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

FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 20032004

[_] 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.
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(Exact name of registrant as specified in its charter)

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

One Corporate Center, Rye, NY 10580-1422
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (914) 921-3700
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Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
on which
Title of each class on which registered:
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Class A Common Stock, $.001$ .001 Par Value New York Stock Exchange
Mandatory convertible securities New York Stock Exchange
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Securities registered 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 [X ].[X].

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [_].

As of March 1, 2004, 6,950,3032005, 7,228,042 shares of class A common stock and 23,128,500
shares of class B common stock were outstanding. All of the shares of class B
common stock were held by GGCP, Inc. (formerly 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, 20042005 was
$294,029,789.$243,833,243.

DOCUMENTS INCORPORATED BY REFERENCE: The definitive proxy statement for the 20042005
Annual Meeting of Shareholders to be held May 11, 2004.Shareholders.
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1

PART I

FORWARD-LOOKING INFORMATION

Our disclosure and analysis in this report and in documents that are
incorporated by reference contain some forward-looking statements.
Forward-looking statements give our current expectations or forecasts of future
events. You can identify these statements because they do not relate strictly to
historical or current facts. They use words such as "anticipate," "estimate,"
"expect," "project," "intend," "plan," "believe," and other words and terms of
similar meaning. They also appear in any discussion of future operating or
financial performance. In particular, these include statements relating to
future actions, future performance of our products, expenses, the outcome of any
legal proceedings, and financial results.

Although we believe that we are basing our expectations and beliefs on
reasonable assumptions within the bounds of what we currently know about our
business and operations, there can be no assurance that our actual results will
not differ materially from what we expect or believe. Some of the factors that
could cause our actual results to differ from our expectations or beliefs
include, without limitation: the adverse effect from a decline in the securities
markets; a decline in the performance of our products; a general downturn in the
economy; changes in government policy or regulation; changes in our ability to
attract or retain key employees; and unforeseen costs and other effects related
to legal proceedings or investigations of governmental and self-regulatory
organizations. We also direct your attention to any more specific discussions of
risk contained in our other public filings or in documents incorporated by
reference here or in prior filings or reports.

We are providing these statements as permitted by the Private Litigation Reform
Act of 1995. We do not undertake to update publicly any forward-looking
statements if we subsequently learn that we are unlikely to achieve our
expectations or if we receive any additional information relating to the subject
matters of our forward-looking statements.

ITEM 1: BUSINESS

Unless we have indicated otherwise, or the context otherwise requires,
references in this report to "Gabelli Asset Management Inc.," "Gabelli,"GBL," "we," "us"
and "our" or similar terms are to Gabelli Asset Management Inc., its
predecessors and its subsidiaries.

OVERVIEW

Gabelli Asset Management Inc. (NYSE: GBL) is a widely recognized provider of
investment advisory and brokerage services to mutual funds, institutional and high net worth
investors, and investment partnerships, principally in the United States.
Through Gabelli & Company, Inc., we provide institutional research services to
institutional clients and investment partnerships. We generally manage assets on
a discretionary basis and invest in a variety of U.S. and international
securities through various investment styles. Our revenues are based primarily
on the firm's levels of assets under management and fees associated with our
various investment products, rather than our own corporate assets.

WeSince 1977, we have focused on a simple mission since our founding in 1977:been identified with and enhanced the "value" style approach
to investing. Our investment objective is to earn a superior risk-adjusted
return for our clients over the long-term by providing
value-added products through our proprietary fundamental
research. Today, inIn addition to our
Gabelli value products, we offer our clients a broad array
of investment strategies that include value, growth, international and convertible
products. We also offer non-market correlated, and fixed income strategies. By
earning returns for our clients, we will be earning returns for all our
stakeholders.

As of December 31, 2003,2004, we had a record $27.6$28.7 billion of assets under
management, 92%93% of which were invested in equity securities.products. We conduct our investment
advisory business principally through three subsidiaries:through: GAMCO Investors, Inc. (Separate
Accounts), Gabelli Funds, LLC (Mutual Funds) and Gabelli Securities, Inc.
(Alternative Investments)(Investment Partnerships). We also act as an underwriter, andare a distributor of
our open-end mutual funds and provide institutional research through Gabelli &
Company, Inc., our broker-dealer subsidiary.

Our assets under management are organized into three operating groups:

o SEPARATE ACCOUNTS: we currently provide advisory services to a broad
range of investors, including high net worth individuals, corporate
pension and profit sharing plans, foundations, endowments, jointly
trusteed plans and municipalities, and also serve as sub-advisersub-advisor to
certain other third-party investment funds.funds which include registered
investment companies ("Separate Accounts"). Each separate account
portfolio is managed to meet the specific needs and objectives of the
particular client by utilizing investment strategies and techniques
within our areas of expertise. AtOn December 31, 20032004, we had $13.5$14.0
billion of separate accountSeparate Account assets under management.

o MUTUAL FUNDS: we currently provide advisory services to (i)
twenty-sixtwenty-seven funds within the Gabelli family of funds; (ii) three
money market funds that comprise the Treasurer's Fund; and (iii) six
mutual funds within the Gabelli Westwood family of funds.funds (collectively, the
"Mutual Funds"). The mutual fundsMutual Funds have a long-term record of achieving
high returns, relative to similar investment products and had $13.3$13.9
billion of total assets under management aton December 31, 2003.2004.

o ALTERNATIVE INVESTMENTS:INVESTMENT PARTNERSHIPS: we currently provide advisory services to
limited partnerships, offshore funds, and separate accounts, and also
provide alternativeserve as a sub-advisor to certain third-party investment products consisting primarily offunds across
merger arbitrage, global and regional long/short equity, and
sector focused funds.sector-focused strategies ("Investment Partnerships"). We managed a
total of $692$814 million in alternative investment strategyInvestment Partnership assets aton December 31,
2003.2004.

Gabelli Asset Management Inc. is a holding company formed in connection with our
initial public offering ("Offering") in February 1999. GGCP, Inc. (formerly
Gabelli Group Capital Partners, Inc.), which is majority owned by Mr. Mario J.
Gabelli ("Mr. Gabelli") with the balance owned by our professional staff and
other individuals, owns all of the outstanding shares of class B common stock of
Gabelli Asset Management Inc., which representsrepresented approximately 97%98% of the
combined voting power of the outstanding common stock and 77%80% of the equity
interest.interest on December 31, 2004. Accordingly, Mr. Gabelli could be deemed to
control Gabelli Asset Management Inc.

Our principal executive offices are located at One Corporate Center, Rye, New
York 10580. Our telephone number is (914) 921-3700. On our website,
www.gabelli.com, we post the following filings as soon as reasonably practicable
after they are electronically filed with or furnished to the Securities and
Exchange Commission (SEC): our annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and any amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934. All such filings on our website are available free of charge.

2004 HIGHLIGHTS

In 2004, we reported record earnings of $2.06 per fully diluted share vs. $1.65
per fully diluted share in 2003. Our revenues increased 23% to a record $255.2
million in 2004 from $207.4 million in 2003 HIGHLIGHTSand operating income rose 32.6% to
$99.1 million in 2004 from $74.7 million in the prior year.

We ended 20032004 with a record $27.6$28.7 billion of assets under management (AUM), an
increase of 29.7%4.0% from the $21.2$27.6 billion on December 31, 2002. Assets of each of
our three investment advisory business segments, GAMCO Investors, Inc., Gabelli
Funds, LLC, and Gabelli Securities, Inc. were at record levels, bolstered by
strong performance in the broader market.

During 2003, the introduction and signing into law of The Jobs and Growth Tax
Reconciliation Act of 2003 (the "2003 Tax Act") by President George W. Bush
offered investors the potential opportunity to earn tax-advantaged returns on
their equity investments. Under the provisions of the 2003 Tax Act, qualifying
dividend income received by individual taxpayers will now be taxed at a maximum
Federal rate of 15%. In response to this tax change, we introduced The Gabelli
Dividend & Income Trust (NYSE: GDV) and generated $1.46 billion of gross
proceeds through the initial public offering of this new closed-end fund that
invests primarily in dividend-paying equity securities. We believe the 15% tax
rate for dividends and long-term capital gains provided by the 2003 Tax Act will
likely be a key driver of growth for our business. These two provisions sunset
in 2008 unless repealed or extended by Congress.

Assets under management2003. On December 31,
2004, AUM in our separate account business at December 31, 2003
eclipsed the prior year end values by over $3.0 billion. The major factor
contributing to this accelerating asset growth wasaccounts and open-end mutual funds totaled $14.0
billion and $9.6 billion, respectively as solid performance from our equity
portfolios.portfolios were the major contributor to growth. Our closed-end funds reached a
record AUM of $4.3 billion on December 31, 2004, an increase of approximately
23% from year-end 2003. In 2003,2004, AUM in our Alternative Investments business continued to
expand its sub-advisory relationships through the addition of a number of
significant new accounts.Investment Partnerships grew
approximately 18%.

Our class A common stock, which is traded on the New York Stock Exchange under
the symbol "GBL", ended the year at a market price of $39.80.$48.52 versus $39.80 at
the end of 2003. In 2004, our shareholders earned a return of 26%, including
dividends(a). Since itsour initial public offering in February 1999, GBL has
earned a return for its shareholders has produced a total
return of 128%188% (including dividends) through
December 31, 20032004 versus a negative total return of (4.5%)7% (including dividends) for the S&P 500
Index during the same period.

During 2004, we returned over $100 million of our earnings to shareholders
through our stock buyback program and dividends. This included $1.16 per share
in dividends paid to our common shareholders in 2004 and an investment of
approximately $70 million through our stock repurchases. We also declared a
special dividend of $0.60 per share in November 2004 which was payable on
January 18, 2005 to all shareholders of record on January 3, 2005.

(a) Includes the $0.60 per share dividend payable to GBL shareholders on January
18, 2005 to shareholders of record on January 3, 2005 as GBL stock traded
ex-dividend on December 30, 2004.

In May 2003 we sold $100 millionNovember 2004, our senior notes were successfully remarketed and the interest
rate was reset from 6% to 5.22% at that time. These senior notes, which are due
February 17, 2007, were originally issued along with purchase contracts in
February 2002 as part of ten-year 5.5%our mandatory convertible securities. GBL's senior
notes. The notes carryunsecured debt currently has an investment grade ratingscredit rating of BBB from
Standard &and Poor's and Baa2 from Moody's.

During 2004, we established the Graham & Dodd, Murray, Greenwald Prize for Value
Investing in coordination with the Columbia University Graduate School of
Business. The notes were issued undermonetary prize will be awarded each year at GAMCO's annual client
meeting to the individual who best exemplifies fundamental research in the
tradition of its honorees.

We also announced several organizational changes during the year aimed at
strengthening and broadening our management team:

- Douglas R. Jamieson, who joined us in 1981, was named to the new
position of President and Chief Operating Officer. In addition to
continuing to head up the firm's separate accounts business (GAMCO),
he now oversees all of GBL's business units.

- Henry G. Van der Eb, CFA, was named Senior Vice President and serves
as a $400 million shelf registration statement filedSenior Advisor to management in December 2001. There remains $120 million available underall aspects of GBL's business. He
has over 30 years of registered investment advisor industry experience
including regulatory, legal, compliance, operations, public relations,
personnel and acquisitions. He has a wide range of responsibilities
across GBL's three major product groups (Mutual Funds, Separate
Accounts, and Investment Partnerships) including portfolio management,
security analysis, macroeconomic strategy, marketing and client
service.

- Michael R. Anastasio, Jr., CPA, was named Chief Financial Officer. He
had served as the shelf registration
statement.Chief Accounting Officer since September 2003 and
was previously the CFO of the Investment Partnerships business at GBL.

- Christopher C. Desmarais, Senior Vice President of GAMCO, has been
named Director of Institutional Marketing. He was previously the
Director of GAMCO's Socially Responsive Investments (SRI) since March
2003 where assets have grown to over half a billion dollars. His
responsibilities include marketing separate account products directly
to Consultants, Corporate Plan Sponsors, Taft Hartley Plans,
Foundations and Endowments.

- Howard F. Ward, CFA, portfolio manager of the Gabelli Growth Fund
since 1994, was named Director of Growth Products. He now oversees
GBL's domestic, international and global growth equity products for
mutual funds and separate accounts and is a member of the Gabelli
Global Growth Fund's portfolio management team.

BUSINESS STRATEGY

Our business strategy targets global growth of the Gabelli franchise through continued
leveraging of our proven asset management strengths including our brand name,
long-term performance record, diverse product offerings and experienced
investment, research and client service professionals. In order to achieve
growth in assets under management and profitability, we are pursuing a strategy
which includes the following key elements:

o BROADENING AND STRENGTHENING THE GABELLIOUR BRAND. We believe thatare undertaking a series of
branding initiatives to enhance long-term shareholder value. Initially, our
Board of Directors has approved and will be recommending to shareholders a
change in the corporate name from Gabelli Asset Management Inc. to GAMCO
Investors, Inc. ("GAMCO"). Our ticker symbol will remain GBL on the New
York Stock Exchange. Additionally, our existing subsidiary named GAMCO
Investors, Inc. will be renamed.

GAMCO is our oldest asset management company and brand, name is onerepresenting our
institutional and high net worth effort since its founding in 1978, and has
historically represented the majority of the firm's asset base. We believe
changing the corporate name back to GAMCO helps us achieve our mission of
earning superior returns for our clients by providing various value added
products. GAMCO is a more visibleencompassing parent company name, and widely recognizedmore
appropriately represents the various investments strategies, philosophies, and
asset management brands incontributing to the U.S. investment management industry. We intend to strengthen and further
extend our brand identity by increasing our marketing to provide a uniform
global image.growth of the organization.

o ESTABLISHING RELATIONSHIP CENTERS. In addition to our corporate office in
Rye NY, we have seven offices which conduct portfolio management, research
and marketing activities in the United States and abroad in the following
cities: Greenwich CT, Chicago IL, Minneapolis MN, Palm Beach FL, Reno NV,
Atlanta GA and London UK. Our offices in Chicago and Minneapolis were
established as the result of acquisitions of on-going investment advisory
operations. The London office was opened in January 2000 to provide a
geographic presence overseas and to coordinate investment research and
marketing activities for our investment product offerings in the European
markets.

4
o INTRODUCING NEW PRODUCTS AND SERVICES. We believe we have the capacity for
development of new products and services around the Gabelli brandand GAMCO
brands to complement our existing product offerings. New products since our
initial public offering include:

- Four open-end mutual funds: Gabelli Blue Chip Value Fund (1999),
Gabelli Utilities Fund (1999), and the Gabelli Woodland Small Cap Value
Fund (2003), and Ned Davis Research Asset Allocation Fund (2003).
brands.

- TwoThree closed-end funds: The Gabelli Utility Trust, and The Gabelli
Dividend & Income Trust and The Gabelli Global Utility and Income
Trust.

- Six private limited partnerships: Gemini Global Partners, L.P.,
Gabelli European Partners, L.P., Gabelli Japanese Value Partners,
L.P., Gabelli Associates Fund II, L.P., GAMCO Performance Partners,
L.P., and GAMA Select Energy Plus, L.P.

- Five offshore funds: Gemini Global Partners, Ltd., Gabelli European
Partners, Ltd., Gabelli Japanese Value Partners, Ltd., GAMCO
Performance Partners, Ltd., and GAMCO Arbitrage Partners, Ltd.

o PROMOTINGO PROMULGATING THE GABELLI "PRIVATE MARKET VALUE WITH A CATALYST" INVESTMENT
APPROACH. While we have expanded our investment product offerings, our
"value investing" approach is stillremains the core of our business. This method is
based on the value investing principles articulated by Graham & Dodd in
1934, and further adaptedaugmented by Mario J. Gabelli with his development of
private market value analysis.and his introduction of a catalyst into the value
investment methodology. The development of private market value ("PMV")
analysis combined with the concept of a catalyst has evolved into our value
investing approach, commonly referred to as "PMV with a Catalyst"
investing. Our approach encompasses the broad spectrum of event-driven
investing including arbitrage and special situations, implemented on a
global basis.

