1999 compared to $5.1 million in 1998. In connection with
the Reorganization, GFI retained most of the proprietary investment portfolio
(which included the remaining PCS licenses and hedging activities). Interest
expense rose $1.2 million to $3.4 million in 1999, from $2.2 million in 1998
principally from the increase in notes payable resulting as part of the
Reorganization.

Income taxes increased to $10.5 million for 1999 from $5.5 million for
1998, principally due to the conversion of the Company from an "S" Corporation
to a "C" Corporation for Federal and state income tax purposes and is net of the
$19.8 million deferred tax benefit resulting from the $50.7 million non
recurring charge.

Minority interest expense increased to $3.3 million in 1999 from $1.7
million in 1998. This increase is reflective of additional income attributable
to the minority interests of the Company's majority controlled subsidiaries,
GSI, Fixed Income and Advisers.

Operating Results for Year Ended December 31, 1998 as Compared to
Year Ended December 31, 1997

Total revenues for GFI in 1998 increased to $138.2 million compared to
$105.3 million in 1997, an increase of approximately $32.9 million or 31%.
Investment advisory and incentive fees, comprising 84% of total revenues
increased $26.7 million or 30% to $116.4 million as the company experienced
strong growth in the level of average assets under management in both its Mutual
Funds and Separate Accounts businesses. Total average assets under management,
which is the basis for investment advisory and incentive fees, were $14.8
billion in 1998, an increase of $3.4 billion or 30% compared to average assets
under management of $11.4 billion in 1997. Total assets under management at
December 31, 1998 were $16.3 billion, an increase of $3.0 billion from assets
under management of $13.3 billion at December 31, 1997. Assets under management
in Mutual Funds were $8.2 billion at December 31, 1998, an increase of
approximately $2.1 billion, or 34%, from December 31, 1997. This increase
represents approximately $1.2 billion in net cash inflows plus $900 million from
market-related appreciation. Assets under management in Separate Accounts were
$8.0 billion at December 31, 1998 and $7.0 billion at December 31, 1997. Growth
in revenues was greater than growth in assets due to a greater weighting of
assets to higher fee equity portfolios.

Commission revenues in 1998 were $8.7 million, an increase of $1.2 million,
or 16%, from commission revenues of $7.5 million in 1997. The increase
principally resulted from increased agency trading activities for accounts
managed by affiliated companies. Commission revenues derived from transactions
on behalf of the Mutual Funds and Separate Accounts clients totaled $7.0
million, or approximately 80% of total commission revenues in 1998.

Distribution fees and other income increased more than 63% to $13.2 million
in 1998 from $8.1 million in 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 $4.4 million, or 86% of the total
increase in distribution fees and other income during 1998 compared to 1997.

Total expenses in 1998 were $93.2 million, an increase of $18.7 million, or
25%, from $74.5 million in 1997. Total expenses as a percentage of total
revenues declined to 67% in 1998 from 71% in the prior year as fixed expenses
were spread over a larger revenue base. Compensation costs rose approximately
$10.8 million, or 24%, to $56.0 million in 1998 from $45.3 million in 1997.
Management fee expense was $12.2 million in 1998, an increase of $1.7 million or
16% from $10.6 million for the year ended December 31, 1997. Other operating
expenses were $24.9 million in 1998, an increase of approximately $6.2 million
or 33% from $18.7 million in 1997. Mutual fund administration and distribution
expenses accounted for more than $5.6 million or 90% of this increase.

26
<PAGE>

Net gain from investments, which was derived from GFI's proprietary
investment portfolio, was approximately $16.5 million in 1998, compared to $7.9
million for 1997, an increase of approximately $8.6 million. This increase
reflects a net gain of approximately $17.6 million from the sale of certain
Personal Communications Services (PCS) licenses as well as a smaller loss from
hedging activities, which losses declined to $4.8 million in 1998 from a loss of
$8.1 million in 1997. Interest and dividend income was $5.1 million in 1998
compared to $4.6 million in 1997. In connection with the Reorganization, GFI
retained most of the proprietary investment portfolio (which included GFI's
hedging activities). The net gain (loss) from the proprietary investment
portfolio to be retained by GFI was $(2.7) million and $6.5 million for 1998 and
1997, respectively.

Income taxes increased to $5.5 million in 1998 from $3.1 million in 1997, in
line with the increase in income before income taxes and minority interest.

Minority interest increased to $1.7 million in 1998 from $1.5 million in
1997. This increase is reflective of additional income attributable to the
minority interests of GFI's majority controlled subsidiaries, GSI, Fixed Income
and Advisers.

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.
<TABLE>
<CAPTION>

Summary cash flow data is as follows:

1997 1998 1999
------ ------ ------
(in thousands)
<S> <C> <C> <C>
Cash flows provided by (used in):
Operating activities $ 38,571 $ 9,543 $(13,454)
Investing activities (69,329) 78,591 4,073
Financing activities 10,419 (50,522) 62,191
-------- -------- --------
Increase (decrease) (20,339) 37,612 52,810
Cash and cash equivalents at beginning of year 32,949 12,610 50,222
-------- -------- --------
Cash and cash equivalents at end of year $ 12,610 $50,222 $103,032
-------- ------- --------
</TABLE>

Cash and liquidity requirements have historically been met through operating
activities and the Company's borrowing capacity. At December 31, 1999 the
Company had cash and cash equivalents of $103 million, an increase of $53
million from the prior year end.

Cash used in operating activities in 1999 of $13.5 million results
principally from $63.4 million in net purchases of securities partially offset
by net income of $49.4 million which is before a non cash charge, net of tax
benefit, of $30.9 million related to a note payable to the Company's Chairman.
Operating activities in 1998 provided net cash inflows of $9.5 million.

Cash provided by investing activities of $4.1 million in 1999 resulted
principally from partnership distributions. Cash provided by investing
activities of $78.6 million in 1998 included gross proceeds of $80 million from
the sale of certain PCS licenses.

