Original GBL Prospectus - Gabelli

$5.2 billion at the end of the prior year. Approximately 39% of the increase in total assets under management
for 1997 and 30% of the increase in investment advisory and incentive fees was due to Gabelli Fixed Income
L.L.C. becoming a consolidated subsidiary on April 14, 1997 when GFI increased its ownership interest from
50% to 80.1%. The remaining 61% of the increase in total assets under management was primarily the result of
investment performance of the equity portfolios throughout the year and net sales of the Mutual Funds from
NTF Programs in the second half of the year. Growth in assets was substantially greater than growth in
revenues, due to the consolidation of Gabelli Fixed Income L.L.C. which charges relatively lower fees, the
weighting of net sales toward the end of the year and increasingly strong investment performance in the latter
part of the year.
As a result of increased agency trading activity for institutional clients, including accounts managed by
aÇliated companies, commission revenues in 1997 increased 12% to $7.5 million from $6.7 million in 1996.
Commissions from the Mutual Funds and the Separate Account clients totaled $6.1 million, or approximately
81% of total commission revenues in 1997.
Distribution fees and other income for 1997 increased approximately 12% to $8.1 million from $7.3
million in 1996. This was the result of both increased assets under management and the restructuring of the
Mutual Funds' 12b-1 plans as compensation plans.
Total expenses for 1997 increased to $74.5 million, from $71.3 million in 1996, an increase of $3.2
million, or approximately 4%. Approximately half of this increase was associated with GFI's acquisition of a
controlling interest in Gabelli Fixed Income L.L.C. in April 1997 and the inclusion of its expenses in GFI's
1997 results. Compensation costs rose to $45.3 million in 1997 from $41.8 million in 1996, an increase of
approximately 8%. Management fee expense rose in line with the increase in pre-tax proÑts to $10.6 million in
1997 from $10.2 million in 1996. Other operating expenses were $18.7 million in 1997 compared to $19.3
million in 1996, a decline of approximately 3%. This decline in other operating expenses was generally due to
lower mutual fund distribution costs.
Net gain from investments, which is derived from GFI's proprietary investment portfolio, was approximately
$7.9 million in 1997, compared to $8.8 million for 1996, a decline of approximately $0.9 million. This
decline was principally due to higher costs associated with hedging activities which in 1997 resulted in hedging
losses of $8.1 million compared to hedging losses of $3.7 million in 1996. Interest and dividend income, net of
interest expense, decreased by approximately $1.7 million in 1997 to $2.8 million compared with $4.5 million
in 1996. This decrease was primarily a result of GFI's change in its mix of investments from publicly-traded
securities and mutual funds which paid interest and dividends to certain private investments which did not
provide a current return. In connection with the Formation Transactions, GFI will retain most of the
proprietary investment portfolio (which includes GFI's hedging activities). The net gain from the proprietary
investment portfolio to be retained by GFI was $4.9 million and $7.6 million for 1997 and 1996, respectively.
Income taxes decreased to $3.1 million in 1997 from $7.6 million in 1996. This was primarily a result of
GAMCO's election of Subchapter ""S'' corporate status eÅective January 1, 1997.
Minority interest declined in 1997 by $1.2 million from $2.7 million in 1996 as a result of GAMCO
becoming a wholly owned subsidiary of GFI on January 1, 1997. Minority interest of $1.5 million in 1997
represents income attributable to the minority interests of GFI's then 76.1%-owned subsidiary, GSI, GFI's
80.1%-owned subsidiary, Gabelli Fixed Income L.L.C., and GFI's then 51.1% economic interest in Gabelli
Advisers, LLC (now Gabelli Advisers, Inc.).
Operating Results for Year Ended December 31, 1996 as Compared to Year Ended December 31, 1995
Total revenues for GFI increased to $98.2 million in 1996 from $89.3 million in 1995, an increase of
approximately $8.9 million or approximately 10%. Investment advisory and incentive fees accounted for the
largest portion of this growth, increasing by $6.9 million or approximately 9% to $84.2 million in 1996 as
overall assets under management rose to $9.5 billion in 1996 from $9.3 billion in the prior year. For 1996,
assets under management in the Mutual Funds increased to $4.2 billion at December 31, 1996 from $4.1
billion at the end of 1995. Assets under management in the Separate Accounts were $5.2 billion compared to
$5.1 billion at December 31, 1995.
30