PMV with a Catalyst investing is a disciplined, research driven approach
based on the extensive use of security analysis. In this process, we
carefully select stocks whose intrinsic value, based on our estimate of
current asset value and future growth and earnings power, is significantly
different from the value as reflected in the public market. We then
calculate the firm's PMV, which is defined as the price an informed
industrial buyer would be likely to pay to acquire the business.

To limit the time horizon in which the PMV is likely to be realized, we
look for situations in which catalysts "hard" and/or "soft", are working to help eliminate the
premium or realize the discount between the public market price and the
estimated PMV. Hard catalystsCatalysts which are company specific and
include but are not limited to:include: realization of
hidden assets, recognition of underperforming subsidiaries, share buybacks,
spin-offs, mergers and acquisitions, balance sheet changes, new products,
accounting changes, new management and cross-shareholder unwinding. SoftOther
catalysts are related to industry relateddynamics or macroeconomic and include but
are not limited to: industry consolidation, deregulation, accounting, tax,
pension and political reforms, technological change and the macroeconomic
backdrop. The time horizons for catalysts to trigger change can either be
short, medium or long-term.

4In an effort to further extend the "value investing" tradition:

- we have established the Graham & Dodd, Murray, Greenwald Prize for
Value Investing in coordination with the Columbia University Graduate
School of Business. The monetary prize will be awarded each year at
GAMCO's annual client meeting to the individual who best exemplifies
fundamental research in the tradition of its honorees.

- we will underwrite two "value investing" seminars to be held in London
and Milan in the summer of 2005 for institutional investors from
leading UK and other European business schools. The seminars will be
hosted by Bruce N. Greenwald, the Robert Heilbrunn Professor of
Finance and Asset Management at Columbia University Graduate School of
Business and the academic Director of the Heilbrunn Center for Graham
& Dodd Investing.

The table below compares the long-term performance record for our separate
accountsaccount composite since 1977, using our flagship valuetraditional value-oriented product,
the Gabelli "PMV with a Catalyst" investment approach, versus various
benchmarks.

GAMCO Value 1977 - 2003VALUE 1977-2004

S&P Russell
GAMCO(1) S&P 500 2000*GAMCO(a) 500(b) 2000(b) CPI + 1010(b)
-------- ------ ------- ----- -------------------
Number of Up Years 23 2122 19
Number of Down Years 34 5 7
Years GAMCO Beat Index 18 1817 17 17
Total Return (CAGR) 18.4% 13.4% 13.3% 14.3%13.5% 14.2%
Total Return 8,269% 2,594%9,761% 2,917%
Beta 0.77

*Calculation of Russell 2000 commenced 1/1/79

The chart below illustrates how this methodology performed during recent
market cycles to capture the upside in bull markets while limiting the
downside in the most recent bear market.

Performance 1997 to 20032004

GAMCO Value vs. S&P 500 Index

-Up Market- -Down Market- -Up Market-

30.6%Markets-

30.5% 27.6% -4.4% -14.6% 33.9% 28.7% Gabelli17.8% 10.9%
GAMCO(a) S&P 500(b) GAMCO S&P 500 GabelliGAMCO S&P 500 GabelliGAMCO S&P 500

1997 - 1999 2000 - 2002 2003 2004
CAGR CAGR

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FOOTNOTES Table
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(1)TO TABLE AND CHART

(a) o The GAMCO composite represents fully discretionary, tax-exempt
accounts managed for at least one full quarter and meeting minimum
account size requirements. The minimum size requirement for inclusion
in 1985 was $500,000; 1986, $1 million; and 1987 and thereafter, $5
million. The performance calculations include accounts under
management during the respective periods. As of 12/31/0304, the GAMCO
composite included 4950 accounts with aggregate market value of $3.6$4.0
billion. A complete list of composites is available upon request. No
two portfolios are identical. Accounts not within this size and type
may have experienced different results.

o GAMCO'sGAMCO performance results are computed on a total-return basis, which
includes all dividends, interest and accrued interest, and realized
and unrealized gains and losses. The summary of past performance is
not intended as a prediction of future results. Returns are presented
in U.S. dollars. The inception date of the GAMCO composite is 10/1/77.

o GAMCO'sGAMCO Compound Annualized Growth Rate is computed after actual
transaction costs, investment advisory fees and other expenses.

o GAMCO'sGAMCO Total Return represents the total net return of the composite
from 10/1/77 through 12/31/03.04.

o Beta is the measure of the GAMCO composite's risk (volatility) in
relation to the S&P 500 Index.

(b) o The S&P 500 is an unmanaged index of 500 U.S. stocks and performance
represents total return of index including reinvestment of dividends.
The Russell 2000 is an unmanaged index of 2000 small capitalization
stocks and performance represents total return of index including
reinvestment of dividends. The performance figures for the Russell
2000 are based on an inception date of 1/1/79. The CPI is a widely
used measure of inflation and the CPI+10 measure is used to show the
results that would have been achieved by obtaining a rate of return
that exceeded the CPI by a constant 10% as a basis of comparison
versus the results of the GAMCO composite.

Chart
- -----

o Up and down markets in Chart determined by the performance of the S&P
500 Index during the respective periods.

o EXPANDING MUTUAL FUND DISTRIBUTION. We continue to expand our
distribution network primarily through national and regional brokerage
firms and have developed additional classes of shares for most of our
mutual funds for sale through these firms and other third-party
distribution channels on a commission basis. We intend to increase our
wholesaling efforts to market the multi-class shares, which have been
designed to meet the needs of investors who seek advice through
financial consultants. During 2003, we
entered into an alliance with a third party wholesaling organization to
assist in the offering of The Gabelli Dividend & Income Trust, a closed-end
fund which generated gross proceeds of $1.46 billion in November 2003. We
will continue to seek and capitalize on similar opportunities.consultants

o INCREASING PRESENCE IN HIGH NET WORTH MARKET. Our high net worth
business focuses, in general, on serving clients who have established
an account relationship of $1 million or more with us. According to
industry estimates, the number of households with over $1 million in
investable assets will continue to grow in the future, subject to ups
and downs in the equity and fixed income markets. With our 27-year28-year
history of serving this segment, long-term performance record,
customized portfolio approach, dominant, tax-sensitive, buy-hold
investment strategy, brand name recognition and broad array of product
offerings we believe that we are well positioned to capitalize on the
growth opportunities in this market.

o INCREASING MARKETING FOR INSTITUTIONAL SEPARATE ACCOUNTS. The
institutional Separate Accounts business has beenwas principally developed
through direct marketing channels. Historically, pension and financial
consultants have not been a major source of new institutional Separate
Accounts business for us. We intendpromoted Christopher Desmarais to addlead
our institutional marketing personnelefforts. We have also launched an effort
to target pension and financial
consultants and increaseaugment our effortsinstitutional sales force including adding staff to
add new accounts throughmarket directly to the consultant community as well as our traditional
marketing channels.

o ATTRACTING AND RETAINING EXPERIENCED PROFESSIONALS. We have increased
the scope of our investment management capabilities by adding
portfolio managers and other investment personnel in order to expand
our broad array of products. The ability to attract and retain highly
experienced investment and other professionals with a long-term
commitment to us and our clients has been, and will continue to be, a
significant factor in our long-term growth. For example, we acquired
the Mathers Fund in 1999, managed by Henry Van der Eb, CFA, (Chicago)
and the Comstock Partners Funds in 2000, managed by Charlie Minter and
Martin Weiner. In addition, Elizabeth Lilly, CFA, (Minneapolis) joined
us upon the acquisition ofthrough our alliance with Woodland Partners, LLC in November 2002.
The addition of investment, research and sales professionals has
strengthened our investment management and asset gathering capabilities and
positionedSubsequent to the year-end, L.J. Haverty joined the firm for renewed growth as an
associate portfolio manager of the markets recovered in 2003. We
plan to add more business professionals to assist in the execution of our
business strategy.Gabelli Global Multimedia Trust.

o SPONSORSHIP OF INDUSTRY CONFERENCES. Gabelli & Company, Inc., our
institutional research boutique, sponsors industry conferences and
management events throughout the year. At these conferences and
events, senior management from leading industry companies share their
thoughts on the industry, competition, regulatory issues and the
challenges and opportunities in their businesses with portfolio
managers and securities analysts. We currently host five annual
conferences which include the Automotive Aftermarket Symposium (27(28
years), Pump Valve & Motor Symposium (14(15 years), Aircraft Supplier
Conference (9(10 years) as well as the, Dental Conference (2 years) and the Small Cap
Orthopedic Conference (2 years). Consistent with our innovative
research on emerging technologies, we will be sponsoring conferences
focusing on WiMAX (Worldwide Interoperability for which we held our
first annual conferences within the past year.Microwave Access)
and RFID (Radio Frequency Identification) in 2005.

o HOSTING OF INVESTOR SYMPOSIUMS. We have a Gabelli tradition of
sponsoring symposiums that bring together prominent portfolio
managers, members of academia and other leading business professionals
to present, discuss and debate current issues and topics in the
investment industry.

During April of 2003, we held our fourth in a series of timely discussions
on topics that impact investor strategy:

- In 1997 we sponsored a debate on "Active vs. Passive Stock Selection".
- 1998 we hosted a meeting on "The Role of Hedge Funds as a Way of Generating Absolute
Returns".
- 2001 we hosted a symposium extolling the "Virtues of Value Investing".
- 2003 Dividends "Taxable"Dividends, Taxable versus Non-Taxable Issues"

provided a
timely forum for the open discussion of the impact that the
dividend policy would have on stocks, markets and the economy.

Dividends were a timely consideration this year as an important component
of total return in a single digit or low double digit return environment as
well as their role as part of the tax cut proposals that were later
enacted. The initial public offering of The Gabelli Dividend & Income Trust
in November 2003 underscores this point.

We also hold annual conferences for our alternative investment partnership clients
and prospects in New York and London at which our portfolio management
team discusses the investment environment, our alternative investment strategies and
portfolios, and event-driven investment opportunities.

During 2003, we held our second annual Global Convertible Investing seminar
at which leading figures in convertible investing presented information on
convertible arbitrage, arbitrage opportunities in the U.S. and Europe, and
the use of credit default swaps.
o CAPITALIZING ON ACQUISITIONS AND STRATEGIC ALLIANCES. We intend to
selectively and opportunistically pursue acquisitions and alliances
that will broaden our product offerings and add new sources of
distribution. In November 2002, we completed our alliance with
Woodland Partners LLC, a Minneapolis based investment adviseradvisor of
institutional, high-net-worthhigh net-worth and sub-advisory accounts. In March
2003, we launched the Ned Davis Research Asset Allocation Fund, a
quantitative style product. On October 1, 1999, we completed our
alliance with Mathers and Company, Inc. and now act as investment
advisor to the Mathers Fund (renamed Gabelli Mathers Fund) and in May
2000 we added Comstock Partners Funds, Inc., (renamed Comstock Funds,
Inc.). The Mathers, Comstock and Ned Davis Research funds are part of
our Non-Market Correlated mutual fund product line, which also
includes our Gabelli ABC Fund and Gabelli Gold Fund. We believe that
we are well positioned to pursue acquisitions and alliances because of
our flexibility in structuring appropriate arrangements to meet the
specific needs of all parties.

o EXPANDING SUB-ADVISORY RELATIONSHIPS. Beginning with Global Asset
Management in 1987, globally renowned institutions have approached us
seeking Gabelli's research-drivenGBL's investment management expertise and we have actively
pursued the strategic partnering of our investment products with these
prominent distribution firms. The resulting relationships include
American Express, American Skandia, EQ/Enterprise Funds, MainStaySkandia Global and UBS (GAM)
funds. During 2003, we further extended our long-term relationship with
Global Asset Management (a subsidiary of Zurich-based UBS AG) with products
for both U.S. and non-U.S. investors seeking exposure to our distinctive
event-driven value style in a U. S. long/ short portfolio context. We believe sub-advisory relationships provide a significant
growth opportunity for our business.

We believe that our growth to date is attributable to the following factors:

o STOCK MARKET GAINS: The S&P 500's compound annual total return is 13.4%
since GabelliSince GBL began managing institutional separate
accounts in 1977.1977, our traditional value-oriented separate account
composite has earned a compound annual return of 18.4% versus a
compound annual return of 13.3% for the S&P 500. Since our initial
public offering in February 1999 through December 20032004, the compound
annual return for our traditional value-oriented separate account
composite was 9.3% versus the S&P 500's compound annual total return
has been a negative (0.9%)of 1.0%. Our
traditional value-oriented separate account performance for these periods
is 18.4% and 7.6%, respectively.

o LONG-TERM PERFORMANCE: We have a long-term record of achieving
relatively high returns for our Mutual Fund and Separate Account
clients when compared to similar investment products. We believe that
our performance record isrepresents a competitive advantage and a
recognized component of our franchise.

o WIDELY RECOGNIZED "GABELLI" AND GAMCO BRAND NAME:NAMES: For much of our
history, our portfolio managers and investment products have been
featured in a variety of financial print media, including both U.S.
and Internationalinternational publications such as THE WALL STREET JOURNAL,
FINANCIAL TIMES, MONEY MAGAZINE, BARRON'S, FORTUNE, BUSINESS WEEK,
NIKKEI FINANCIAL NEWS, FORBES MAGAZINE and INVESTOR'S BUSINESS DAILY.
We also underwrite publications written by our investment
professionals, including "DEALS...DEALS...AND MORE DEALS" which
examines the practice of merger arbitrage and "GLOBAL CONVERTIBLE
INVESTING: THE GABELLI WAY"Way", a comprehensive guide to effective
investing in convertible securities.

o DIVERSIFIED PRODUCT OFFERINGS: Since the inception of our investment
management activities, we have sought to expand the breadth of our
product offerings. We currently offer 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 investment products.partnerships.

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. Since Gabelli was foundedGBL began
managing institutional separate accounts in 1977, world equity markets
have grown at an 11.9%11.8% compounded annual growth rate through December
31, 2003,2004, including the net addition of new stocks in many countries,
to $30.1 trillion (est.)$36.4 trillion(a). The U.S. equity market comprises about $14.5 trillion$15.1
trillion(a) or 48%41.5% of world equity markets. We believe 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.

Gabelli'sGBL's financial strength is underscored by having received an investment
grade ratingsrating from two well respectedwell-respected ratings agencies, Moody's Investors
Services and Standard and Poor's Ratings Services. We believe that
maintaining these investment grade ratings will provide greater access to
the capital markets, enhance liquidity and lower overall borrowing costs.

7(a) Source: Birinyi Associates, LLC

BUSINESS DESCRIPTION

GabelliGBL was originally founded in 1976 as an investment partnership. Our initial
operations focused on our institutional broker-dealer and we entered the
separate accounts business in 1977, alternative investmentsmanagement of investment partnerships in
1985 and the mutual fund business in 1986. Our initial product offering centered
on Gabelli'sGBL's tax sensitive, buy-hold, value-oriented investment philosophy. Starting
in the mid-1980s, we began building on our core value-oriented equity investment
products by adding new investment strategies designed for a broad array of
clients seeking to invest in growth-oriented equities, convertible securities
and fixed income products. Since then, we have continued to build our franchise
by expanding our investment management capabilities through the addition of
industry specific, international, global, and non-market correlated, venture
capital, leveraged buy-out and merchant banking product offerings. Throughout
our 27-year28-year history, we have marketed most of our products under the "Gabelli"
and "GAMCO" brand names. Other brands include Mathers, Comstock, Westwood,
Woodland and Ned Davis Research.

Our assets under management are organized principally in three groups: Separate
Accounts, Mutual Funds and Alternative Investments.Investment Partnerships.

SEPARATE ACCOUNTS - INSTITUTIONAL AND HIGH NET WORTH: Since 1977, we have
provided investment management services through our subsidiary GAMCO Investors,
Inc. ("GAMCO") to a broad spectrum of institutional and high net worth
investors. At December 31, 2003,2004, we had $13.5$14.0 billion of assets in approximately
1,7601,800 separate accounts, representing approximately 49% of our total assets
under management. We currently provide advisory services to a broad range of
investors, the majority of which (in total number of accounts) are high-nethigh net
worth client accounts - defined as individuals and their retirement assets
generally having minimum account balances of $1 million. As of December 31,
2003,2004, high net worth accounts comprised approximately 84%82% of the total number of
Separate Accounts and approximately 23%24% of the assets.