27
<PAGE>

Cash provided by financing activities in 1999 of $62.2 million largely
results from the receipt of the net proceeds from the Offering of $96 million
partially offset by distributions to GFI, of $18.2 million, and to shareholders,
of $10.0 million, prior to the date of the Reorganization. Proceeds from the
Offering are being used for general corporate purposes and to initiate strategic
growth plans, which call for expanding product offerings, enhancing distribution
and marketing of existing investment products and pursuing strategic
acquisitions and alliances. At present, the Company has no plans, arrangements
or understandings relating to any specific acquisitions or alliances, other than
with respect to Comstock Partners Funds. The Company does not intend to use any
of the net proceeds from the Offering to pay debt service on the $50 million
payable to the Chairman under the terms of his Employment Agreement. Financing
activities resulting in the $50.5 million use of cash in 1998 was primarily
attributable to the repayment of a $30 million bank loan used to finance the
purchase of PCS licenses and $19.9 million of distributions made to
shareholders.

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 minimum net capital of $250,000. As of December 31, 1998 and 1999,
Gabelli & Company had net capital, as defined, of approximately $14.5 million
and $10.1 million, respectively, exceeding the regulatory requirement by
approximately $14.2 million and $9.9 million, respectively. Regulatory net
capital requirements increase when Gabelli & Company is involved in underwriting
activities.

Market Risk

The Company is subject to potential losses from certain market risks as a
result of absolute and relative price movements in financial instruments due to
changes in interest rates, equity prices and other factors. The Company's
exposure to market risk is directly related to its role as financial
intermediary and advisor for assets under management in its mutual funds,
institutional and separate accounts business and its proprietary investment and
trading activities. At December 31, 1999 the Company's primary market risk
exposure was for changes in equity prices and interest rates. At December 31,
1998 and 1999, the Company had equity investments, including mutual funds
largely invested in equity products, of $69.3 million and $45.6 million,
respectively. Investments in mutual funds, $42.0 million and $31.2 million at
December 31, 1998 and 1999, respectively, generally lower market risk through
the diversification of financial instruments within their portfolios. In
addition, the Company may alter its investment holdings from time to time in
response to changes in market risks and other factors considered appropriate by
management.

The Company's exposure to interest rate risk results, principally, from its
investment of excess cash in government obligations. These investments are
primarily short term in nature and the fair value of these investments generally
approximates market value.

The Company's revenues are largely driven by the market value of its assets
under management and are therefore exposed to fluctuations in market prices of
these assets, which are largely readily marketable equity securities. Investment
advisory fees for mutual funds are based on average daily asset values.
Management fees earned on institutional and separate accounts, for any given
quarter, are determined based on asset values on the last day of the preceding
quarter. Any significant increases or decreases in market value of assets
managed which occur on the last day of the quarter will result in a relative
increase or decrease in revenues for the following quarter.

28
<PAGE>

Recent Accounting Developments

In 1998, the Financial Accounting Standards Board 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 of these
statements 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.

Year 2000

In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementaion effors,
the Company experienced no significant disruptions in mission critical
information technology and non- technology systems and believes those systems
successfully responded to the Year 2000 date change. The Company did not incur
any significant costs during 1999 in connection with remediating its systems.
The Company is not aware of any material problems resulting from Year 2000
issues, either with its products, its internal systems, or the products and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
the Year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.

29
<PAGE>

Item 7A: Quantitative and Qualitative Disclosures About Market Risk

Reference is made to the information contained under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Market Risk."

Item 8: Financial Statements and Supplementary Data

Reference is made to the Index on page F-1 of the Consolidated
Financial Statements of the Company and the Notes thereto contained herein.

30
<PAGE>

Item 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GABELLI ASSET MANANAGEMENT INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

Page

<S> <C>

Report of Independent Auditors....................................................... F-2

Consolidated Financial Statements:
Consolidated Statements of Income for the years ended December 31, 1997, 1998 and
1999............................................................................... F-3
Consolidated Statements of Financial Condition at December 31, 1998 and 1999......... F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1997, 1998 and 1999................................................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1998
and 1999........................................................................... F-6
Notes to Consolidated Financial Statements........................................... F-8

Supplementary Data:
Unaudited Pro Forma Consolidated Statement of Income................................. F-18

</TABLE>

--------

All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission that are not required
under the related instructions or are inapplicable have been omitted.

31
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Gabelli Asset Management Inc. and Subsidiaries

We have audited the accompanying consolidated statements of financial
condition of Gabelli Asset Management Inc. and Subsidiaries as of December 31,
1998 and 1999 and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1999. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Gabelli Asset
Management Inc. and Subsidiaries at December 31, 1998 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.

ERNST & YOUNG LLP

New York, New York
February 29, 2000

32
<PAGE>

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>

Year ended December 31,
1997 1998 1999
----------- ----------- ----------
(In thousands, except per share data)
<S> <C> <C> <C>
Revenues
Investment advisory and incentive fees..................... $ 89,684 $ 116,358 $ 147,414
Commission revenue......................................... 7,496 8,673 11,856
Distribution fees and other income......................... 8,096 13,156 16,992
-------- --------- ---------
Total revenues........................................ 105,276 138,187 176,262
-------- --------- ---------
Expenses
Compensation costs......................................... 45,260 56,046 71,860
Management fee............................................. 10,580 12,246 10,153
Other operating expenses................................... 18,690 24,883 28,917
Non recurring charge....................................... - - 50,725
-------- --------- ---------
Total expenses........................................... 74,530 93,175 161,655
-------- --------- ---------
Operating income........................................... 30,746 45,012 14,607
-------- --------- ---------
Other Income (Expense)
Net gain (loss) from investments............................ 7,888 (1,103) 14,253
Gain on sale of PCS licenses, net........................... - 17,614 -
Interest and dividend income................................ 4,634 5,117 6,850
Interest expense............................................ (1,876) (2,212) (3,438)
Other...................................................... (109) - -
-------- --------- ---------
Total other income, net............................... 10,537 19,416 17,665
-------- --------- ---------
Income before income taxes and
minority interest......................................... 41,283 64,428 32,272
Income taxes............................................... 3,077 5,451 10,467
Minority interest.......................................... 1,529 1,710 3,270
-------- --------- ---------
Net income................................................. $ 36,677 $ 57,267 $ 18,535
======== ========= =========

Net income per share:
Basic and diluted......................................... $ 0.64
=========

Weighed average shares outstanding:
Basic and diluted......................................... 29,117

