Original GBL Prospectus - Gabelli

As a result of increased agency trading activity for institutional clients, including accounts managed by
aÇliated companies, commission revenues increased to $6.7 million in 1996 from $5.7 million in 1995, an
increase of approximately 17%. Commissions from the Mutual Funds and the Separate Accounts totaled $4.8
million in 1996, or approximately 72% of total commission revenues.
Distribution fees and other income increased to $7.3 million in 1996 from $6.3 million in 1995, an
increase of approximately 15%, reÖecting GFI's increased eÅorts to distribute its Mutual Funds. For 1996 and
1995, distribution revenues were closely tied to distribution expenses, as the 12b-1 plans for the open-end
Mutual Funds were then structured to reimburse GFI for distribution expenditures incurred on behalf of such
funds, subject to a limitation of 25 basis points of average fund net assets for those funds with 12b-1 plans.
Total expenses in 1996 increased to $71.3 million, from $67.5 million in 1995, an increase of $3.8 million,
or approximately 6%, primarily as a result of increased compensation costs and costs associated with the
distribution of the Mutual Funds. Compensation costs, a signiÑcant portion of which are variable in nature,
rose approximately 6% from $39.4 million in 1995 to $41.8 million in 1996. Other operating expenses
increased approximately $0.6 million or 3% to $19.3 million in 1996 from $18.7 million in 1995.
Net gain from investments, which is derived from GFI's proprietary investment portfolio, was approximately
$8.8 million in 1996 compared to $10.1 million in 1995, a decline of approximately $1.3 million. This
decline was attributable to lower investment and market related gains from GFI's investments including losses
from hedging activities of $3.7 million. Interest and dividend income, net of interest expense, decreased to $4.5
million in 1996 from $5.2 million in 1995, a decrease of approximately 13%. This was primarily a result of the
use of capital for certain private investments in 1996 which did not provide a current return. In connection
with the Formation Transactions, GFI will retain most of the proprietary investment portfolio (which includes
GFI's hedging activities). The net gain from the proprietary investment portfolio to be retained by GFI was
$7.6 million and $6.9 million in 1996 and 1995, respectively.
Higher net income reported on a separate company basis by both GFI's then 79.1%-owned subsidiary,
GAMCO, and then 75.3%-owned subsidiary, GSI, resulted in an increase in income attributable to the
minority interests in GFI's consolidated subsidiaries.
Liquidity and Capital Resources
The Company's principal assets consist of cash, short-term investments, securities held for investment
purposes and investments in partnerships in which the Company is either a general or limited partner. Shortterm
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 reÖect that underlying liquidity.
The Company has historically met its cash requirements through cash generated by its operating
activities. Based upon the Company's current level of operations and anticipated growth in net revenues and
net income as a result of implementing its business strategy, the Company expects that cash Öows from its
operating activities will be suÇcient to enable the Company to Ñnance its working capital needs for the
foreseeable future. The Company has no material commitments for capital expenditures.
Gabelli & Company is registered with the Commission as a broker-dealer and is a member of the NASD.
As such, it is subject to the minimum net capital requirements promulgated by the Commission. Gabelli &
Company's net capital has historically exceeded these minimum requirements. Gabelli & Company computes
its net capital under the alternative method permitted by the Commission, which requires that minimum net
capital be $250,000. As of September 30, 1998 and December 31, 1997 and 1996, Gabelli & Company had net
capital, as deÑned, of approximately $12.3 million, $6.6 million and $8.1 million, respectively, exceeding the
regulatory requirement by approximately $12.1 million, $6.3 million and $7.8 million, respectively. Regulatory
net capital requirements increase when Gabelli & Company is involved in underwriting activities.
The net proceeds of the OÅering to be received by the Company, which are expected to be approximately
$95.8 million ($110.4 million if the Underwriters' overallotment option is exercised in full), will be used for
general corporate purposes, including working capital and the expansion of its business through new
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