TheseHigh net worth clients are typically long-term relationships, aided in partattracted to us by our gross returns and the
buy-hold and tax
efficient nature of the underlying investment process in these traditional
products. Foundation and endowment fund assets represented an additional 4%9% of
the number of Separate Accounts and approximately 5%11% of the assets. The
sub-advisory portion of the Separate Accounts (where GAMCO actswe act as sub-advisersub-advisor to
certain other third-party investment funds) held approximately $3.9$3.7 billion or
29%27% of total Separate Account assets with less than 1% of the number of
accounts. Institutional client accounts, which include corporate pension and
profit sharing plans, jointly-trusteed plans and public funds, comprisedrepresented 39%
of the balance.Separate Accounts assets and 8% of the accounts. The ten largest Separate
Accounts comprised approximately 20%40% of our total separate accountSeparate Account assets under
management and approximately 12%21% of our total separate accountSeparate Account revenues as of
and for the period ended December 31, 2003.2004, respectively.

In general, our separate accountsSeparate Accounts are managed under the GAMCO brand to meet the
specific needs and objectives of each client by utilizing investment strategies
- - traditional "value", "large cap growth"value", "large cap value"growth", "global",
"international growth" and convertible bonds"convertible bonds" - and techniques that are within
our areas of expertise. We distinguish between taxable and tax-free assets and
manage client portfolios for the greatestwith tax benefitsensitivity within given investment
strategies.

At December 31, 2003,2004, over 95%76% of our assets in Separate Accounts (excluding
sub-advisory assets) were obtained through direct sales relationships. Sales
efforts are conducted on a regional and product specialist basis. A team of
professionals (who generally remain assigned to a specific client from the onset
of the relationship) focus on client service. Members of the sales and marketing
staff for the Separate Accounts business have an average of more than 10ten years
of experience with us and focus on developing and maintaining direct, long-term
relationships with their Separate Account clients. This enables the service team
to understand and focus on the individual client's needs. We believe that an
important element of future growth in the Separate Accounts is dependent on
client relationships and retention. As we have for the past eighteen years, theThe firm will host its 20th Annual Client
conference in May. This two-day event will kick off with a gathering at the
American Museum of Natural HistoryWaldorf-Astoria in New York followed by presentations by our portfolio managers
and analysts the following day. Along with these client seminars, we continue to
establish and staff relationship offices around the country.

We are also willing to fight for clients as evidenced by our efforts in a recent
appraisal action. After a lengthy and time-consuming process, the Delaware
Chancery Court decided in favor of our GAMCO clients in this appraisal action
during the fourth quarter 2004. Over five hundred clients received a premium of
nearly 45% over the merger price offered in September 2001.

9
Sub-advisory relationships are a growing source of assets under management and
require above average operational, trading and marketing support. We act as a
sub-advisersub-advisor on certain funds for several large and well knownwell-known fund managers
including American Express, American Skandia, EQ/Enterprise Funds, MainStaySkandia Global and UBS (GAM)
funds. These relationships contributed substantiallyIn November 2004, a sub-advisory client transferred management of the
largest of its three portfolios managed by the firm to the firm's cash flows in
recent years.another asset manager.
Similar to corporate clients, sub-advisory clients are also subject to business
combinations which may result in the curtailment of product distribution or the
termination of the relationship.

Investment advisory agreements for our Separate Accounts are typically subject
to termination by the client without penalty on 30 days' notice or less.

8
MUTUAL FUNDS: We currently provide advisory services to (a) the Gabelli family
of funds, which consists of twenty-one open-end mutual funds and fivesix closed-end
funds of which one open-end fund is managed by an unaffiliated sub-adviser;sub-advisor; (b)
The Treasurer's Fund, consisting of three open-end money market funds (the
"Treasurer's Funds"); and (c) the Gabelli Westwood family of funds, consisting of six
open-end mutual funds, five of which are managed on a day-to-day basis by
Westwood Management Corporation, a wholly-owned subsidiary of Westwood Holdings
Group (collectively, the "Mutual Funds"). At December 31, 2003,2004, we had $13.3$13.9
billion of assets under management in open-end mutual funds and closed-end
funds, representing approximately 48% of our total assets under management. The
Mutual Funds have a long-term record of achieving high returns, relative to
similar investment products. At December 31, 2003, 95%2004, 94% 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 approximately 38%37% of such assets in open-end Mutual Funds
ranked "five stars" and and/or "four stars" on an overall basis (I.E., derived from
a weighted average of the performance figures associated with its three-, five-,
and ten-year Morningstar Rating metrics). 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, 2003,2004, approximately 38% of
our assets under management in open-end, no-load equity Mutual Funds had been
obtained through direct sales relationships. We also sell our open-end Mutual
Funds through Third-Party Distribution Programs, particularly No-Transaction Fee
("NTF") Programs, and have developed additional classes of shares for many of
our mutual funds for sale through additional third-party distribution channels
on a commission basis. At December 31, 2003,2004, Third Party Distribution Programs
accounted for approximately 62% of all assets in open-end funds. Five closed endSix closed-end
funds represent 26%31% of the total assets in the mutual funds business, including
the newly organizedbusiness. The
Gabelli Dividend & Income Trust, which generated gross proceeds of $1.46 billion
in November 2003 and subsequent to year-end generatedthrough its initial public offering, raised an additional $194
million in gross proceeds through the exercise of the underwriters'
overallotment option.option in January 2004 and $300 million through the placement of
preferred shares in October 2004. In addition, The Gabelli Global Utility &
Income Trust generated gross proceeds of approximately $58 million through its
initial public offering in May 2004.

A detailed description of our Mutual Funds is provided within this Item 1
beginning on page 11.

ALTERNATIVE INVESTMENTS:12.

INVESTMENT PARTNERSHIPS: We provide alternative investment productsmanage Investment Partnerships through our rapidly
growing (32%(29% CAGR since 1999)2000) 92% majority-owned subsidiary, Gabelli Securities,
Inc. ("GSI"). The alternative investment productsInvestment Partnerships consist primarily of limited
partnerships, offshore funds, separate accounts and sub-advisory relationships
within the following strategies: merger arbitrage, event-driven long/short
equity funds, sector focusedsector-focused funds and merchant banking. We had $692$814 million of
alternative investmentInvestment Partnership assets under management, or approximately 3% of total
assets under management, at December 31, 2003.2004.

We introduced our first targeted portfolio, a merger arbitrage fundpartnership in
1985. A
second fundAn offshore version of this strategy was added in 1986 focusing on U.S. special situations, followed by
two offshore funds in 1989. Building on our
strengths in global event-driven value investing, several new hedge fundsInvestment
Partnerships have been added to balance investors' geographic, strategy and
sector needs. Today we offer a broad range of absolute return products. Within
our merger arbitrage strategy, we manage approximately $393$432 million of assets
for investors who seek positive returns not correlated to fluctuations of the
general market. These funds seek to drive returns by investing in announced
merger and acquisition transactions that are primarily dependent on the deal
closure and less on the overall market environment. In event-driven long/short
strategies, we manage $268$358 million of assets focused on the U.S., Japanese, and
globalEuropean markets. Recently we introduced the GAMA Select
portfolios,We also manage a series of sector-focused absolute return
funds designed to offer investors a mechanism to diversify their portfolios by
global economic sector rather than by geographic region. We currently offer two
GAMA Selectsector-focused portfolios: the Gabelli International Gold Fund Ltd. and GAMA
Select Energy Plus, L.P. Merchant banking activities are carried out through
ALCE Partners, L.P. and Gabelli Multimedia Partners, L.P., both of which are
closed to new investors.

Our alternative investment productsInvestment Partnerships have been marketed primarily by our direct sales
force to high-net-worthhigh net worth individuals and institutions. During 2003,Separate accounts and
sub-advisory relationships have becomecontinue to be an increasingly important aspect of our alternative investmentInvestment
Partnerships business and now account for approximately 40%48% of our alternative investmentInvestment
Partnership assets under management. We intend to expand product offerings, both
domestic and international, and the geographic composition of our customer base
in alternative investment products.Investment Partnerships. It is our expectation that the assets invested in
these products will provide a growing source of revenues in the future.

910

ASSETS UNDER MANAGEMENT

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)

JANUARY 1,
19992000 TO
DECEMBER 31,
AT DECEMBER 31, 20032004
----------------------------------------------------
1999
2000 2001 2002 2003 2004 CAGR(A)
-------- -------- -------- -------- -------- ----------

EQUITY:
Mutual Funds ................................. $ 10,459............................ $ 10,680 $ 10,165 $ 8,091 $ 11,618 2.7%$ 12,371 3.4%
Institutional & HNW Separate Accounts ........ 9,370... 10,142 11,513 9,990 13,031 8.613,587 7.7
-------- -------- -------- -------- --------
Total Equity ............................... 19,829.......................... 20,822 21,678 18,081 24,649 5.625,958 5.5
-------- -------- -------- -------- --------

FIXED INCOME:
Money Market Mutual Funds .................... 1,175............... 1,425 1,781 1,963 1,703 9.71,488 4.8
Bond Mutual Funds ............................ 6....................... 8 9 14 11 16.411 12.9
Institutional & HNW Separate Accounts ........ 694... 859 720 613 504 (7.7)388 (11.0)
-------- -------- -------- -------- --------
Total Fixed Income ......................... 1,875.................... 2,292 2,510 2,590 2,218 4.31,887 0.1
-------- -------- -------- -------- --------

ALTERNATIVE INVESTMENTS:
Alternative Investments ...................... 230INVESTMENT PARTNERSHIPS:
Investment Partnerships ................. 437 573 578 692 31.7814 28.8
-------- -------- -------- -------- --------
Total Assets Under Management .............. $ 21,934......... $ 23,551 $ 24,761 $ 21,249 $ 27,559 5.9$ 28,659 5.5
======== ======== ======== ======== ========

BREAKDOWN OF TOTAL ASSETS UNDER MANAGEMENT:
Mutual Funds ................................. $ 11,640............................ $ 12,113 $ 11,955 $ 10,068 $ 13,332 3.5$ 13,870 3.6
Institutional & HNW Separate Accounts ........ 10,064... 11,001 12,233 10,603 13,535 7.7
Alternative Investments ...................... 23013,975 6.8
Investment Partnerships ................. 437 573 578 692 31.7814 28.8
-------- -------- -------- -------- --------
Total Assets Under Management .............. $ 21,934......... $ 23,551 $ 24,761 $ 21,249 $ 27,559 5.9$ 28,659 5.5
======== ======== ======== ======== ========

(a) Compound annual growth rate.

SUMMARY OF INVESTMENT PRODUCTS

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

U.S. EQUITIES: GLOBAL AND INTERNATIONAL EQUITIES: ALTERNATIVE PRODUCTS:INVESTMENT PARTNERSHIPS:
-------------- ---------------------------------- ---------------------------------------------

All Cap Value International Growth Merger Arbitrage
Large Cap Value Global Growth U.S. Long/Short
Large Cap Growth Global Value Global Long/Short
Mid Cap Value Global Telecommunications European Arbitrage
Small Cap Value Global Multimedia Japanese Long/Short
Small Cap Growth Gold "GAMA Select" Sector FundsSector-Focused
Micro Cap Merchant Banking
Real Estate
Utilities
Non-Market Correlated

CONVERTIBLE SECURITIES: U.S. BALANCED: U.S. FIXED INCOME:
----------------------- -------------- -----------------
U.S. Convertible Securities Asset Allocation Corporate
Global Convertible Securities Balanced Growth Government
Balanced Value Municipals
Asset-backed
Intermediate
Short-term

1011

ADDITIONAL INFORMATION ON MUTUAL FUNDS

The Mutual Funds include 30 open-end mutual funds and 56 closed-end funds which
had total assets as of December 31, 20032004 of $13.3$13.9 billion. The open-end Mutual
Funds are available to individuals and institutions on both a no-load and
commission basis, while the closed-end funds are listed and traded on either the
New York Stock Exchange ("NYSE") or the American Stock Exchange ("AMEX"). At
December 31, 2003,2004, the open-end funds had total net assets of $9.8$9.6 billion and
the closed-end funds had total net assets of $3.5$4.3 billion. The assets managed in
the closed-end funds represent approximately 26.5%31% of the assets in the Mutual
Funds and 12.8%15% of the total assets under management at December 31, 2003.2004. Our
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 our Mutual Fund shareholders. At December 31, 2003,2004, approximately
38% of our assets under management in open-end Mutual Funds had been obtained
through direct sales relationships.

We, through our affiliates, act as adviseradvisor to all of the Mutual Funds, except
with respect to the Gabelli Capital Asset Fund for which we act as a sub-advisersub-advisor
and Guardian Investment Services Corporation, an unaffiliated company, acts as
manager. As sub-adviser,sub-advisor, we make day-to-day investment decisions for the Gabelli
Capital Asset Fund.

Gabelli Funds, LLC ("Funds Adviser"), a wholly-owned subsidiary of Gabelli Asset
Management Inc., acts as the investment adviseradvisor for all of the Mutual Funds
other than the Gabelli Westwood family of funds and theThe Treasurer's Fund. Funds Adviser
has retained Ned Davis Research, Inc. ("NDR") to act as sub-advisersub-advisor for the Ned
Davis Research Asset Allocation Fund ("NDR Fund"). As sub-adviser,sub-advisor, NDR makes
day-to-day investment decisions for the NDR Fund utilizing a team investment
approach.

Gabelli Advisers, Inc., a subsidiary controlled by Gabelli Asset Management
Inc.
and our affiliates,, acts as investment adviseradvisor to the Gabelli Westwood family of funds and has
retained Westwood Management Corporation to act as sub-advisersub-advisor for five of the
six portfolios. Westwood Management is a wholly-owned subsidiary of Westwood
Holdings Group (NYSE: WHG). InCorporation, in its capacity as sub-adviser, Westwood Managementsub-advisor,
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 sub-advisers.sub-advisors. Westwood Management
Corporation owns an 18.8%approximately 19.0% equity interest in Gabelli Advisers,
Inc. Gabelli Asset Management Inc. owns approximately 12%At December 31, 2004, GBL in turn owned 16.1% of Westwood Holdings Group.Group
(NYSE: WHG).

Gabelli Fixed Income LLC, a majority ownedmajority-owned subsidiary of Gabelli Asset
ManagementFixed Income,
Inc., currently manages short-term and short-intermediate term fixed income
securities for the Treasurer's Fund as well as for Separate Accounts. We plan to
further increase and diversify the number of fixed income products offered.
Certain members of senior management of Gabelli Fixed Income LLC own a 19.9%
equity interest in Gabelli Fixed Income LLC.

1112

The following table lists the Mutual Funds, together with the December 31, 20032004
Morningstar overall rating, where rated (ratings are not available for the
money-market mutual funds and other mutual funds, which collectively represent
40.7%43.4% of the assets under management in the Mutual Funds), 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 Funds as of December 31, 2003.2004.

NET ASSETS AS
OF
DECEMBER 31,
FUND PRIMARY ADVISORY 12B-1 INITIAL 20032004
(MORNINGSTAR OVERALL PRIMARY INVESTMENT FUND FEES FEES OFFER (ALL CLASSES)
RATING)(1) OBJECTIVE CHARACTERISTICS (%) (%) DATE ($ IN MILLIONS)
----------- ---------- --------------------- ------------------ --------------- --- --- ---- ------------------- ------- -------------

GABELLI OPEN-END FUNDS:

VALUE:

The Gabelli Asset Growth of capital as Class AAA: 1.00 .25 03/03/86 $ 1,959.92,218.4
Fund a primary investment No-load,
****oooo objective, with Open-end,
current income as a Diversified
secondary investment Multi-class
objective. Invests in shares (2)
equity securities of
companies selling at
a significant discount
to their private market
value.

Gabelli Westwood Capital appreciation Class AAA: 1.00 .25 01/02/87 $ 220.4181.7
Equity Fund through a diversified No-load,
****ooo portfolio of equity Open-end,
securities using bottom-up Diversified
fundamental research Multi-class
with a focus on shares (2)
identifying well-seasoned
companies.