Pro forma data (unaudited):
Income before income taxes and minority interest
as reported.......................................... $ 32,272
Pro forma interest expense on $50 million note
payable.............................................. (338)
Pro forma management fee adjustment from 20%
to 10% of pre tax profits............................ 1,096
Pro forma reallocation of expenses to the new
parent company....................................... 23
Pro forma effect on income and expenses of
distribution of assets and liabilities............... (2,256)
Pro forma provision for income taxes..................... (12,728)
Pro forma minority interest.............................. (3,270)
---------
Pro forma net income..................................... $ 14,799
=========

Pro forma net income per share:
Basic and diluted........................................ $ 0.50
=========

Pro forma weighted average shares outstanding:
Basic and diluted........................................ 29,890
=========
See accompanying notes.
</TABLE>

33
<PAGE>

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>

December 31,
1998 1999
---------- ----------
(In thousands, except share data)

<S> <C> <C>
ASSETS

Cash and cash equivalents...................................... $ 50,222 $ 103,032
Investments in securities...................................... 83,802 69,791
Investments in partnerships and affiliates..................... 49,795 21,018
PCS licenses .................................................. 33,311 -
Receivable from broker......................................... 13,463 -
Investment advisory fees receivable............................ 8,851 14,269
Notes and other receivables from affiliates.................... 5,178 11,589
Capital lease.................................................. 3,433 3,186
Deferred income taxes.......................................... - 16,887
Intangible assets.............................................. 1,724 1,553
Other assets................................................... 4,896 1,737
--------- --------
Total assets................................................. $ 254,675 $243,062
========= ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Securities sold, but not yet purchased......................... $ 13,011 $ 2
Distributions payable to shareholders.......................... 11,616 -
Payable to broker.............................................. - 5,637
Notes payable.................................................. 5,876 50,000
Income taxes payable (including deferred income taxes of
$2,203 in 1998)............................................... 3,300 4,592
Capital lease obligation....................................... 3,614 3,581
Compensation payable........................................... 5,118 10,260
Accrued expenses and other liabilities......................... 5,113 6,596
--------- --------
Total liabilities............................................ 47,648 80,668
--------- --------

Minority interest.............................................. 12,127 14,818

Stockholders' equity:
Common Stock, $.01 par value; 1,000,000 shares authorized;
196,537 shares issued and outstanding in 1998................ 2 -
Class A Common Stock, $.001 par value; 100,000,000 shares
authorized; 6,000,000 shares issued in 1999.................. - 6
Class B Common Stock, $.001 par value; 100,000,000 shares
authorized; 24,000,000 shares issued and outstanding in 1999 - 24
Additional paid-in capital................................... 21,471 117,046
Retained earnings............................................ 184,141 35,156
Treasury stock, at cost (300,800 shares in 1999)............. - (4,656)
Notes receivable............................................. (10,714) -
--------- --------
Total stockholders' equity................................. 194,900 147,576
--------- --------
Total liabilities and stockholders' equity................ $ 254,675 $ 243,062
========= ========

See accompanying notes.
</TABLE>

34
<PAGE>

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1997, 1998 and 1999
(Dollars in thousands)
<TABLE>
<CAPTION>

Additional
Common Paid-in Retained Treasury Notes
Stock Capital Earnings Stock Receivable Total
--------- ------------ -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
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 stockholders...... - - (20,592) - - (20,592)
Net income......................... - - 36,677 - - 36,677
--------- --------- --------- -------- ---------- --------
Balance at December 31, 1997........ 2 12,372 152,775 - (1,530) 163,619
--------- --------- --------- -------- ---------- --------
Repurchase and retirement of 400
shares........................... - (351) - - 351 -
Issuance of 11,000 shares.......... - 9,450 - - (9,535) (85)
Distributions to stockholders...... - - (25,901) - - (25,901)
Net income......................... - - 57,267 - - 57,267
--------- --------- --------- -------- ---------- --------
Balance at December 31, 1998........ 2 21,471 184,141 - (10,714) 194,900
--------- --------- --------- -------- ---------- --------
Issuance of 6,000,000 shares,
Class A Common Stock............. 6 95,575 - - - 95,581
Issuance of 24,000,000 shares,
Class B Common Stock............. 24 - - - - 24
Distribution to GFI................ (2) - (165,271) - 10,714 (154,559)
Distributions to stockholders...... - - (2,249) - - (2,249)
Purchase of treasury stock......... - - - (4,656) - (4,656)
Net income......................... - - 18,535 - - 18,535
--------- --------- --------- -------- ---------- --------
Balance at December 31, 1999........ $ 30 $ 117,046 $ 35,156 $ (4,656) $ - $147,576
========= ========= ========= ======== ========== ========

</TABLE>
See accompanying notes.

35
<PAGE>

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year ended December 31
1997 1998 1999
----------- ----------- ----------
(In thousands)
<S> <C> <C> <C>
Operating activities
Net income............................................ $ 36,677 $ 57,267 $ 18,535
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in earnings of partnerships and affiliates.. (7,886) (1,414) (6,793)
Depreciation and amortization...................... 451 865 740
Deferred income taxes.............................. 50 (615) (16,887)
Minority interest in income of subsidiaries........ 1,529 1,710 3,270
Non-recurring charge............................... - - 50,725
Gain on sale of PCS licenses....................... - (28,449) -
Changes in operating assets and liabilities:
Investments in securities....................... 3,205 (27,195) (63,446)
Investment advisory fees receivable............. (1,145) (367) (5,418)
Notes and other receivables from affiliates..... 9,100 4,910 (8,483)
Other receivables............................... 784 1,464 -
Receivable from broker.......................... (1,391) (10,308) 6,166
Other assets.................................... (201) (2,460) 1,826
Notes payable................................... (879) (1,232) -
Income taxes payable............................ (670) 163 1,592
Compensation payable............................ (133) 1,662 4,417
Securities sold, but not yet purchased.......... (436) 12,665 (338)
Distributions payable to shareholders........... 2,754 7,311 -
Accrued expenses and other liabilities.......... (3,238) (6,434) 640
-------- -------- --------
Total adjustments..................................... 1,894 (47,724) (31,989)
-------- -------- --------
Net cash provided by (used in) operating activities... 38,571 9,543 (13,454)
-------- -------- --------
Investing activities
(Purchase) sale of PCS licenses...................... (63,201) 80,000 -
Distributions from partnerships and affiliates....... 2,607 3,770 5,554
Investments in partnerships and affiliates........... (6,560) (5,179) (1,481)
Cost of acquisitions................................. (2,175) - -
-------- -------- --------
Net cash (used in) provided by investing activities.. (69,329) 78,591 4,073
-------- -------- --------
Financing activities
Proceeds from (repayment of) bank loan............... 30,000 (30,000) -
Distributions to shareholders........................ (17,794) (19,636) (10,023)
Cash included in deemed distribution................. - - (18,170)
Purchase of minority stockholders' interest.......... (1,864) (886) (579)
Proceeds from issuance of common stock............... - - 95,619
Purchase of treasury stock........................... - - (4,656)
Other financing activities........................... 77 - -
-------- -------- --------
Net cash provided by (used in) financing activities.. 10,419 (50,522) 62,191
-------- -------- --------
Net (decrease) increase in cash and cash equivalents. (20,339) 37,612 52,810
Cash and cash equivalents at beginning of year....... 32,949 12,610 50,222
-------- -------- --------
Cash and cash equivalents at end of year............. $ 12,610 $ 50,222 $103,032
======== ======== ========
</TABLE>

See accompanying notes

36
<PAGE>

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

Year ended December 31,
1997 1998 1999
----------- ----------- ---------
(In thousands)
<S> <C> <C> <C>
Supplemental disclosure of cash flow information
Cash paid for interest................................... $ 1,784 $ 2,212 $ 3,438
-------- -------- ---------
Cash paid for income taxes............................... $ 3,337 $ 5,903 $ 25,762
-------- -------- ---------
Supplemental disclosure of noncash financing activity
Issuance of note payable for repurchase of subsidiary's
common stock........................................... $ 976 - -
-------- -------- ---------
Receipt of note for common stock sold.................... $ 404 $ 9,535 -
-------- -------- ---------
Receipt of notes for sale of minority interest........... $ 375 - -
-------- -------- ---------
</TABLE>

See accompanying notes.

37
<PAGE>

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS
DECEMBER 31, 1999

A. Significant Accounting Policies

Basis of Presentation

Gabelli Asset Management Inc. ("GAMI" or the "Company" and where the context
requires, the "Company" includes its predecessors and/or its unconsolidated
subsidiaries) was incorporated in April 1998 in the state of New York, with no
significant assets or liabilities and did not engage in any substantial business
activities prior to the initial public offering ("Offering") of its shares. On
February 9, 1999, the Company exchanged 24 million shares of its Class B Common
Stock, representing all of its then issued and outstanding common stock, with
Gabelli Funds, Inc. ("GFI") and two of its subsidiaries in consideration 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 (the "Reorganization"). GAMI distributed net
assets and liabilities, principally a proprietary investment portfolio, of
approximately $165 million, including cash of $18 million, which has been
recorded for accounting purposes as a deemed distribution to GFI. GFI was later
renamed Gabelli Group Capital Partners, Inc. ("GGCP").

On February 17, 1999, the Company completed its sale of 6 million shares of
Class A Common Stock in the Offering and received proceeds, after fees and
expenses, of approximately $96 million. Immediately after the Offering GFI owned
80% of the outstanding common stock of the Company. In addition, with the
completion of the Offering, the Company became a "C" Corporation for Federal and
state income tax purposes and is subject to substantially higher income tax
rates.

The accompanying consolidated financial statements for periods prior to the
date of the Reorganization include the assets, liabilities and earnings of 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 Inc.
("Advisers"). After the Reorganization these financial statements include the
accounts of Gabelli Funds, L.L.C., GAMCO and former GFI majority-owned
subsidiaries GSI, Fixed Income and Advisers.

At December 31, 1997, 1998 and 1999, the Company owned approximately 76% of
GSI (77% in 1999) and 41% of Advisers, which, combined with the voting interests
of affiliated parties, represented voting control, and 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
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.

Nature of Operations

GAMCO, Gabelli Funds L.L.C., 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 with the Securities and Exchange Commission ("SEC") and is a
member of the National Association of Securities Dealers, Inc. ("NASD"). 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 consolidated 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.

38
<PAGE>

Cash Equivalents

Cash equivalents consist of highly liquid investments with a maturity of
three months or less at the time of purchase.

Securities Transactions

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 (loss) from investments. Securities
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. Commissions and related clearing charges are recorded
on a trade date basis.

Securities sold, but not yet purchased are stated at quoted market values
and represent obligations of the Company to purchase the securities at
prevailing market prices. Therefore, the future satisfaction of such obligations
may be for an amount greater or less than the amounts recorded on the
consolidated statements of financial condition. The ultimate gains or losses
recognized are dependent upon the prices at which these securities are purchased
to settle the obligations under the sales commitments.

Investments in Partnerships 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 stated at
their estimated fair values as determined by the Company's management.

Receivables from and Payables to Brokers

Receivables from and payables to brokers consist of amounts arising from
the purchases and sales of securities. A substantial portion of the receivable
from brokers balance at December 31, 1998 represents required margin deposits
for securities sold, but not yet purchased.

Investment Advisory Fees

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

Depreciation and Amortization

Fixed assets are recorded at cost and 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. Accumulated
amortization at December 31, 1998 and 1999 was approximately $356,000 and
$578,000, respectively.

39
<PAGE>

Income Taxes

The Company accounts for income taxes under the liability method prescribed
by Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to the differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
basis. Future tax benefits are recognized only to the extent that realization of
such benefits is more likely than not.

Minority Interest

Minority interest represents the minority stockholders' ownership of Fixed
Income, GSI and Advisers for 1997, 1998 and 1999. With the exception of GSI,
these minority stockholders are principally employees, officers and directors of
the Company.

Fair Values of Financial Instruments

The carrying amount of all assets and liabilities, other than goodwill and
fixed assets, in the consolidated statements of financial condition approximate
their fair values.

Earnings Per Share

The Company has not presented historical earnings per share for periods
prior to 1999 due to the significant changes in its operations which are not
reflected in those historical financial statements. For the year ended December
31, 1999 net income per share is computed in accordance with SFAS No. 128,
"Earnings Per Share". Basic net income 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 net income per share is computed using the treasury stock method.
Diluted net income per 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 operates predominantly in one business segment, the investment
advisory and asset management industry.

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 not presented a consolidated statement of comprehensive
income in accordance with SFAS No. 130, "Reporting Comprehensive Income,"
because it does not have any items of "other comprehensive income".