The Gabelli Blue Chip Capital appreciation through Class AAA: 1.001.00(8) .25 08/26/99 $ 48.338.4
Value Fund investments in equity securities No-load,
*o securities of established Open-end,
companies, which Open-end,
are Diversified
temporarily out of favor Multi-class
and Diversified which have market shares (2)
capitalizations Multi-class
in excess of $5 billion.

shares (2)The Gabelli Capital Asset Capital appreciation No-load, .75 n/a 05/01/95 $ 214.4240.2
Asset Fund from equity Open-end,
(not rated)(7) securities of Diversified,
companies selling at Variable Annuity
a significant Annuity
discount to their
private market value.

FOCUSED VALUE:

The Gabelli Value High level of capital Class A: 1.00 .25 09/29/89 $ 1,289.21,299.1
Fund appreciation from Front end-load,
***ooo undervalued equity Open-end
securities that are Non-diversified
held in a concentrated Multi-class
portfolio. shares (2)

SMALL CAP VALUE:

The Gabelli Small Cap High level of capital Class AAA: 1.00 .25 10/22/91 $ 621.5703.6
Growth Fund appreciation from No-load,
***ooo equity securities of Open-end,
smaller companies Diversified
with market Multi-Class
capitalization of Shares (2)
$1 billion or less.

1213

The Gabelli Woodland Long TernTerm capital appreciation Class AAA: 1.001.00(8) .25 12/31/02 $ 2.74.5
Small Cap Value Fund appreciation investing No-load,
(not rated) (7) at least 80% of Open-end,
its assets No-load,
(not rated) (7) in equity Non-diversified
securities of companies Open-end,Multi-class
with market capitalizations shares (2)
of Non-diversified $1.5 billion or less.

Westwood Long-term capital Class AAA: 1.00(8) .25 04/15/97 $ 13.7
SmallCap appreciation, No-load,
Equity Fund investing at least Open-end,
oo 80% of its assets in Diversified
equity securities of Multi-class
companies with market shares (2)
capitalizations of
$1.5 billion or less.

GROWTH:

Gabelli International Capital appreciation Class AAA: 1.00 .25 06/30/95 $ 42.155.6
Growth Fund by investing No-load,
****oooo primarily in equity Open-end,
securities of foreign Diversified
companies with rapid Multi-class
growth in revenues and earnings. shares (2)
earnings.

The Gabelli Growth Capital appreciation from Class AAA: 1.00 .25 04/10/87 $ 1,883.81,452.7
Fund from companies that have No-load,
*** haveooo favorable, yet Open-end,
undervalued, DiversifiedOpen-end,
prospects for Multi-Class
earnings Diversified
growth. Shares (2)Multi-Class
Invests in equity Shares (2)
securities of companies
that have above-
averageabove-average
or expanding market
shares and profit margins.

AGGRESSIVE GROWTH:

The Gabelli Global High level of capital Class AAA: 1.00 .25 02/07/94 $ 133.8
capital114.9
Growth Fund appreciation through No load,
**oo investment in a Open-end,
portfolio of equity Non-diversified
securities focused on Multi-class
companies involved shares (2)
in the global marketplace.

MICRO-CAP:

Gabelli Westwood Long-term capital Class AAA:, 1.001.00(8) .25 05/11/98 $ 59.953.0
Mighty MitesSM Fund appreciation by No-load,
****oo investing primarily Open-end,
in equity securities Diversified
with market Multi-class
capitalization of shares (2)
$300 million or less.

EQUITY INCOME:

Gabelli Westwood Both capital Class AAA: .75 .25 10/01/91 $ 153.9
Balanced Fund appreciation and No-load,
**** current income using Open-end,
portfolios containing Diversified
stocks, bonds, and Multi-class
cash as appropriate in light shares (2)
of current economic and
business conditions.

The Gabelli Equity High level of total Class AAA: 1.00 .25 01/02/92 $ 301.3396.8
Income Fund return with an No-load,
***ooooo emphasis on income Open-end,
producing equities Diversified
with yields greater Multi-Class
than the S&P 500 Shares (2)
average.

1314

GabelliWestwood Both capital Class AAA: .75 .25 10/01/91 $ 146.2
Balanced Fund appreciation and No-load,
oooo current income using Open-end,
portfolios containing Diversified
stocks, bonds, and Multi-class
cash as appropriate shares (2)
in light of current
economic and business
conditions.

Westwood Long-term capital Class AAA: 1.001.00(8) .25 09/30/97 $ 15.319.3
Realty Fund appreciation as well No-load,
***oo as current income, Open-end,
investing in equity Diversified
securities that are Multi-class
primarily engaged in shares (2)
or related to the
real estate industry.

SPECIALTY EQUITY:

The Gabelli Global High level of capital Class AAA: 1.001.00(8) .25 05/11/98 $ 19.421.2
Opportunity Fund appreciation through No-load,
****ooo worldwide investments Open-end,
in equity securities. Non-diversified
Multi-class
shares (2)

The Gabelli Global High level of total Class AAA: 1.001.00(8) .25 02/03/94 $ 17.521.2
Convertible return through a No-load,
Securities Fund combination of Open-end,
***oo current income and Non-diversified
capital appreciation Multi-class
through investment in shares (2)
convertible
securities of U.S.
and non-U.S. issuers.

SECTOR:

The Gabelli Utilities High level of total return through Class AAA: 1.001.00(8) .25 08/31/99 $ 44.3102.1
Fund return through a No-load,
oooo combination of capital No-load,
*****Open-end,
appreciation and current Diversified
income Open-end, from investments Multi-class
in utility Diversified
companies. Multi-class shares (2)

The Gabelli Global High level of capital Class AAA: 1.00 .25 11/01/93 $ 187.2211.2
Telecommunications appreciation through No-load,
Fund worldwide investments Open-end,
****ooo in equity securities, Non-diversified
including the U.S., Multi-class
primarily in the shares (2)
telecommunications
industry.

Gabelli Gold Seeks capital Class AAA: 1.00 .25 07/11/94 $ 362.3298.7
Fund appreciation and No-load,
****ooo employs a value Open-end,
approach to investing Diversified
primarily in equity Multi-class
securities of gold- shares (2)
related companies
worldwide.

MERGER AND ARBITRAGE:

The Gabelli ABC Fund Total returns from equity No-load, 0.50(6) n/a(6) 05/14/93 $ 293.8
**** equity301.4
ooo and debt Open-end,
securities that Open-end,
are Non-
diversified attractive to investors Non-diversified
in various market conditions
without excessive risk
of capital loss.
QUANTITATIVE:

The Ned Davis Research Seeks to provide capital Class AAA: 1.00 .25 03/31/03 $ 11.6
Asset Allocation Fund appreciation as its primary No-load,
(not rated) (7) objective with a secondary Open-end,
objective of current income. Diversified
Multi-class
shares (2)loss.

1415

QUANTITATIVE:

Ned Davis Research Seeks to provide capital Class AAA: 1.00(8) .25 03/31/03 $ 9.3
Asset Allocation Fund appreciation as its primary No-load,
(not rated) (7) objective with a secondary Open-end,
objective of current income. Diversified
Multi-class
shares (2)

CONTRARIAN:

The

Comstock Capital appreciation and current Class A 1.00 .25 10/10/85 $ 105.770.1
Capital Value Fund current income through investment in a Load,
(not rated) (7) investment in a highly Open-end,
diversified portfolio Diversified
of Open-end,
securities. Diversified Multi-class
shares (2)

The Comstock Capital appreciation and current Class A .85 .25 05/5/88 $ 19.514.7
Strategy Fund current income through investment in a Load,
(not rated) (7) investment in a Open-end,
portfolio of debt Non-Diversified
securities. Open-end,
Non-Diversified Multi-class
shares (2)

The

Gabelli Mathers Long-term capital appreciation Class AAA: 1.00 .25 8/19/65 $ 60.941.3
Fund appreciation in various No-load,
o market conditions No-load,
*Open-end,
without excess risk of Diversified
capital loss.

Open-end,
Diversified

SMALL CAP GROWTH:

Gabelli Westwood Long-term capital Class AAA: 1.00 .25 04/15/97 $ 18.6
SmallCap appreciation, No-load,
Equity Fund investing at least Open-end,
** 80% of its assets in Diversified
equity securities of Multi-class
companies with market shares (2)
capitalizations of $1.5
billion or less.

FIXED INCOME:

Gabelli

Westwood Total return and Class AAA: .60.60(8) .25 04/06/93 $ 11.210.6
Intermediate Bond current income, while No-load,
Fund limiting risk to Open-end,
***ooo principal. Pursues Diversified
higher yields than Multi-class
shorter maturity funds, shares (2)
and has more price
stability than generally
higher yielding long-term
funds.

CASH MANAGEMENT-MONEY MARKET:

The Gabelli U.S. Treasury High current income Money Market, .30.30(8) n/a 10/01/92 $ 970.6
Money Market Fund970.8
Treasury with preservation of Open-end,
Money Market Fund principal and Diversified
(not rated) (7) principal and Diversified liquidity, while
striving to keep
expenses among the
lowest of all U.S.
Treasury money market
funds.

The Treasurer's Fund, Current income with No-load, .30.30(8) n/a 01/01/88 $ 433.7
Inc.--322.7
Inc. -- Domestic preservation of Open-end,
Prime Money Market principal and Diversified
Portfolio liquidity through Dual class
(not rated) (7) investment in U.S.
Treasury securities
and corporate bonds.

1516

The Treasurer's Current income with No-load, .30.30(8) n/a 12/18/87 $ 233.1139.4
Fund, Inc.--Inc. -- Tax preservation of Open-end,
Exempt Money Market principal and Diversified
Portfolio liquidity through Dual class
(not rated) (7) investment in U.S.
municipal bond
securities.

The Treasurer's Current income with No-load, .30.30(8) n/a 07/25/90 $ 63.254.9
Fund, Inc.--Inc. -- U.S. preservation of Open-end,
Treasury Money Market principal and Diversified
Portfolio liquidity through Dual class
(not rated) (7) investment in U.S.
Treasury securities.

GABELLI CLOSED-END FUNDS:

The Gabelli Equity Long-term growth of Closed-end, 1.001.00(9) n/a 08/14/86 $ 1,514.81,638.4
Trust Inc. capital by investing Non-diversified
(not rated) (7) in equity securities. NYSE Symbol: GAB

The Gabelli High total return Closed-end, 1.001.00(9) n/a 07/03/89 $ 151.7147.2
Convertible and Income from investing Diversified
Securities Fund Inc. (4) primarily in NYSE Symbol: GCV
****(4) convertible
oo instruments.

The Gabelli Global Long-term capital Closed-end, 1.001.00(9) n/a 11/15/94 $ 200.2223.8
Multimedia Trust Inc. (3) appreciation from Non-diversified
(not rated) (7)Inc. (3) equity investments in NYSE Symbol: GGT
(not rated) (7) global telecommunications,
media, publishing and
entertainment holdings.

The Gabelli High total return from Closed-end, 1.001.00(9) n/a 07/09/99 $ 211.5261.6
Utility Trust (5) investments primarily in Non-Diversified
(not rated) (7) securities of companies NYSE Symbol: GUT
involved in gas, electricity
and water industries.

The Gabelli Qualified dividend income Closed-end, 1.001.00(9) n/a 11/24/03 $ 1,451.72,006.8
Dividend & Income and capital appreciation Non-Diversified
Trust potential. NYSE Symbol: GDV
(not rated) (7)

The Gabelli A consistent level of Closed-end, 1.00 n/a 5/28/04 $ 64.2
Global Utility after-tax total Non-Diversified
& Income Trust return with an emphasis AMEX Symbol: GLU
(not rated) (7) on tax-advantaged
dividend income.

(1) For each fund with at least a three-year history, Morningstar calculates a
Morningstar RatingTM based on a Morningstar risk-adjusted return measure
that accounts for variation in a fund's monthly performance (including the
effects of sales charges, loads and redemption fees) placing more emphasis
on downward variations and rewarding consistent performance. 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 bottom 10% receive one star. The Overall
Morningstar Rating for a fund is derived from a weighted average of the
performance figures associated with its three, five, and ten-year (if
applicable) Morningstar Rating metrics. Morningstar Ratings are shown for
the respective class shown; other classes may have different performance
characteristics. There were 177228 Conservative Allocation funds rated for
three years, 140164 funds for five years and 3553 funds for ten years (Gabelli(The
Gabelli ABC Fund, Gabelli Mathers Fund). There were 237283 Mid-Cap Blend funds
rated for three years, 147172 funds for five years and 4457 funds for ten years
(Gabelli(The Gabelli Asset Fund, The Gabelli Value Fund).

17
There were 655781 Large Value funds rated for three years, 516559 funds for five
years and 190244 funds for ten years (Gabelli(The Gabelli Blue Chip Value Fund,
Gabelli Westwood Equity Fund). There
were 173 Mid-Cap Value funds rated for three years, 136 funds for five
years and 49 funds for ten years (GabelliFund, The Gabelli Equity Income Fund). There were 6364
Convertibles funds rated for three years, and 5556 funds for five years (Gabelliand 27
funds for ten years (The Gabelli Global Convertible Securities Fund)Fund, The
Gabelli Convertible and Income Securities Fund Inc.). There were 268274 World
Stock funds rated for three years, and 211208 funds for five years (Gabelliand 73 funds
for ten years (The Gabelli Global Growth Fund, The Gabelli Global
Opportunity Fund). 16
There were 3640 Specialty-Communications funds rated for
three years, 1715 funds for five years and 98 funds for ten years (Gabelli(The Gabelli
Global Telecommunications Fund). There were 3439 Specialty-Precious Metals
funds rated for three years, and 30 funds for five years and 19 funds for ten
years (Gabelli Gold Fund). There were 9591,039 Large Growth funds rated for
three years, 615743 funds for five years and 219260 funds for ten years (Gabelli(The
Gabelli Growth Fund). There were 164175 Foreign Large Growth funds rated for
three years and 127131 funds for five years (Gabelli International Growth
Fund). There were 188201 Small Value funds rated for three years, 137154 funds
for five years and 3440 funds for ten years (Gabelli(The Gabelli Small Cap Growth
Fund, Gabelli Westwood Mighty MitesMitesSM Fund). There were 7066 Specialty-Utilities
funds rated for three years (Gabelliand 59 funds rated for five years (The Gabelli
Utilities Fund). There were 632654 Moderate Allocation funds rated for three
years, 508515 funds for five years and 166212 funds for ten years (Gabelli
Westwood(Westwood
Balanced Fund). There were 655738 Intermediate-Term Bond funds rated for three
years, 512554 funds for five years and 224275 funds for ten years (Gabelli Westwood(Westwood
Intermediate Bond Fund). There were 134146 Specialty-Real Estate funds rated
for three years and 101120 funds for five years (Gabelli
Westwood(Westwood Realty Fund). There
were 506554 Small Growth funds rated for three years and 344402 funds for five
years (Gabelli Westwood Small Cap(Westwood SmallCap Equity Fund). (a) 20032004 Morningstar, Inc. All
Rights reserved. This information is (1) proprietary to Morningstar and/or
its content providers (2) may not be copied or distributed; and (3) is not
warranted to be accurate, complete or timely. Neither Morningstar nor its
content providers are responsible for any damages or losses arising from
any use of this information. Past performance is no guarantee of future
results. Other share classes may have different performance
characteristics.

(2) These funds have multi-classes of shares available. Multi-class shares
include Class A shares with a front-end sales charge; Class B shares are
subject to a back-end contingent deferred sales charge for up to 6 years
and Class C shares are subject to a 1% back-end contingent deferred sales
charge for up to two years. However, Class B shares are no longer offered
as of July 2004. Comstock Strategy Fund Class R shares, which are no-load,
are available only for retirement and certain institutional accounts.
Comstock Strategy Fund class O shares are no longer offered to the public.
Ned Davis Research Asset Allocation Fund classand The Gabelli Blue Chip Value
Fund Class I shares are available to institutional and certainaccounts. Class I shares
for other accounts.funds are expected to be available in May 2005. Net assets
include all shares classes.