Reclassifications

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

40
<PAGE>

B. Investments in Securities

Investments in securities at December 31, 1998 and 1999 consist of the
following:
<TABLE>
<CAPTION>

1998 1999
------------------- -------------------
Market Market
Cost Value Cost Value
------- -------- ------- --------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Government
obligations............ $ 14,280 $ 14,402 $ 24,046 $ 24,195
Common stocks............. 19,466 25,772 12,133 13,684
Mutual funds.............. 36,126 42,032 29,137 31,166
Preferred stocks.......... 285 1,521 339 335
Other investments......... 75 75 410 411
-------- -------- -------- --------
$ 70,232 $ 83,802 $ 66,065 $ 69,791
======== ======== ======== ========
</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, 1998 and 1999 and for
the years then ended, is as follows (in thousands):
<TABLE>
<CAPTION>

1998 1999
--------- ---------
<S> <C> <C>
Total assets.................. $ 143,933 $ 180,516
Total liabilities............. 7,067 9,422
Equity........................ 136,866 171,094
Net earnings.................. 10,252 35,394
Company's carrying value... 15,334 19,635
Company's income.............. 2,162 8,612
</TABLE>

Income from the above partnerships for the year ended December 31, 1997 was
approximately $3,065,000.

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. For the years ended December
31, 1997, 1998 and 1999, the Company earned administrative fees of approximately
$1,085,000, $1,177,000, and $1,328,000, respectively.

At December 31, 1998 and 1999, the Company had various limited partner
interests in unaffiliated limited partnerships aggregating approximately
$35,347,000 and $1,141,000, respectively. For the years ended December 31, 1997,
1998 and 1999, the net gains (losses) recorded by the Company in these
investments approximated $5,666,000, $(659,000), and $(8,000), respectively.

Prior to April 14, 1997, 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. On April 14, 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 $2,130,000 of cost in excess 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 statements of income effective April
14, 1997. For the year ended December 31, 1997, the Company recorded an equity
loss from these entities of approximately $(109,000). Pro forma information
relating to this transaction is not presented because its effect is immaterial.

41
<PAGE>

D. Notes Receivable

The Company had $2,252,000 and $2,913,000 in various notes and interest
receivable outstanding at December 31, 1998 and 1999, respectively, from certain
executive officers and employees in connection with the acquisition of ownership
interests in various subsidiaries and affiliates of the Company. Interest rates
on these notes range from 5% to 10%.

The notes referred to in the following paragraphs were included in the
deemed distribution of assets and liabilities to GFI in conjunction with the
Reorganization. Following the date of the Reorganization these notes were no
longer included as part of the Company. In 1999 interest income from these notes
has been recorded only through the date of the Reorganization.

At December 31, 1998 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 years ended December 31, 1998
and 1999 the Company did not record any income under the terms of the note.

The Company had approximately $11,055,000 in various other notes and
interest receivable outstanding at December 31, 1998 from certain executive
officers, directors and employees in connection with the acquisition of stock
and other ownership interests in GFI. Interest rates on these notes ranged from
5% to 10%.

E. Income Taxes

The Company and its two less than 80% owned subsidiaries, GSI and Advisers,
each file separate income tax returns. Accordingly, the income tax provision
represents the aggregate of the amounts provided for all companies.

Prior to the Offering the Company elected to be taxed as a Subchapter S
Corporation for Federal and state income tax purposes. Pursuant to this election
earnings were subject to tax at the stockholder level rather than the corporate
level. Therefore, no provision was made for Federal income tax on earnings
generated by the Company in the consolidated financial statements prior to the
Offering. In conjunction with the Offering the S Corporation status was
terminated after February 17, 1999 and the Company became subject to a
substantially higher Federal and state income tax rate. The Federal and state
income tax provisions for periods prior to the Offering are substantially those
of GSI.

The provision (benefit) for income taxes for the years ended December 31,
1997, 1998 and 1999 consisted of the following:

<TABLE>
<CAPTION>
1997 1998 1999
-------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Federal:
Current.................... $ 2,399 $ 4,668 $ 23,895
Deferred.................. (8) (607) (15,350)
State and local:
Current.................... 628 1,398 5,119
Deferred.................. 58 (8) (3,197)
------- ------- --------
$ 3,077 $ 5,451 $ 10,467
======= ======= ========
</TABLE>

42
<PAGE>

The Company's effective tax rate for each of the years ended December 31,
1997, 1998 and 1999 was 7.5%, 8.5% and 32.4%, respectively.

A reconciliation of the Federal statutory income tax rate to the actual
effective rate reflected on the historical consolidated financial statements for
the year ended December 31, 1999 is as follows:

Statutory Federal income tax rate 35.0%
State income tax, net of Federal benefit 3.9%
GFI's pre-Offering earnings not subject to tax (7.7%)
Other 1.2%
------
Effective income tax rate 32.4%
======
Significant components of the Company's deferred tax assets and liabilities
were as follows:
<TABLE>
<CAPTION>

1998 1999
-------- --------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Deferred compensation - $19,830
-------- -------

Deferred tax liabilities:
Investments in securities and partnerships $ (2,203) (2,789)
Other - (154)
-------- -------
Total deferred tax liabilities (2,203) (2,943)
-------- -------

Net deferred tax assets (liabilities) $ (2,203) $16,887
======== =======
</TABLE>

Included in the 1998 deferred tax liabilities is $543,000 included in the
deemed distribution to GFI.

SFAS No. 109 requires that deferred tax assets be reduced by a valuation
allowance if it is more likely than not that some or all of the deferred tax
asset may not be realized. Since the Company has a history of generating pre-tax
earnings and is expected to generate pre tax earnings in future years sufficient
to realize the full benefit of the deferred tax asset, no valuation allowance
has been recorded.

F. Notes Payable

In conjunction with the Reorganization the Company entered into an
Employment Agreement with its Chairman and Chief Executive Officer ("Chairman")
which, in part, provides the Chairman will be paid $50 million on January 2,
2002. Interest is payable quarterly at an annual rate of 6% from the date of the
Agreement. This payment, plus related costs and net of a related deferred tax
benefit of $19.8 million, has been reflected as a one time charge to earnings in
the first quarter of 1999 and the liability has been recorded as a note payable.
Interest expense recorded on this note for the year ended December 31, 1999 was
$2,653,000.

Prior to the Reorganization the Company had two notes payable totaling
$5,876,000 which are described below and were included as part of the deemed
distribution of net assets to GFI. In 1999 interest expense on these two notes
have been reflected through the date of the Reorganization.

At December 31, 1998, the Company had notes payable outstanding of
approximately $4,900,000, which mature on May 31, 2003, unless certain
circumstances arise which allow for an accelerated repayment. The notes accrue
interest at 2% over the prime rate, subject to a minimum interest rate of 9% and
a maximum interest rate of 15%, payable quarterly. Interest expense on these
notes amounted to approximately $557,000, $512,000, and $56,000 for the years
ended December 31, 1997, 1998, and 1999, respectively.

43
<PAGE>

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 matured and was paid in full on January 2, 2000. The note
accrued interest at an annual rate of 12%, payable quarterly. Interest expense
on this note amounted to approximately $117,000 for the years ended December 31,
1997 and 1998, respectively and $13,000 for the year ended December 31, 1999.

G. Stockholders' Equity

Stock Award and Incentive Plan

On February 5, 1999, the Board of Directors adopted the 1999 Gabelli Asset
Management Inc. Stock Award and Incentive Plan (the "Plan"), designed to provide
incentives which will attract and retain individuals key to the success of the
Company through direct or indirect ownership of the Company's common stock.
Benefits under the Plan may be granted in any one or a combination of stock
options, stock appreciation rights, restricted stock, restricted stock units,
stock awards, dividend equivalents and other stock or cash based awards. A
maximum of 1,500,000 shares Class A Common Stock have been reserved for issuance
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 75% after three years and 100% after four years from the date of grant and
expire after ten years.

On February 10, 1999 options were granted to all full time employees and a
non-employee director to purchase an aggregate of 1,134,500 shares of common
stock at an exercise price of $16.28 per share. There were 41,000 options
canceled and none exercised during 1999. At December 31, 1999 there were
1,093,500 shares under option outstanding. None of the options were exercisable
at December 31, 1999 and there were 406,500 shares available for future grants.

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 fair value of the options granted is estimated as of the grant date
using the Black-Scholes option pricing model with the following assumptions:

Expected volatility 36%
Risk free interest rate 5.14%
Expected life 8 years
Dividend yield 0%

The fair value of the options granted in 1999 was $9.38 per share.

The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its stock option plan. Accordingly, no compensation expense is recognized where
the exercise price equals or exceeds the market price of the underlying stock on
the date of the grant. If the Company had elected to account for its stock
options under the fair value method of SFAS No. 123 "Accounting for Stock Based
Compensation," the Company's net income and net income per share would have been
reduced to the pro forma amounts indicated below:

As Reported Pro forma
----------- ---------
Net income (000's) $ 18,535 $ 17,419
======== =========
Net income per share:
Basic and diluted $ 0.64 $ 0.60
======== =========

Stock Repurchase Program

During 1999 the Board of Directors authorized the repurchase, at
management's discretion, of up to $6 million of its Class A common stock in open
market transactions. Under the program the Company has repurchased 300,900
shares of common stock through December 31, 1999 at an aggregate cost of $4.7
million which are held in treasury.

Certain shareholders of GSI are required to sell, upon disassociation with
the Company, their shares to GSI at book value or a price established by
management (approximately $5.2 million at December 31, 1999).

44
<PAGE>

H. Capital Lease

In December 1997, the Company signed an agreement to lease 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,
1999 are as follows:

(In thousands)
2000........................................... 720
2001........................................... 720
2002........................................... 720
2003........................................... 756
2004........................................... 765
Thereafter..................................... 6,375
--------
Total minimum obligations................ 10,056
Interest.................................... 3,565
--------
Present value of net obligations............ $ 6,491
========

Lease payments under this agreement amounted to approximately $720,000 for
each of the years ended December 31, 1998 and 1999, respectively. Future minimum
lease payments have not been reduced by related minimum future sublease rentals
of approximately $1,031,000, of which approximately $266,000 is due from an
affiliated entity. Total minimum obligations exclude the operating expenses to
be borne by the Company, which are estimated to be approximately $400,000 per
year.
<PAGE>

I. Commitments

The Company rents office space under leases which expire at various dates
through 2005. Future minimum lease commitments under these operating leases as
of December 31, 1999 are as follows:

(In thousands)
2000........... 1,083
2001........... 1,013
2002........... 379
2003........... 392
2004........... 232
Thereafter.... 6
------
$3,105
======

Equipment rentals and occupancy expense amounted to approximately
$1,644,000, $1,502,000, and $1,724,000 respectively, for the years ended
December 31, 1997, 1998 and 1999.

J. Related Party Transactions

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

The Company had an aggregate investment in the Funds of approximately
$88,878,000 and $136,938,000 at December 31, 1998 and 1999, respectively, of
which approximately $48,622,000 and $103,032,000 is invested in a money market
mutual fund at December 31, 1998 and 1999, respectively.

45
<PAGE>

Prior to the Reorganization the Company was required to pay the Chairman a
management fee, which was equal to 20% of the pretax profits of each of the
Company's operating divisions before consideration of this management fee.
Immediately preceding the Offering and in conjunction with the Reorganization,
the Company and its Chairman entered into an Employment Agreement. The
Employment Agreement provides that the Company will pay the Chairman 10% of the
Company's aggregate pre-tax profits while he is an executive of the Company and
devoting the substantial majority of his working time to the business of the
Company. The Employment Agreement further provides that the Company will pay the
Chairman $50 million on January 2, 2002, which amount has been included in notes
payable (see Note F). The management fee was approximately $10,580,000,
$12,246,000, and $10,153,000, for the years ended December 31, 1997, 1998 and
1999, respectively. The Chairman also received portfolio management compensation
and account executive fees of approximately $23,005,000, $30,105,000, and
$31,645,000, respectively, for the years ended December 31, 1997, 1998 and 1999,
which have been included in compensation costs.

The Company contributed approximately $1,014,000 for the year ended December
31, 1997 to an accredited charitable foundation, of which the Chairman of the
Company is an officer. The Company did not make any contributions to this
charitable foundation in 1998 or 1999.