(3) The Gabelli Global Multimedia Trust Inc. was formed in 1994 through a spin-offspin
off of assets previously held in thefrom The Gabelli Equity Trust.

(4) The Gabelli Convertible and Income Securities Fund IncInc. was originally
formed in 1989 as an open endopen-end investment company and was converted to a
closed endclosed-end investment company in March 1995.

(5) The Gabelli Utility Trust was formed in 1999 through a spin off of assets
from theThe Gabelli Equity Trust.

(6) Funds Adviser has voluntarily reduced the Advisory fee from 1.00% to 0.50%
since April 1, 2002. Gabelli & Company, Inc. has waived receipt of the
12b-1 Plan distribution fees as of January 1, 2003 and on February 25, 2004
the Fund's Board of Directors agreed with the Funds Advisers' request to
terminate the 12b-1 Plan.

(7) Certain funds are not rated because they don't have a three year history or
there are not enough similar funds in the category determined by
Morningstar.

17(8) Funds Adviser has an agreement in place to waive its advisory fee or
reimburse expenses of the Fund to maintain fund expenses at a specified
level for Class AAA shares; Multiclass shares have separate limits as
described in the Fund's prospectus. (The Gabelli Blue Chip Value Fund -
2.00%; The Gabelli Woodland Small Cap Value Fund - 2.00%; Westwood Mighty
Mites SM Fund - 1.50%; Westwood Realty Fund - 1.50%; The Gabelli Global
Opportunity Fund - 1.50% (2.00% after May 1, 2005); The Gabelli Global
Convertible Securities Fund - 2.00%; The Gabelli Utilities Fund - 2.00%;
Ned Davis Research Asset Allocation Fund - 2.50% through April 30, 2005;
Westwood SmallCap Equity Fund - 1.50%; Westwood Intermediate Bond Fund -
1.00%; The Gabelli U.S. Treasury Money Market Fund - 0.30%; The Treasurer's
Fund - Domestic Prime Money Market Portfolio - 0.60%; The Treasurer's Fund
- Tax Exempt Money Market Fund - 0.60%; The Treasurer's Fund - U.S.
Treasury Money Market Portfolio - 0.65%.)

(9) Funds Adviser has agreed to reduce its advisory fee on the liquidation
value of Preferred stock outstanding if certain performance levels are not
met.

Shareholders of the no-load open-end Mutual Funds are allowed to exchange shares
among the open-end funds as economic and market conditions and investor needs
change at no additional cost. However, as noted below certain Mutual Funds
impose a 2% redemption fee foron shares redeemed within 60 days.days of a purchase. We
periodically introduce new mutual funds designed to complement and expand our
investment product offerings, respond to competitive developments in the
financial marketplace and meet the changing needs of clients.investors.

In February 2003, to discourage short-term trading, time zone arbitrage and late
trading, the Boards of Directors of our open-end Mutual Funds with significant
holdings in non-US securities, approved the imposition of a 2% redemption fee on
shares redeemed within 60 days of purchase. The 2% redemption fee on these funds
became effective in May 2003. In May 2004, the Boards of Directors of our other
open-end Mutual Funds, other than the money market funds and The Gabelli Capital
Asset Fund, considered and approved the imposition of a 2% redemption fee on
shares redeemed within 60 days of a purchase. As of November 2004, the 2%
redemption fee was effective for all of these funds. The Board of Directors of
our open-end Mutual Funds will continue to review the need to maintain the 2%
redemption fee in light of the regulatory environment and other industry
developments and may elect to selectively remove this fee on certain funds.

The shareholders of The Gabelli ABC Fund voted on December 30, 2004 to approve a
charter amendment that would require investment accounts held at the fund's
transfer agent, State Street Bank & Trust Company, be directly registered to the
beneficial owners of the fund. The action, which was recommended by Funds
Adviser and approved by the fund's Board of Directors, permits the redemption of
shares held through certain brokers and financial consultants in omnibus and
individual accounts where the beneficial owner is not disclosed.

Our marketing efforts for the Mutual Funds are currently focused on increasing
the distribution and sales of our existing funds as well as creating new
products for sale through our distribution channels. We believe that our
marketing efforts for the Mutual Funds will continue to generate additional
revenues from investment advisory fees. We have traditionally distributed most
of our open-end Mutual Funds by using a variety of direct response marketing
techniques, including telemarketing and advertising, and as a result we maintain
direct relationships with a high percentagemany of our no-load open-end Mutual Fund customers.
Beginning in late 1995, we expanded our product distribution by offering several
of our open-end Mutual Funds through Third-Party Distribution Programs,
including NTF Programs. In 1998 and 1999, we further expanded these efforts to
include substantially all of our open-end Mutual Funds in Third-Party
Distribution Programs. More than 38% of the assets under management in the
open-end Mutual Funds are still attributable to our direct response marketing
efforts. Third-Party Distribution Programs have become an increasingly important
source of asset growth for us. Of the $8.1$8.0 billion of assets under management in
the open-end equity Mutual Funds as of December 31, 2003,2004, approximately 62% were
generated through Third-Party Distribution Programs. We are responsible for
paying the service and distribution fees charged by many of the Third-Party
Distribution Programs. Legislation currentlySeveral bills have been introduced byin Congress may result inthat would
amend the Investment Company Act. These proposals, which include but are not
limited to the elimination or restriction of Rule 12b-1 distribution fees, paid by mutualif
enacted or adopted, could have a substantial impact on the regulation and
operation of our registered funds. In light of such legislation and efforts by
some of the program sponsors to increase fees beyond what we deem to be
acceptable, may result in several of our Mutual Funds beingmay be withdrawn from such programs.
During 2000, we completed development of additional classes of shares for many
of our mutual funds for sale through national brokerage and investment housesfirms and
other third-party distribution channels on a commission basis. The multi-class
shares are available in all of Gabelli mutual funds except for theThe Gabelli ABC Fund
and the Gabelli Mathers Fund. The use of multi-class share products will expand
the distribution of all Gabelli Fund products into the advised sector of the
mutual fund investment community. During 2003, we introduced Class I shares,
which are no load shares with higher minimum initial investment and without
distribution fees available to Institutional and Retirement Plan Accounts
directly through Gabelli & Company. The no-load shares are designated as Class
AAA shares and are 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 our
traditional direct sales methods.

We provide investment advisory and management services pursuant to an investment
management agreement with each Mutual Fund. The investment management agreements
with the Mutual Funds generally provide that we are responsible for the overall
investment and administrative services, subject to the oversight of each Mutual
Fund's boardBoard of directorsDirectors or trusteesTrustees and in accordance with each Mutual Fund's
fundamental investment objectives and policies. The investment management
agreements permit us to enter into separate agreements for administrative and
accounting services on behalf of the respective Mutual Funds.

19
We provide the Mutual Funds with administrative services pursuant to the
management contracts. Most of these administrative services are provided through
sub-contracts with unaffiliated third parties. Such services include, without limitation, supervision of
the 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. Most of these administrative
services are provided through sub-contracts with unaffiliated third parties.
Transfer agency and custodial services are provided directly to the Mutual Funds
by unaffiliated third parties.

Our 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 boardBoard of directorsDirectors or trusteesTrustees 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 boardBoard of directorsDirectors or trusteesTrustees 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. We may terminate an
investment management agreement without penalty on 60 days' written notice.

18
MUTUAL FUND DISTRIBUTION, INSTITUTIONAL RESEARCH, BROKERAGE AND UNDERWRITING

Gabelli & Company, Inc. ("Gabelli & Company"), the wholly-owned subsidiary of
our 92% ownedmajority-owned subsidiary Gabelli Securities, Inc., is a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc. ("NASD"). Gabelli & Company's
revenues are derived primarily from the distribution of our Mutual Funds,
brokerage commissions, on transactions in equity securities from institutional research as
well as from Gabelli clients, and from underwriting fees and selling concessions.

MUTUAL FUND DISTRIBUTION

Gabelli & Company distributes our open-end Mutual Funds pursuant to distribution
agreements with each Mutual Fund. Under each distribution agreement with an
open-end Mutual Fund, Gabelli & Company offers and sells such open-end Mutual
Fund's shares on a continuous 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 Gabelli sales
personnel. Gabelli & Company receives fees for such services pursuant to
distribution plans adopted under provisions of Rule 12b-1 ("12b-1") of the
Investment Company Act. Distribution fees from the open-end Mutual Funds
amounted to $21.4 million, $18.4 million, $17.1 million and $17.1$18.9 million for the years ended
December 31, 2001, 2002, 2003 and 2003,2004, respectively. Gabelli & Company is the
principal underwriter for funds distributed in multiple classes of shares which
carry either a front endfront-end or backback- end sales charge. Underwriting and sales
charges amounted to $419,000, $356,000, $268,000 and $268,000$346,000 for the years ended December
31, 2001, 2002, 2003 and 2003,2004, respectively.

Under the distribution plans, the open-end no load (Class AAA shares) Mutual
Funds (except theThe Treasurer's Fund, The Gabelli US Treasury Money Market Fund
and theThe Gabelli ABC Fund) and the Class A shares of various funds pay Gabelli &
Company a distribution or service fee of .25% per year (except the Class A
shares of the Gabelli Westwood Funds which pay .50% per year) on the average daily net
assets of the fund. Class B and Class C shares have a 12b-1 distribution plan
with a service and distribution fee totaling 1%. Gabelli & 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
boardBoard of directorsDirectors or trusteesTrustees 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.
Gabelli & Company may terminate a distribution agreement without penalty upon 60
days' written notice.

20
Gabelli & Company also offers our open-end mutual fund products through our
website, www.gabelli.com,WWW.GABELLI.COM, where directly registered mutual fund investors can
access their personal account information and buy, sell and exchange Fund
shares. Fund prospectuses, quarterly reports, fund applications, daily net asset
values and performance charts are all available. As part of our efforts to
educate investors, we introduced Gabelli University with our initial
publications "DEALS, DEALS... AND MORE DEALS" and "GLOBAL CONVERTIBLE INVESTING:
THE GABELLI WAY." Our website is an active, informative and valuable resource
which we believe has become an increasingly important feature of our client
service efforts.

INSTITUTIONAL RESEARCH

Gabelli & Company provides institutional investors with investment ideas on
numerous industries and special situations, with a particular focus on small and
midcap companies. Our team of over 25 sell-side analysts follow economic sectors on a
global basis, and are bottom-up stock pickers, recommending companies that trade
at significant differences to Private Market Value. Our research focuses on
company fundamentals, cash flow statistics, and catalysts that will help realize
returns.

COMMISSIONS

Gabelli & Company generates brokerage commission revenues from securities
transactions executed on an agency basis on behalf of our mutual funds,
institutional and high net worth clients as well as from institutional and
retail customers. Commission revenues totaled $15.9 million, $13.9 million, $12.9 million, and
$12.9$15.6 for the years ended December 31, 2001, 2002, 2003 and 2003,2004, respectively.

UNDERWRITING

Gabelli & Company is involved in external syndicated underwriting activities. In
November2002, 2003 Gabelli & Company was a leader in the underwriting group that led
the initial public offering of GDV. In 2001, 2002 and 20032004, Gabelli & Company participated in 7, 10, 9 and 95 syndicated
underwritings of public equity and debt offerings managed by major investment
banks, respectively, with commitments of $33.7 million,
$34.9 million, $24.7 million and $24.7$32.1
million, respectively.

COMPETITION

We compete with other investment management firms and mutual fund companies,
insurance companies, banks, brokerage firms and other financial institutions
that offer products that have similar features and investment objectives to
those offered by us. Many of the investment management firms with which we
compete 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, we have competed primarily on the basis of the long-term
investment performance of many of our funds.investment products. However, we have
taken steps to increase our distribution channels, brand name awareness and
marketing efforts.
Although there can be no assurance that we will be successful in these efforts,
our market share of Mutual Funds has increased over the past few years.

The market for providing investment management services to institutional and
high net worth Separate Accounts is also highly competitive. Approximately 39%40%
of our investment advisory fee revenue for the year ended December 31, 20032004 was
derived from our Separate Accounts. Selection of investment advisersadvisors by U.S.
institutional investors is often subject to a screening process and to favorable
recommendations by investment industry consultants. Many of these investors
require their investment advisersadvisors to have a successful and sustained performance
record, often five years or longer, and also focus on one and three year
performance records. We have significantly increased our assets under management
on behalf of U.S. institutional investors since our entry into the institutional
asset management business in 1977. At the current time, we believe that our
investment performance record would be attractive to potential new institutional
and high net worth clients. However, no assurance can be given that our efforts
to obtain new business will be successful.

INTELLECTUAL PROPERTY

Service marks and brand name recognition are important to our business. We have
rights to the service marks under which our products are offered. We have
registered certain service marks in the United States and will continue to do so
as new trademarks and service marks are developed or acquired. We have rights to
use (i) the "Gabelli" name, (ii) the "GAMCO" name, (iii) the research triangle
logo, and (iv) the "Mighty Mites" name. Pursuant to an assignment agreement, Mr.
Gabelli has assigned to us 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 GabelliGBL have entered into a
license agreement with us permitting them to continue limited use of the
"Gabelli" name under specified circumstances. We have taken, and will continue
to take, action to protect our interests in these service marks.

REGULATION

Virtually all aspects of our 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
advisersadvisors and broker-dealers such as us have broad administrative powers,
including the power to limit, restrict or prohibit such an adviseradvisor 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 adviseradvisor and other registrations, censures, and fines. We believe
that we are in substantial compliance with all material laws and regulations.

Our business is subject to regulation at both the federal and state level by the
Securities and Exchange Commission ("Commission") and other regulatory bodies.
Certain of our subsidiaries are registered with the Commission under the
Investment Advisers Act, and the Mutual Funds are registered with the Commission
under the Investment Company Act. Three of our subsidiaries are also registered
as broker-dealers with the Commission and are subject to regulation by the NASD
and various states.

20
The subsidiaries of GabelliGBL that are registered with the Commission under the
Investment Advisers Act (Gabelli Funds LLC, Gabelli Advisers, Inc., Gabelli
Fixed Income LLC and GAMCO) are regulated by and subject to examination by the
Commission. The Investment Advisers Act imposes numerous obligations on
registered investment advisersadvisors 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'sadvisor's registration. The failure of a subsidiary
to comply with the requirements of the Commission could have a material adverse
effect on us. We believe that we are in substantial compliance with the
requirements of the regulations under the Investment Advisers Act.

We derive a substantial majority of our revenues from investment advisory
services through our investment management agreements. Under the Investment
Advisers Act, our 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 Gabelli.GBL.

In their capacity as broker-dealers, Gabelli & Company, Inc., Gabelli Fixed
Income Distributors, Inc. and Gabelli Direct, Inc. are required to maintain
certain minimum net capital and cash reserves for the benefit of our customers.
Gabelli & Company, Inc.'s and Gabelli Fixed Income Distributors, Inc.'s net capital, as defined, has consistently met or
exceeded all minimum requirements. Gabelli Direct, Inc., which was acquired on December 22, 2000 and isGabelli Fixed Income
Distributors, Inc. are currently dormant, hasbut have also consistently met or
exceeded all minimum requirements. Gabelli & Company, Inc., Gabelli Fixed Income
Distributors, Inc. and Gabelli Direct, Inc. are also subject to periodic
examination by the NASD.

22
Subsidiaries of GabelliGBL are subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and to regulations promulgated there under,
insofar as they are "fiduciaries" under ERISA with respect to certain of 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. Our
failure to comply with these requirements could have a material adverse effect
on us.

Investments by GabelliGBL on behalf of our clients often represent a significant equity
ownership position in an issuer's class of stock. As of December 31, 2003,2004, we
had five percent or more beneficial ownership with respect to 126121 equity
securities. This activity raises frequent regulatory and legal issues regarding
our 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. Our failure to comply
with these requirements could have a material adverse effect on us.

The USA Patriot Act of 2001, enacted in response to the terrorist attacks on
September 11, 2001, contains anti-money laundering and financial transparency
laws and mandates the implementation of various new regulations applicable to
broker-dealers, mutual funds and other financial services companies, including
standards for verifying client identification at account opening, and
obligations to monitor client transactions and report suspicious activities.
Anti-money-laundering laws outside of the U.S. contain some similar provisions.
Our failure to comply with these requirements could have a material adverse
effect on us.