In February 1998, the Company guaranteed a $30 million loan made by a bank
to Rivgam LMDS, LLC, an entity in which the Company's Chairman is the Managing
Member and in which he has a 71% ownership interest. Such loan and interest
thereon were repaid in April 1998 thereby relieving the Company of its
obligation under the guarantee.

In 1998 the Company transferred to Lynch Corporation, in exchange for
certain services provided, a PCS license with a cost basis of $674,000. The
estimated fair market value of the PCS license at the time of the transfer was
approximately $1,000,000.

K. Financial Requirements

The Company is required to maintain minimum capital levels with affiliated
partnerships. At December 31, 1999, the minimum capital requirements
approximated $1,562,000.

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, 1999, Gabelli & Company had net capital in excess of the minimum
requirement of approximately $9,897,000.

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.

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, $80,000,
$50,000, and $60,000 to the plans for the years ended December 31, 1997, 1998
and 1999, respectively.

46
<PAGE>

N. Derivative Financial Instruments

Prior to the Reorganization, 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 period ended December 31, 1998.

Notional
Amounts Average Fair
Outstanding Fair Value Value
------------- ---------- ------------
(In thousands)
$ 26,456 $ (1,568) $ (741)

At December 31, 1998 the Company had margin deposits of approximately
$1,413,000 with a futures broker for these open futures contracts.

In connection with this futures activity, the Company incurred losses of
approximately $8,063,000 and $4,749,000, during the years ended December 31,
1997 and 1998 and a gain of $542,000 in 1999. Such losses are reflected as part
of net gain (loss) from investments in the consolidated statements of income.

O. PCS Licenses

The Company, through Rivgam Communicators, LLC purchased Personal
Communications Service ("PCS") licenses auctioned by the Federal Communications
Commission ("FCC") in 1997. The PCS licenses were valued at the lower of their
original purchase

cost or their market value. Market values were determined based upon the most
recent public auction for similar licenses, fair value estimates provided by
independent companies that solicit bids for such licenses or bids received from
unaffiliated potential acquirers.

During 1998, the Company sold certain of its PCS licenses with a cost basis
of $51,551,000. The Company recorded a pre-tax gain of approximately
$17,614,000, net of investment banking, management and other related fees of
approximately $10,835,000 paid principally to related parties, of which
$4,196,000 was paid to the Company's Chairman.

In conjunction with the Reorganization the remaining licenses were included
as part of the net assets and liabilities distributed to GFI.

P. Quarterly Financial Information (Unaudited)

Quarterly financial information for the years ended December 31, 1998 and
1999 is presented below. The financial information has been presented on a pro
forma basis for each of the quarters in 1998 and the first quarter of 1999.
Historical information, except for revenues, for these periods are not presented
due to the significant changes in the Company's operations which are not
reflected in the historical consolidated financial statements (See Note A).

Pro forma financial information reflects the results of operations as if all
of the following were in effect at January 1, 1998: the Formation Transactions
and resulting impact on income and expense items; the $50 million note payable;
the reduction in management fee from 20% to 10% and the conversion from a
Subchapter S Corporation to a "C" Corporation for tax purposes.

Operating income, net income and net income per share for the first quarter
1999 exclude a non recurring charge related to the note payable ($30.9 million,
net of tax benefit of $19.8 million, or $1.03 per share). Including this non
recurring charge the Company had an operating loss, net loss and net loss per
share of $(35.9) million, $(21.6) million and $(0.72), respectively, for the
first quarter of 1999.

47
<PAGE>

1998 Quarter
-------------------------------------------------------------
(in thousands, except per share data) 1st 2nd 3rd 4th
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 31,928 $ 36,031 $ 34,350 $ 35,878
Operating income 12,076 14,217 13,071 13,854
Net income 7,334 7,020 7,506 9,010
Net income per share:
Basic and diluted 0.24 0.23 0.25 0.30

1999 Quarter
-------------------------------------------------------------
1st 2nd 3rd 4th
---------- ---------- --------- ---------
Revenues $ 39,691 $ 42,623 $ 44,091 $ 49,857
Operating income 14,869 14,504 17,428 19,650
Net income 9,279 11,655 10,237 14,523
Net income per share:
Basic and diluted 0.31 0.39 0.34 0.49
</TABLE>

Q. Subsequent Events

On February 15, 2000 the Company's Board of Directors approved a second
option grant of 135,000 shares under the Stock Award and Incentive Plan at an
exercise price, equal to the market price on that date, of $16.00 per share.

Subsequent to year end the Company repurchased an additional 84,000 shares
of its Class A Common Stock at an aggregate cost of $1.3 million and completed
its $6 million stock repurchase program. The Board of Directors then authorized
the repurchase of up to an additional $3 million of these shares under this
program at the discretion of management. Shares are repurchased when, in the
opinion of management, the purchase price is well below the Company's intrinsic
value.

48
<PAGE>

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENT
December 31, 1999

The following unaudited pro forma consolidated financial information gives
effect to assets and liabilities assumed to be distributed as part of the
Reorganization and the resulting impact on allocated income and expenses; the
$50 million deferred payment to the Chairman and Chief Executive Officer net of
deferred tax benefit; the reduction in the management fee from 20% to 10%
pursuant to the Employment Agreement; and the conversion from an "S" corporation
to a "C" corporation.

The unaudited pro forma consolidated financial information does not purport
to represent the results of operations or the financial position of the Company
which actually would have occurred had the Reorganization and Formation
Transactions been previously consummated or project the results of operations or
the financial position of the Company for any future date or period. The
unaudited pro forma information does not give effect to the use of proceeds
received from the Offering for the period prior to the Offering.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Pro Forma
As Reported Adjustments Pro Forma
----------- ----------- ---------
(in thousands except per share data)
<S> <C> <C> <C>
Revenues
Investment advisory and incentive fees..... $ 147,414 $ 147,414
Commission revenue......................... 11,856 11,856
Distribution fees and other income......... 16,992 16,992
------------- -----------
Total revenues................... 176,262 176,262
------------- -----------
Expenses
Compensation costs......................... 71,860 71,860
Management fee............................. 10,153 (1,096) (a) 9,057
Other operating expenses................... 28,917 (23) (b) 28,894
Non-recurring charge....................... 50,725 50,725
------------- ----------- -----------
Total expenses................... 161,655 (1,119) 160,536
------------- ----------- -----------
Operating income........................... 14,607 1,119 15,726
------------- ----------- -----------
Other Income (Expense)
Net gain from investments.................. 14,253 (1,903) (c) 12,350
Interest and dividend income............... 6,850 (476) (c) 6,374
Interest expense........................... (3,438) 123 (c)
(338) (d) (3,653)
Total other income, net.......... 17,665 (2,594) 15,071
------------- ------------ -----------
Income before income taxes and minority
interest................................... 32,272 (1,475) 30,797
Income taxes............................... 10,467 2,261 (e) 12,728
Minority interest.......................... 3,270 3,270
------------- ------------- -----------
Net income................................. $ 18,535 $ (3,736) $ 14,799
============= ============ ===========
Net income per share:
Basic and diluted..................... $ 0.50
===========
Weighted average shares outstanding:
Basic and diluted..................... 29,890
===========
</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 reflect the reallocation of expenses to the new parent company.

(c) To reflect the effect on income and expenses related to the distribution of
assets and liabilities which occurred on February 9, 1999.

(d) To reflect interest expense on the $50 million note payable to the Chairman
and Chief Executive Officer.

(e) To record additional taxes related to conversion from an "S" corporation to
a "C" corporation and other pro forma adjustments.

49
<PAGE>

Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.
PART III

Item 10: Directors and Executive Officers of the Registrant

Information regarding the Directors and Executive Officers of the Company
and compliance with Section 16(a) of the Securities Exchange Act of 1934 is
incorporated herein by reference from the sections captioned "Election of
Director" and "Security Ownership of Certain Beneficial Owners and Management
Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's
definitive proxy statement for its 2000 Annual Meeting of Shareholders (the
"Proxy Statement").

Item 11: Executive Compensation

The information set forth under the captions "Executive Compensation" and
"Election of Directors - Compensation of Directors" in the Proxy Statement is
incorporated herein by reference.

Item 12: Security Ownership of Certain Beneficial Owners and Management

The information set forth under the captions "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated herein
by reference.

Item 13: Certain Relationship and Related Transactions

The information set forth under the captions "Election of Directors" in the
Proxy Statement is incorporated herein by reference.

50
<PAGE>

PART IV

Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) List of documents filed as part of this Report:

(1) Consolidated Financial Statements and Independent Auditors'
Report included herein: See Index on page F-1

(2) 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.

(3) List of Exhibits:

Exhibit
Number Description of Exhibit

3.1 -- Restated Certificate of Incorporation of the Company. (Incorporated
by reference to Exhibit 3.2 to Amendment No. 4 to the Company's
Registration Statement on Form S-1 (File No. 333-51023) filed with the
Securities and Exchange Commission on February 10, 1999).

3.2 -- Amended Bylaws of the Company. (Incorporated by reference to
Exhibit 3.4 to Amendment No. 4 to the Company's Registration Statement
on Form S-1 (File No. 333-51023) filed with the Securities and
Exchange Commission on February 10, 1999).

4.1 -- Specimen of Class A Common Stock Certificate. (Incorporated by
reference to Exhibit 4.1 to Amendment No. 3 to the Company's
Registration Statement on Form S-1 (File No. 333-51023) filed with the
Securities and Exchange Commission on January 29, 1999).

10.1 -- Management Services Agreement between the Company and GFI dated as
of February 9, 1999. (Incorporated by reference to Exhibit 10.1 to
Amendment No. 4 to the Company's Registration Statement on Form S-1
(File No. 333-51023) filed with the Securities and Exchange Commission
on February 10, 1999).

10.2 -- Tax Indemnification Agreement between the Company and GFI.

10.3 -- Lock-Up Agreement between the Company and GFI.

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

10.5 -- Gabelli Asset Management Inc. 1999 Annual Performance Incentive
Plan.

10.6 -- Employment Agreement between the Company and Mario J. Gabelli.
(Incorporated by reference to Exhibit 10.6 to Amendment No. 4 to the
Company's Registration Statement on Form S-1 (File No. 333-51023)
filed with the Securities and Exchange Commission on February 10,
1999).

21.1 -- Subsidiaries of the Company. (Incorporated by reference to Exhibit
21.1 to Amendment No. 4 to the Company's Registration Statement on
Form S-1 (File No. 333-51023) filed with the Securities and Exchange
Commission on February 10, 1999).

24.1 -- Powers of Attorney (included on page II-3 of this Report).

*27.1 -- Financial Data Schedule.

- ------------------
* Filed herewith.

(b) Reports on Form 8-K:

Gabelli Asset Management Inc. filed no reports on Form 8-K during the
fiscal year ended December 31, 1999.

51
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Rye,
State of New York, on March 29, 2000.

GABELLI ASSET MANAGEMENT INC.

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

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
Robert S. Zuccaro, Stephen G. Bondi and James E. McKee and each of them, his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him in his name, place and stead, in any and all capacities,
to sign any and all amendments to this report and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date

/s/ Mario J. Gabelli Chairman of the Board, March 29, 2000
- -------------------------- Chief Executive Officer
Mario J. Gabelli and Chief Investment Officer
(Principal Executive Officer)

/s/ Robert S. Zuccaro Vice President and Chief March 29, 2000
- --------------------------- Financial Officer (Principal
Robert S. Zuccaro Financial Officer and
Principal Accounting Officer)

/s/ Raymond C. Avansino Director March 29, 2000
- ---------------------------
Raymond C. Avansino

/s/ John C. Ferrara Director March 29, 2000
- ---------------------------
John C. Ferrara

/s/ Eamon M. Kelly Director March 29, 2000
- ---------------------------
Eamon M. Kelly

/s/ Karl Otto Pohl Director March 29, 2000
- ---------------------------
Karl Otto Pohl

</TABLE>

<ARTICLE> 5
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 103,032
<SECURITIES> 69,791
<RECEIVABLES> 25,858
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 243,062
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 30
<OTHER-SE> 147,546
<TOTAL-LIABILITY-AND-EQUITY> 243,062
<SALES> 0
<TOTAL-REVENUES> 176,262
<CGS> 0
<TOTAL-COSTS> 161,655
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 32,272
<INCOME-TAX> 10,467
<INCOME-CONTINUING> 18,535
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,535
<EPS-BASIC> 0.64
<EPS-DILUTED> 0.64

</TABLE>