We, and certain of our affiliates, are subject to the laws of non-U.S.
jurisdictions and non-U.S. regulatory agencies or bodies. In particular, we are
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,advisor, investment counsel and portfolio manager
with the Ontario Securities Commission in Canada in order to market our services
to prospective clients which reside in Ontario. Several of our Alternative
Investment
productsPartnerships are organized under the laws of foreign jurisdictions. In
connection with our opening of an office in London and our plans to market
certain products in Europe we are required to comply with the laws of the United
Kingdom and other European countries regarding these activities. Our subsidiary,
Gabelli Asset Management (UK) Limited is regulated by the Financial Services
Authority. In connection with our registration in the United Kingdom we have
minimum capital requirements that have been consistently met or exceeded.

RECENT REGULATORY DEVELOPMENTS

On September 3, 2003, the New York Attorney General's office ("NYAG") announced
that it had found evidence of widespread improper trading involving mutual fund
shares. These transactions included the "late trading" of mutual fund shares
after the 4:00 p.m. pricing cutoff and "time zone arbitrage" of mutual fund
shares designed to exploit pricing inefficiencies. Since the NYAG's
announcement, the NASD, the SEC, the NYAG and officials of other states have
been conducting inquiries into and bringing enforcement actions related to
trading abuses in mutual fund shares. We received information requests and
subpoenas from the SEC and a subpoena from the NYAG in connection with their inquiries. We are
complying with these requests and have been conducting an internal review of our
mutual fund practices and procedures in a variety of areas with the guidance of
outside counsel. A special committee of all of our independent directors was
also formed to review various issues involving mutual fund share transactions
and is beingwas assisted by independent counsel.

As part of our review, hundreds of documents were examined and approximately
fifteen individuals were interviewed. We found no evidence that any employee
participated in or facilitated any "late trading". We also found no evidence of
any improper trading in our mutual funds by our investment professionals or
senior executives. As we previously reported, we did find that in August of
2002, we banned an account, which had been engaging in frequent trading in our
Global Growth Fund (the prospectus of which did not impose limits on frequent
trading) and which had made a small investment in one of our hedge funds, from
further transactions with our firm. Certain other investors had been banned
prior to that. Since our internal review and requests from regulators are
ongoing, we can make no assurances that additional information will not become
available or that we will not become subject to disciplinary action.

23
In response to industry wide inquiries and enforcement actions, a number of
regulatory and legislative initiatives have been recentlywere introduced. The SEC has adoptedproposed and
proposedadopted a number of rules under the Investment Company Act and the Investment
Advisers Act. For example, theAct and is currently studying potential major revisions of other rules.
The SEC adopted final rules requiring written compliance programs for registered
investment advisersadvisors and registered investment companies. Severalcompanies and additional
disclosures regarding portfolio management and advisory contract renewals. In
addition, several bills have also beenwere introduced in the prior Congress and
one has passedthat, if adopted,
would have amended the House of Representatives.Investment Company Act. These proposals, if reintroduced
and enacted, or if adopted by the SEC, could have a substantial impact on the
regulation and operation of our registered and unregistered funds. For example,
the Mutual Fund Reform Actcertain of 2004these proposals would, among other things, limit or eliminate Rule
12b-1 distribution fees, limit or prohibit third party soft dollar arrangements
and restrict the management of hedge funds and mutual funds by the same
portfolio manager.

In the coming months, the investment management industry is likely to continue
facing a high level of regulatory scrutiny and become subject to additional
rules designed to improveincrease disclosure, strengthentighten controls and reduce potential
conflicts of interest. In addition, the SEC has substantially increased its use
of focused inquiries in which it requests information from a number of fund
complexes regarding particular practices or provisions of the securities laws.
We participate in some of these inquiries in the normal course of our business.
Changes in laws, regulations and administrative practices by regulatory
authorities, and the associated compliance costs, have increased our cost
structure and could in the future have a material impact.

PERSONNEL

At March 1, 2004,2005, we had a full-time staff of approximately 197188 individuals, of
whom 8372 served in the portfolio management, research and trading areas, 71
served in the marketing and shareholder servicing areas and 4345 served in the
administrative area. As part of our staff, we employ 18 portfolio managers for
the Mutual Funds, Separate Accounts and Alternate Investment products.Partnerships. Additionally,
Westwood Management employs three portfolio managersa team of 19 investment professionals who advise
five of the six portfolios of the Gabelli Westwood family of funds, and Ned Davis
Research, Inc. employs fivefour portfolio managers who are responsible for the
management of the Ned Davis Research Asset Allocation Fund.

24
ITEM 2: PROPERTIES

At December 31, 20032004, we leased our principal offices which consisted of a
single 60,000 square foot building located at 401 Theodore Fremd Avenue, Rye,
New York. This building was leased in December 1997 (prior to our 1999 IPO) from
an entity controlled by members of Mr. Gabelli's immediate family, and
approximately 9,000 square feet are currently subleased to other tenants. We
receive rental payments under the sublease agreements, which totaled
approximately $260,000$282,000 in 20032004 and were used to offset operating expenses
incurred for the property. The lease provides that all operating expenses
related to the property, which are estimated at $650,000$675,000 annually, are to be
paid by us.

We have also entered into leases for office space in both the U.S. and overseas
principally for portfolio management, research, sales and marketing personnel.
These offices are generally less than 4,000 square feet and leased for periods
of five years or less.

ITEM 3: LEGAL PROCEEDINGS

From time to time, we are a defendant in various lawsuits incidental to our
business. We do not believe that the outcome of any current litigation will have
a material effect on our financial condition.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the fourth
quarter of 2003.2004.

PART II

ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Our shares of class A common stock have been traded on the New York Stock
Exchange (NYSE) under the symbol GBL since our initial public offering on
February 11, 1999. Prior to that, there was no public market for our common
stock.

As of March 1, 20042005, there were 13373 class A common stockholders of record and 3
class B common stockholders of record (Gabelli(GGCP, Inc., formerly Gabelli Group
Capital Partners, Inc., and two of its 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 4,000.approximately 5,000.

The following table sets forth the high and low prices of our class A common
stock for each quarter of 20032004 and 20022003 as reported by the New York Stock
Exchange.

QUARTER ENDED HIGH LOW
------------- ---- ---
March 31, 2004 $ 45.00 $ 38.49
June 30, 2004 $ 42.97 $ 38.30
September 30, 2004 $ 43.60 $ 37.22
December 31, 2004 $ 50.50 $ 42.55

March 31, 2003 $ 33.50 $ 25.60
June 30, 2003 $ 36.24 $ 26.25
September 30, 2003 $ 39.00 $ 34.61
December 31, 2003 $ 40.80 $ 33.50

March 31, 2002 $ 44.45 $ 35.60
June 30, 2002 $ 41.05 $ 35.22
September 30, 2002 $ 36.65 $ 24.40
December 31, 2002 $ 33.92 $ 27.20

We paid our first dividend, a $.02 per share dividend, on December 15, 2003 to
our class A shareholders of record December 1, 2003. TheOur class B shareholders
elected to waive receipt of this dividend.

We paid $1.16 per share in dividends to our common shareholders in 2004. This
included three quarterly dividends of $0.02 per share on June 30, 2004,
September 30, 2004 and December 28, 2004 to all shareholders of record on June
15, 2004, September 15, 2004 and December 14, 2004, respectively. We also paid
two special dividends, a $0.10 per share dividend on June 30, 2004 to all
shareholders of record on June 15, 2004 and a $1.00 per share dividend on
November 30, 2004 to class A shareholders of record on November 15, 2004 and on
December 23, 2004 to our class B shareholders of record on that date. Our Board
of Directors also declared a special dividend of $0.60 per share in 2003.November
2004 which was payable on January 18, 2005 to all shareholders of record on
January 3, 2005.

The information set forth under the caption "Equity Compensation Plan
Information" in the Proxy Statement is incorporated herein by reference.

23ITEM 5(C): CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF
EQUITY SECURITIES

The following table provides information with respect to the
shares of common stock we repurchased during the three months
ended December 31, 2004:

(d) Maximum
(c)Total Number of Number of Shares (or
(b)Average Price Shares Repurchased Approximate Dollar
(a)Total Number Paid Per Share, as Part of Publicly Value) That May Yet
of Shares net of Announced Plans Be Purchased Under
Period Repurchased Commissions or Programs the Plans or Programs
------------------- ------------ -------------- ------------------- ---------------------

GBL
10/01/04 - 10/31/04 184,100 $ 44.65 184,100 $ 62,736,065
11/01/04 - 11/30/04 720,950 46.89 720,950 $ 53,929,322
12/01/04 - 12/31/04 118,500 49.24 118,500 1,071,658 (a)
------------ -------------------
Totals 1,023,550 1,023,550
============ ===================

In October 2004, we announced an increase in the number of shares
of GBL to be repurchased of 1 million shares. In November 2004,
we announced an increase in the dollar value of GBL shares
available to repurchase under our stock repurchase program of
$25.0 million to be used for an accelerated stock repurchase
program ("ASR"). Our stock repurchase programs are not subject to
expiration dates.

We made no repurchases of GBL.I (mandatory convertible
securities) during the three months ended December 31, 2004.

(a) Authorization for the period 12/1/04 through 12/31/04 is denoted in
shares.

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.

YEAR ENDED DECEMBER 31,
(In thousands, except per share data)
1999 2000 2001 2002 2003 ---------- ---------- ---------- ---------- ----------2004
--------- --------- --------- --------- ---------

INCOME STATEMENT DATA
Revenues:
Investment advisory and
incentive fees ........................ $ 147,414fees............. $ 190,200 $ 186,124 $ 177,077 $ 176,943 $ 219,939
Commission revenue ...................... 11,856revenue........... 16,805 15,939 13,883 12,863 15,573
Distribution fees and
other income ...... 16,992income............... 26,913 22,351 18,999 17,631 ---------- ---------- ---------- ---------- ----------19,651
--------- --------- --------- --------- ---------
Total revenues ........................ 176,262revenues............. 233,918 224,414 209,959 207,437 ---------- ---------- ---------- ---------- ----------255,163
--------- --------- --------- --------- ---------

Expenses:
Compensation costs ...................... 71,860costs........... 97,055 85,754 80,387 89,169 104,091
Management fee .......................... 10,153fee............... 11,296 11,325 9,533 9,002 11,017
Other operating
expenses ................ 28,917expenses................... 36,653 33,887 30,377 34,552 Non-recurring charge .................... 50,725 -- -- -- --
---------- ---------- ---------- ---------- ----------40,987
--------- --------- --------- --------- ---------
Total expenses ........................ 161,655expenses............. 145,004 130,966 120,297 132,723 ---------- ---------- ---------- ---------- ----------156,095
--------- --------- --------- --------- ---------
Operating income .......................... 14,607income............... 88,914 93,448 89,662 74,714 ---------- ---------- ---------- ---------- ----------99,068
--------- --------- --------- --------- ---------
Other income (expense), net:
Net gain from investments ............... 14,253investments.... 6,716 5,187 1,353 15,610 5,627
Interest and dividend
income ............ 6,850income..................... 9,745 9,461 6,757 5,530 10,481
Interest expense ........................ (3,438)expense............. (3,714) (6,174) (11,977) (14,838) (16,027)
---------- ---------- ---------- ---------- ------------------- --------- ---------
Total other income
(expense), net ..... 17,665net........... 12,747 8,474 (3,867) 6,302 ---------- ---------- ---------- ---------- ----------81
--------- --------- --------- --------- ---------

Income before income taxes
and minority interest ................... 32,272interest........ 101,661 101,922 85,795 81,016 99,149
Income taxes ............................ 10,467taxes................. 40,257 39,342 32,259 30,339 36,097
Minority interest ....................... 3,270interest............ 3,409 1,482 224 833 ---------- ---------- ---------- ---------- ----------493
--------- --------- --------- --------- ---------
Net income ................................ $ 18,535income..................... $ 57,995 $ 61,098 $ 53,312 $ 49,844 ========== ========== ========== ========== ==========$ 62,559
========= ========= ========= ========= =========

Net income per share:
Basic .................................. $ 0.64Basic........................ $ 1.96 $ 2.06 $ 1.77 $ 1.66 ========== ========== ========== ========== ==========
Diluted ................................ $ 0.642.11
========= ========= ========= ========= =========
Diluted...................... $ 1.94 $ 2.03 $ 1.76 $ 1.65 ========== ========== ========== ========== ==========$ 2.06
========= ========= ========= ========= =========

Weighted average shares
outstanding:
Basic .................................. 29,117Basic........................ 29,575 29,666 30,092 30,018 ========== ========== ========== ========== ==========
Diluted ................................ 29,11729,673
========= ========= ========= ========= =========
Diluted...................... 29,914 30,783 30,302 32,081 ========== ========== ========== ========== ==========31,804
========= ========= ========= ========= =========

Actual shares outstanding
at December 31st .......................... 29,69931st............. 29,519 29,828 29,881 30,050 ========== ========== ========== ========== ==========28,837
========= ========= ========= ========= =========

2427

DECEMBER 31,
1999 2000 2001 2002 2003 ---------- ---------- ---------- ---------- ----------2004
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT ASSETS UNDER MANAGEMENT)

BALANCE SHEET DATA
Total assets ............................ $ 243,062assets................. $ 317,804 $ 486,394 $ 582,731 $ 736,511 $ 698,972

Total liabilities and
minority interest .................... 95,486interest.......... 115,607 211,097 260,938 358,200 ---------- ---------- ---------- ---------- ----------364,094
--------- --------- --------- --------- ---------
Total stockholders' equity .............. $ 147,576equity... $ 202,197 $ 275,297 $ 321,793 $ 378,311 ========== ========== ========== ========== ==========$ 334,878
========= ========= ========= ========= =========

ASSETS UNDER MANAGEMENT (UNAUDITED)
(at year end, in millions):
Separate Accounts ................... $ 10,064 $ 11,001 $ 12,233 $ 10,603 $ 13,535 $ 13,975

Mutual Funds ........................ 11,640 12,113 11,955 10,068 13,332 Alternative Investments ............. 23013,870

Investment Partnerships 437 573 578 692 ---------- ---------- ---------- ---------- ----------814
--------- --------- --------- --------- ---------
Total ........................... $ 21,934 $ 23,551 $ 24,761 $ 21,249 $ 27,559 ========== ========== ========== ========== ==========$ 28,659
========= ========= ========= ========= =========

YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED PRO FORMA INCOME STATEMENT DATA

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(a)
==========

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

Weighted average shares outstanding:
Basic and diluted ............................................. 29,890
==========

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 I 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 our management believed were reasonable under the
circumstances. The pro forma financial data does not purport to represent the
results of operations or the financial position of Gabelli 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 Gabelli for any
future date or period.

- --------------------------------------------------------------------------------
(a) 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 for the year ended December 31, 1999 were
$45.7 million and $1.53, respectively.

2628

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.

INTRODUCTION

Our principal business is providing investment advisory and brokerage services to mutual
fund,funds, institutional and high net worth investors, primarilyand investment partnerships,
principally in the United States. Through Gabelli & Company, Inc., we provide
institutional research services to institutional clients and investment
partnerships. We generally manage assets on a discretionary basis and invest in
a variety of U.S. and international securities through various investment
styles.

Our revenues are highly correlated to the level of assets under management,
which are directly influenced by the value of the overall equity markets. Assets
under management can also increase through acquisitions and by the addition of
new accounts. Since various equity products have different fees, changes in our
business mix may also affect revenues. At times, the performance of our equity
products may differ markedly from popular market indices, and this can also
impact our revenues. It is our belief that general stock market trends will have
the greatest impact on our level of assets under management and hence, revenues.
This becomes increasingly likely as the base of assets grows.

For the 77-year78-year period ended December 31, 2003,2004, stocks provided an average total
return of about 10.4%, according to Ibbotson Associates. Management believes the
market will continue to exhibit volatility in line with historical experience
and believesexperience.
Over the 28.7% return registered bynext 10 years, our model for the S&P 500 Index in 2003 must be
taken in the context of a market that declined in the 3 prior years. For
planning purposes, we are estimatingU.S. stock market gainsenvisions average
annual returns of 6%7% to 8% for the next
3 to 5 year period, driven by9% from a similar magnitudecombination of nominal gross world product
growth, in corporate
profits.stable profit margins and rising dividend payout ratios, with an
offsetting drag on P/E multiples from rising interest rates. We expect that an
increase in tax rates or inflation rates would reduce stock market returns.
Similarly, increased regulation of the mutual fund industry, combined with
growing fee pressures and our willingness to participate in certain NTF
programs, may impair our profit margins.

As discussed in the Regulation section in Item 1 of this report, the Mutual Fund
ReformSEC has
proposed and adopted a number of rules under the Investment Company Act and the
Investment Advisers Act and is currently studying potential major revisions of
2004 (the "Mutual Fund Act")other rules. In addition, several bills were introduced in the prior Congress
that, if adopted, would have amended the Investment Company Act. These
proposals, if reintroduced and enacted, or if adopted by the SEC, could have a
substantial impact on the regulation and operation of our registered and
unregistered funds. For example, certain of these proposals would, impactamong other
things, limit or eliminate Rule 12b-1 distribution fees, limit or prohibit third
party soft dollar arrangements and restrict the management of hedge funds and
mutual funds by the same portfolio manager. The effects ofChanges in laws, regulations, and
administrative practices by regulatory authorities, and the Mutual Fund Actassociated
compliance costs, have increased our cost structure and potentially other regulatory actions posecould in the future have
a risk to our
future revenues and operating margins. While we are unable to quantity the
effects at this time, the impact may be material to our business.impact.

OVERVIEW

Investment advisory and incentive fees, which are based on the amount and
composition of assets under management in our Mutual Funds, Separate Accounts
and Alternative Investments,Investment Partnerships, represent our largest source of revenues. In
addition to the general level and trends of the stock market, growth in revenues
depends on good investment performance, which influences the value of existing
assets under management as well as 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, we have depended primarily on direct distribution of our products
and services, but since 1995 have participated in Third-Party Distribution
Programs, including NTF Programs. A majority of our cash inflows to mutual fund
products have come through these channels since 1998. Attempts by some NTF
Program sponsors to increase their service or distribution fees may result in
several of our Mutual Funds being withdrawn from such programs. The effects of
this on our future financial results cannot be determined at this time, but
could be material. In recent years, we have been engaged to act as a sub-advisersub-advisor
for other much larger financial services companies with much larger sales
distribution organizations. A substantial portion of the cash flows into our
institutional and separate accounts businessSeparate Accounts has come through this channel. These sub-advisory clients are
subject to business combinations that may result in the termination of the
relationship. The loss of a sub-advisory relationship could have a significant
impact on our financial results in the future.

our Alternative
Investments29

Investment Partnerships also generally include an incentive allocation or fee of
20% of the economic profit, as defined. The

27
incentive allocation and fees are
recorded as earned with the related compensation expense accrued. The incentive
allocation and fees and related compensation expense may increase or decrease
during the year depending upon the performance of the underlying Alternative Investment products.investment
partnerships. We also receive fulcrum fees from certain Separate Accountsinstitutional separate
accounts based upon meeting or exceeding certain contractual investment return
thresholds over a stipulated period of time. These fees are finalized and
received when the contract measurement period is completed. Certain feesFees on the
preferred shares in our closed endclosed-end funds are only earned if the fund's total
return is greater than a specified total return. A total of $575$873 million of
assets in closed-end funds are subject to such arrangements.

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. Commission revenues vary directly with
account trading activity and new account generation. Investment banking revenues
are directly impacted by the overall market conditions, which affect the number
of public offerings which may take place.

Distribution fees and other income primarily include distribution fee revenue 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 Gabelli &
Company and through various distribution channels. As discussed in the
Regulation section in Item 1 of this report, several bills were introduced in
the effects of the Mutual Fund
Reform Act of 2004prior Congress that, if enacted andadopted, would, among other congressional and SEC actionsthings, pose a risk to
Gabelli & Company's future distribution fee revenue as 12b-1 fees may be repealedlimited
or restricted.eliminated.

Compensation costs include variable and fixed compensation and related expenses
paid to officers, portfolio managers, sales, trading, research and all other
professional staff. Other operating expenses include marketing, product
distribution and promotion costs, clearing charges and fees for Gabelli &
Company's brokerage operation, and other general and administrative operating
costs.

Other Income and Expenses include net gain from investments (which includes both
realized and unrealized gains), interest and dividend income, and interest
expense. Net gaingains from investments are derived from our proprietary investment
portfolio consisting of various public and private investments.

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

ASSET HIGHLIGHTS

We reported assets under management as follows (dollars in millions):

%Inc(Dec)
1999% Inc(Dec)
2000 2001 2002 2003 2003/2002 %CAGR(a)
-------- -------- -------- -------- --------2004 2004/2003 % CAGR (a)
------- ------- ------- ------- ------- --------- -----------------

Mutual Funds
Open-End $ 8,509 $ 8,979 $ 8,334 $ 6,482 $ 8,088 24.8% (1.3%$ 8,029 (0.7%) (1.2%)
Closed-End 1,950 1,709 1,831 1,609 3,530 119.4 16.04,342 23.0 17.4
Fixed Income 1,181 1,425 1,790 1,977 1,714 (13.3) 9.8
-------- -------- -------- -------- --------1,499 (12.5) 4.9
------- ------- ------- ------- -------
Total Mutual Funds 11,640 12,113 11,955 10,068 13,332 32.4 3.513,870 4.0 3.6
Institutional & Separate Accounts
Equities 9,370 10,142 11,513 9,990 13,031 30.4 8.613,587 4.3 7.7
Fixed Income 694 859 720 613 504 (17.8) (7.7)
-------- -------- -------- -------- --------388 (23.0) (11.0)
------- ------- ------- ------- -------
Total Institutional & Separate Accounts 10,064 11,001 12,233 10,603 13,535 27.7 7.7
Alternative Investments 23013,975 3.3 6.8
Investment Partnerships 437 573 578 692 19.7 31.7
-------- -------- -------- -------- --------814 17.6 28.8
------- ------- ------- ------- -------
Total Assets Under Management $ 21,934 $ 23,551 $ 24,761 $ 21,249 $ 27,559 29.7 5.9
======== ======== ======== ======== ========$23,551 $24,761 $21,249 $27,559 $28,659 4.0 5.5
======= ======= ======= ======= =======

(a) the % CAGR is computed for the five year period December 31, 1998January 1, 2000 through
December 31, 20032004

Net inflowsoutflows in 2004 totaled $1.7 billion compared to a net inflow of $1.1
billion in 2003 totaled $1.1 billion compared toand a net outflow of $61 million in 2002 and a net inflow of $2.7 billion in 2001.2002. The 2002 cash flows do
not include $248 million in assets under management added through our
affiliation with Woodland Partners LLC in November 2002.

28
Total net inflowsoutflows from equities products were approximately $1.5$1.3 billion in
20032004 with the initial public offeringloss of The Gabelli Dividend & Income Trust ("GDV")a sub-advised account in November 20032004 being the most
significant contribution to net inflows as the
offering addedoutflows of approximately $1.46$0.9 billion of
assets. Total net outflows from fixed income products were $391,000$353 million in 2003.2004.

For the three years ended December 31, 2001, 2002, 2003 and 20032004 our net cash inflows
and outflows by product line were as follows (in millions):

2001 2002 2003 ------- ------ -------2004
-------- -------- --------
Mutual Funds
Equities $ 846 $ (188) $ 1,364 $ (261)
Fixed Income 310 156 (276) ------- ------ -------(228)
-------- -------- --------
Total Mutual Funds 1,156 (32) 1,088 ------- ------ -------(489)
-------- -------- --------
Institutional & HNW & Separate Accounts
Equities
1,600 97 52 (1,178)
Fixed Income (171) (120) (115) ------- ------ -------(125)
-------- -------- --------
Total Institutional & HNW & Separate Accounts 1,429 (23) (63) ------- ------ -------
Alternative Investments(1,303)
-------- -------- --------
Investment Partnerships
Equities 136 (6) 54 92
Fixed Income -- -- --
------- ------ --------------- -------- --------
Total Alternative Investments 136Investment Partnerships (6) 54 ------- ------ -------92
-------- -------- --------

Total Equities 2,582 (97) 1,470 (1,347)
Total Fixed Income 139 36 (391) ------- ------ -------(353)
-------- -------- --------
Total Net Cash In (Out) Flows $ 2,721 $ (61) $ 1,079 =======$ (1,700)
======== ======== ========

OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2004 AS COMPARED TO THE YEAR
ENDED DECEMBER 31, 2003

REVENUES
Total revenues were $255.2 million in 2004, $47.7 million or 23.0% ahead of
total revenues of $207.4 million in 2003. The increase in total revenues by
revenue component was as follows (in millions):

INCREASE (DECREASE)
---------------
2003 2004 $ %
------ ------ ------ ------
Investment advisory and incentive fees $176.9 $219.9 $ 43.0 24.3%
Commissions 12.9 15.6 2.7 21.1
Distribution Fees and other income 17.6 19.7 2.1 11.5
------ ------ ------
Total revenues $207.4 $255.2 $ 47.8 23.0
====== ============= ======

INVESTMENT ADVISORY AND INCENTIVE FEES: Investment advisory and incentive fees,
which comprised 86% of total revenues in 2004, are directly influenced by the
level and mix of assets under management. Assets under management ended the year
at a record $28.7 billion, a 4.0% increase over prior year end assets under
management of $27.6 billion. The effect of a full twelve months of The Gabelli
Dividend and Income Trust ("GDV") as well as an increase in average assets under
management of $5.5 billion to $27.9 billion in 2004 from $22.4 billion in 2003.
The initial public offering of GDV generated gross proceeds of approximately
$1.46 billion in November 2003 and added an additional $194 million of gross
proceeds through the exercise of the underwriters' over allotment option in
January 2004.

Mutual fund revenues increased $25.6 million or 27.4%, as higher revenues from
open-end equity mutual funds and closed-end funds were offset slightly by lower
revenues from fixed income mutual funds. Revenue from open-end equity funds
increased $7.1 million or 9.8% from the prior year as average assets under
management in 2004 increased to $7.8 billion from $7.1 billion in 2003.
Closed-end fund revenues increased $19.1 million or 103% from the prior year
principally due to fees earned from GDV.

Revenue from Separate Accounts increased $18.6 million or 26.9% principally due
to higher average asset levels and an increase in fulcrum fees earned on certain
accounts traceable to excellent performance relative to benchmark. Assets in our
equity Separate Accounts rose $600 million or 4.3% for the year despite a
sub-advisory client transferring management of the largest of its three
portfolios (approximately $900 million) to another asset manager in
mid-November. The loss of this sub-advisory portfolio will have a negative
impact on revenues in 2005.

Total advisory fees from Investment Partnerships decreased to $13.0 million in
2004 from $14.2 million in 2003. Higher overall assets under management led to
an increase in management fees of 42.5% to $8.7 million from $6.1 million in
2003. Incentive allocations and fees from investment partnerships, which
generally represent 20% of the economic profit, decreased to $4.3 million in
2004 compared to $8.1 million in 2003.

COMMISSIONS: Commission revenues in 2004 were $15.6 million, $2.7 million or
21.1% higher than commission revenues of $12.9 million in 2003. The increase in
revenues was due to an increase agency trading activity for accounts managed by
affiliated companies and higher revenues from institutional customers.
Commission revenues derived from transactions on behalf of our Mutual Funds and
Separate Account clients totaled $13.3 million, or approximately 85% of total
commission revenues in 2004.

DISTRIBUTION FEES AND OTHER INCOME: Distribution fees and other income increased
11.5% or $2.1 million to $19.7 million in 2004 from $17.6 million in 2003. The
year-to-year increase was principally the result of higher average assets under
management in our open-end equity mutual funds with distribution plans.

EXPENSES
Total expenses were $156.1 million in 2004, an increase of $23.4 million or
17.6% from total expenses of $132.7 million in 2003. Operating margin increased
to 38.8% in 2004 from 36.0% in 2003 as operating income increased $24.4 million
year over year.

COMPENSATION: Compensation costs, which are largely variable in nature and
increase or decrease as revenues grow or decline, increased approximately $14.9
million, or 16.7%, to $104.1 million in 2004 from $89.2 million in 2003. Our
variable compensation costs increased $11.1 million to $78.1 million in 2004
from $67.0 million in 2003 but declined, as a percent of revenues, to 30.6% in
2004 compared to 32.3% in 2003. The increase in total variable compensation
costs is principally due to higher revenues from Separate Accounts and Mutual
Funds (an increase of $12.2 million) partially offset by lower variable
compensation costs related to Investment Partnerships (a decrease of $1.8
million). The decrease, as a percent of revenues, is traceable to a shift in
revenue mix from Investment Partnerships to Separate Accounts and Mutual Funds.
Fixed compensation costs rose approximately $3.8 million to $26.0 million in
2004 from $22.2 million in 2003 principally due to increases in salaries,
accruals for incentive compensation and stock option expense.

MANAGEMENT FEE: Management fee expense, for acting as CEO, is incentive-based
and entirely variable compensation in the amount of 10% of the aggregate pre-tax
profits which is paid to Mr. Gabelli pursuant to his Employment Agreement so
long as he is an executive of Gabelli and devoting the substantial majority of
his working time to the business. In 2004, management fee expense increased
22.4% to $11.0 million in 2004 versus $9.0 million in 2003.

OTHER OPERATING EXPENSES: Other operating expenses, which include marketing,
promotion and distribution costs as well as general operating expenses increased
$6.4 million or 18.6% to $41.0 million in 2004. A large portion of this increase
related to ongoing distribution costs for the two new closed end funds, GDV and
GLU ($4.1 million) as well as higher general operating expenses including
accounting, legal and insurance costs which include compliance costs with the
Sarbanes-Oxley Act of 2002 as well as other regulatory and governance
initiatives. These costs are expected to continue to have an impact in 2005 as
well as in subsequent years.

OTHER INCOME AND EXPENSE
Our proprietary investment portfolio consists of investments in mutual funds,
U.S. treasury bills, common stocks as well as other investments including
limited partnerships and offshore funds. Net gain from investments, which is
derived from our proprietary investment portfolio, was approximately $5.6
million for the year ended December 31, 2004 compared to $15.6 million in 2003.
In 2004 and 2003 gains of $34,000 and $96,000, respectively, were realized from
the repurchase of 68,900 shares and 20,600 shares, respectively, of our
mandatory convertible securities.

Interest and dividend income was $10.5 million in 2004 compared to $5.5 million
in 2003. The increase in 2004 dividend income was principally the result of our
investments in GDV and Westwood Holdings Group, Inc. ("WHG") as dividend income
for these investments increased $2.7 million and $0.3 million, respectively.
Interest income rose principally due to an increase in short-term interest
rates.

Interest expense rose $1.2 million to $16.0 million in 2004, from $14.8 million
in 2003. The increase was due an entire year of interest expense on our $100
million of 5.5% senior notes, which were issued in May 2003, offset partially by
the full year effect of a one percentage point decrease in the interest rate on
our convertible note from 6% to 5% (which occurred in August 2003) and the
decrease of the interest rate on the senior notes issued in connection with our
mandatory convertible securities to 5.22% from 6.0% due to the remarketing in
November 2004. The 5% convertible note is convertible, at the holder's option,
into shares of our class A common stock at $52 per share.

INCOME TAXES
The effective tax rate for 2004 was 36.4% down from the 2003 effective tax rate
of 37.4% as we adjusted the tax rate in 2004 to reflect our estimate of the
current year-end tax liability.

MINORITY INTEREST
Minority interest expense was $0.5 million in 2004 lower by 40.8% from $0.8
million in 2003. The decrease in minority interest expense was largely the
result of decreased earnings from our Investment Partnerships and income from
investments at our 92% owned subsidiary, Gabelli Securities, Inc.

NET INCOME
Net income for 2004 was $62.6 million or $2.06 per diluted share versus $49.8
million or $1.65 per diluted share for 2003.

SHAREHOLDER COMPENSATION AND INITIATIVES
During 2004, we returned over $100 million of our earnings to shareholders
through dividends and our stock buyback program. We paid $1.16 per share in
dividends to our common shareholders in 2004 which included three quarterly
dividends of $0.02 per share paid on June 30, September 30, and December 28. In
addition, we paid two special dividends, a $0.10 per share dividend on June 30
and a $1.00 per share dividend on November 30, 2004 to class A shareholders and
December 23, 2004 to class B shareholders. Our Board of Directors also declared
a special dividend of $0.60 per share in November 2004 which was payable on
January 18, 2005 to all shareholders of record on January 3, 2005. Through our
stock buyback program, we repurchased approximately 1,596,000 shares in 2004 for
a total investment of $70.7 million. There remains approximately 944,000 shares
authorized under our stock buyback program, exclusive of the ASR authorization,
on December 31, 2004.

Shares outstanding on a diluted basis at December 31, 2004 were 31.8 million and
included 1.9 million shares from the assumed conversion of our 5% convertible
note for the full year 2004 as under the applicable accounting methodology used
to compute dilution, the convertible note was dilutive. The full number of
shares which may be issued upon conversion of this note is approximately 1.9
million. Shares issuable under the mandatory convertible securities are excluded
from the diluted shares calculation under current accounting rules but will have
a dilutive effect on earnings per share upon settlement of the purchase
contracts on February 17, 2005. During 2004, we issued 131,300 shares from the
exercise of stock options and 252,456 shares from the early settlement of
purchase contracts relating to the mandatory convertible securities. The
settlement of the remaining purchase contracts in February 2005 resulted in the
issuance of 1,517,483 shares of our class A common stock and the receipt of
$70.6 million in proceeds. This will have a dilutive effect on earnings per
share in 2005.

At December 31, 2004, we had 799,325 options outstanding to purchase our class A
common stock which were granted under our Stock Award and Incentive Plans (the
"Plans").

OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2003 AS COMPARED TO THE YEAR
ENDED DECEMBER 31, 2002

REVENUES
Total revenues were $207.4 million in 2003, $2.6 million or 1.2% below total
revenues of $210.0 million in 2002. The decline in total revenues by revenue
component was as follows (in millions):

INCREASE (DECREASE)
---------------
2002 2003 $ %
------ ------ ------ ------
Investment advisory and incentive fees $177.1 $176.9 $ (0.2) (0.1%)
Commissions 13.9 12.9 (1.0) (7.3)
Distribution Fees and other income 19.0 17.6 (1.4) (7.2)
------ ------ ------
Total revenues $210.0 $207.4 $ (2.6) (1.2)
====== ====== ======

INVESTMENT ADVISORY AND INCENTIVE FEES: Investment advisory and incentive fees,
which comprised 85% of total revenues in 2003, are directly influenced by the
level and mix of assets under management. Assets under management ended the year
at a record $27.6 billion, a 29.7% increase over prior year end assets under
management of $21.2 billion. Despite reaching a record level of assets on
December 31, 2003, investment advisory fees in 2003 declined slightly from 2002
as average assets under management in 2003 declined to $22.4 billion from $23.6
billion in 2002. As we look forward to 2004, investment advisory fees will
benefit from a full twelve months of revenue from GDV. The initial public offering of GDV generated gross proceeds of
approximately $1.46 billion in November 2003 and added an additional $194
million of gross proceeds through the exercise of the underwriters'
overallotment option in January 2004.

Mutual fund revenues increased $1.4 million or 1.5%, as lower revenues from
open-end equity mutual funds were more than offset by higher revenues from
closed-end funds. Revenue from open-end equity funds decreased $4.5 million or
5.9% from the prior year as average assets under management in 2003 declined to
$7.1 billion from $7.4 billion in 2002. The increase in assets during the last
half of 2003 resulting from strong performance results did not offset the effect
on revenues of lower asset levels during the first six months. Closed-end fund
revenues increased $5.9 million or 47.1% from the prior year as fees from assets
subject to performance fee arrangements where the fees are earned based upon the
respective fund meeting or exceeding certain contractual investment thresholds
over a stipulated period of time contributed to the majority of this increase.
Closed-end fund assets and revenue also benefited from the launch of GDV during
the fourth quarter of 2003. GDV began trading on the New York Stock Exchange on
November 25, 2003 and commenced investment operations on November 28, 2003.
29
Revenue from our institutional and high net worth Separate Accounts decreased
$7.4 million or 10.3% as lower average asset levels and a lower average advisory
fee rate due to the effect of a shift in account mix were the principal reasons
for the decline. While revenue declined, assets in our equity Separate Accounts
rose $3 billion or 30.4% for the year of which $1.7 billion or 15.3% of this
increase occurred in the 4th quarter of 2003, principally through market
appreciation.

As our Separate Account revenues are largely based on values at
the beginning of a quarter, the impact of the fourth quarter increase will be
more fully realized in 2004. The strong historical performance of our Separate
Accounts coupled with renewed interest from investors seeking to rebalance their
portfolios and reallocate from fixed income to tax-sensitive, separately managed
equity accounts should provide additional benefits in 2004.

Total advisory fees from alternative investmentsInvestment Partnerships increased to $14.2 million in
2003 from $7.5 million in 2002. Higher overall assets under management led to an
increase in management fees of 8.0% to $6.1 million from $5.7 million in 2002.
Incentive allocations and fees from alternative investment products,partnerships, which generally
represent 20% of the economic profit, increased to $8.1 million in 2003 compared
to $1.8 million in 2002.

COMMISSIONS: Commission revenues in 2003 were $12.9 million, $1.0 million or
7.3% lower than commission revenues of $13.9 million in 2002. Lower commission
revenues from a decline in agency trading activity for accounts managed by
affiliated companies and the implementation of a simplified commission structure
were partially offset by higher commission revenues from institutional and
retail customers. Commission revenues derived from transactions on behalf of our
Mutual Funds and Separate Account clients totaled $9.7 million, or approximately
75% of total commission revenues in 2003.

DISTRIBUTION FEES AND OTHER INCOME: Distribution fees and other income declined
7.2% or $1.4 million to $17.6 million in 2003 from $19.0 million in 2002. The
year-to-year decline was principally the result of lower average assets under
management in open-end equity mutual funds with distribution plans and the
waiver of the 12b-1 distribution fee on the ABC fund which began in January
2003.
34
EXPENSES
Total expenses were $132.7 million in 2003, an increase of $12.4 million or
10.3% from total expenses of $120.3 million in 2002. Operating margin declined
to 36.0% in 2003 from 42.7% in 2002 as operating income declined $14.9 million
year over year.

COMPENSATION: Compensation costs, which are largely variable in nature and
increase or decrease as revenues grow or decline, increased approximately $8.8
million, or 10.9%, to $89.2 million in 2003 from $80.4 million in 2002. The
majority of this increase was attributable to higher variable compensation
related to our alternative investmentsInvestment Partnerships (an increase of $2.5 million) and
compensation not directly tied to revenues which included stock option expense
(an increase of $1.3 million), higher costs related to research, sales and
investment professionals (an increase of $2.0 million) and the year-over-year
effect of a reversal of incentive compensation in 2002 ($2.2 million). While the
increase in staffing has impacted operating margins in the short-term, we have
strengthened our asset gathering capabilities and broadened our research and
investment expertise which is expected to increase asset and revenue growth and
improve operating margins over the longer term.

In 2004, we also expect to add
professional staff to assist in the execution of our business strategy.

MANAGEMENT FEE: Management fee expense, a totallyfor acting as CEO, is incentive-based
and entirely variable cost based oncompensation in the amount of 10% of the aggregate pre-tax
profits which is paid to Mr. Gabelli pursuant to his Employment Agreement so
long as he is an executive of Gabelli and devoting the substantial majority of
his working time to the business. In 2003, management fee expense declined 5.6%
to $9.0 million in 2003 versus $9.5 million in 2002.

OTHER OPERATING EXPENSES: Other operating expenses, which include marketing,
promotion and distribution costs as well as general operating expenses increased
$4.1 million or 13.7% to $34.5 million in 2003. A large portion of this increase
related to higher general operating expenses including accounting, legal and
insurance costs which were partly related to complying to the requirements of
the Sarbanes-Oxley Act of 2002. These costs are expected to continue to have an
impact in 2004 as well as in subsequent years.

OTHER INCOME AND EXPENSE
Our proprietary investment portfolio consists of investments in mutual funds,
U.S. treasury bills, common stocks as well as private investments. Net gain from
investments, which is derived from our proprietary investment portfolio, was
approximately $15.6 million for the year ended December 31, 2003 compared to
$1.4 million in 2002. In 2003 a gain of $0.1 million was realized from the
repurchase of 20,600 shares of our mandatory convertible securities.

Interest and dividend income was $5.5 million in 2003 compared to $6.8 million
in 2002. The decrease in interest income was principally the result of a
decrease in short-term interest rates. Dividend income included a $518,000
dividend received in the third quarter of 2003 from our Westwood Holdings Group,
Inc. ("WHG") investment. 30
Interest expense rose $2.8 million to $14.8 million in
2003, from $12.0 million in 2002. The increase in interest expense was
attributable to the issuance of $100 million 5.5% senior notes in May 2003
offset partially from the decrease of 1% on the convertible note from 6% to 5%
in August 2003. The note is convertible, at the holder's option, into shares of
our class A common stock at $52 per share.

The mandatory convertible securities consist of both a purchase contract to
purchase shares of our class A common stock on February 17, 2005 and senior
notes due February 17, 2007. The purchase contract includes a contract
adjustment payment of 0.95% per year through February 17, 2005 and the notes
bear interest at 6% per year, which rate is expected to be reset on November 17,
2004. The settlement of the purchase contract in February 2005 will result in
the issuance of between 1.8 million and 2.2 million shares of our class A common
stock which will have a dilutive effect on earnings per share.

INCOME TAXES
The effective tax rate for 2003 was 37.4% down from the 2002 effective tax rate
of 37.6% traceable to the effect of a dividend received deduction related to the
WHG dividend.

MINORITY INTEREST
Minority interest expense was $0.8 million in 2003 up 271.9% from $0.2 million
in 2002. The increase in minority interest expense was largely the result of
increased earnings from our alternative investment productsInvestment Partnerships and income from our
investments at our 92% owned subsidiary, Gabelli Securities, Inc.

NET INCOME
Net income for 2003 was $49.8 million or $1.65 per diluted share versus $53.3
million or $1.76 per diluted share for 2002. The decline in net income of 6.5%
in 2003 can be attributed to the impact of weak equity markets during the first
six months of the year on average assets under management, higher compensation
costs and an increase in other operating expenses.

Shares outstanding on a diluted basis at December 31, 2003 were 32.1 million and
included 1.9 million shares from the assumed conversion of our convertible note
for the full year 2003 as under the applicable accounting methodology used to
compute dilution, the convertible note was dilutive. The full number of shares
which may be issued upon conversion of this note is approximately 1.9 million.
Shares issuable under the mandatory convertible securities are excluded from the
diluted shares calculation under current accounting rules. Shares of our class A
common stock issuable under the mandatory convertible securities pursuant to the
settlement of the purchase contract in February 2005 will be between 1.8 million
and 2.2 million and will have a dilutive effect on earnings per share. During 2003, we
issued 225,256 shares from the exercise of stock options and repurchased 56,922
shares.

At December 31, 2003, we had 949,650 options outstanding to purchase our class A
common stock which were granted under our Stock Award and Incentive Plans (the
"Plans"). Management may recommend to the Board of Directors to commence a
tender offer in 2004 to purchase the options granted in 2003 under the Plans. As
of December 31, 2003, there were 570,500 options outstanding that would be
eligible to participate in the tender offer. If the tender offer is consummated,
it will result in the acceleration of compensation and other expenses in our
consolidated statement of operations in the period in which the tender offer is
completed rather than over the remaining life of the options and will result in
a decline in earnings in 2004.

DIVIDEND
We paid our first dividend of $0.02 per share on December 15, 2003 to our class
A shareholders of record on December 1, 2003. The holders of our class B common
stock, Gabelli Group Capital Partners, Inc. and its two subsidiaries, agreed to
waive receipt of this dividend or $460,000.

OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2002 AS COMPARED TO THE YEAR
ENDED DECEMBER 31, 2001

REVENUES
Total revenues were $210.0 million in 2002, $14.4 million or 6.4% below total
revenues of $224.4 million in 2001. The decline in total revenues by revenue
component was as follows (in millions):
INCREASE (DECREASE)
------------------
2001 2002 $ %
------ ------ ------- -----
Investment advisory and incentive fees $186.1 $177.1 $ (9.0) (4.9%)
Commissions 15.9 13.9 (2.0) (12.9)
Distribution Fees and other income 22.4 19.0 (3.4) (15.0)
------ ------ -------
Total revenues $224.4 $210.0 $ (14.4) (6.4)
====== ====== =======

INVESTMENT ADVISORY FEES AND INCENTIVE FEES: Investment advisory fees are
directly influenced by the level and mix of assets under management. Nearly 88%
of assets managed by Gabelli are in equity products. Average assets managed, and
therefore investment advisory fees, continued to be impacted by the overall
decline in the world equity markets during 2002. Equity markets were down for a
third straight year as the S&P 500, Russell 2002 and NASDAQ indices fell 22.1%,
20.5% and 31.1%, respectively. Against this backdrop, assets managed in our
open-end equity mutual funds declined 22.2% to $6.5 billion in 2002, from $8.3
billion in 2001. Substantially all of this $1.8 billion decline was due to
market performance as equity mutual fund cash outflows were less than $ 0.2
billion in 2002. The decline in equity-managed assets was largely offset by an
increase in assets managed in our fixed income products. The result of lower
equity valuations and a shift in mix to lower margin fixed income products led
to a decline in mutual fund revenues of 12.8%, or $13.5 million, to $92.2
million in 2002 from $105.7 million in 2001. Investment advisory fees from our
institutional and high-net-worth Separate Accounts rose $4.9 million to $77.4
million in 2002 compared to $72.5 million in 2001, benefiting from nearly $100
million in net new cash flows into its equity portfolios during the year.
Advisory fees from alternative investment products increased 16% to $5.7 million
from $4.9 million in 2001 due to higher overall levels of assets under
management. Incentive allocations from alternative investment products, which
generally represent 20% of the absolute gain in a portfolio, were lower at $1.8
million in 2002 compared with $3.0 million in 2001 as portfolio gains were
impacted by the world equity markets.

COMMISSIONS: Commission revenues in 2002 were $13.9 million, $2.0 million, or
12.9% lower than commission revenues of $15.9 million in 2001. The lower
commission revenues result from a decline in agency trading activity for
accounts managed by affiliated companies. Commission revenues derived from
transactions on behalf of our Mutual Funds and Separate Accounts clients totaled
$11.9 million, or approximately 86% of total commission revenues in 2002.

DISTRIBUTION FEES AND OTHER INCOME: Distribution fees and other income declined
15.0% or $3.4 million to $19.0 million in 2002 from $22.4 million in 2001. The
year-to-year decline was principally the result of lower average assets under
management in open-end equity mutual funds.

EXPENSES
Total expenses were $120.3 million in 2002, a decrease of $10.7 million, or
8.1%, from total expenses of $131.0 million in 2001. Operating income as a
percentage of total revenues rose to 43% in 2002 from 42% in 2001.

COMPENSATION: Compensation costs, which are largely variable in nature and
increase or decrease as revenues grow or decline, decreased approximately $5.4
million, or 6.3%, to $80.4 million in 2002 from $85.8 million in 2001. We began
to increase staffing in portfolio management, research and marketing during the
second half of 2002 to further strengthen and expand our core competencies in
these areas. This will impact operating margins in the short-term but are
expected to strengthen our asset gathering capabilities and increase asset and
revenue growth and improve operating margins over the longer term.

MANAGEMENT FEE: Management fee expense, which is totally variable and increases
or decreases as pre-tax profits grow or decline, was $9.5 million in 2002 and
$11.3 in 2001.

OTHER OPERATING EXPENSES: Other operating expenses, which include marketing,
promotion and distribution costs as well as general operating expenses were
$30.4 million in 2002, a decrease of approximately $3.5 million, or 10.4%, from
$33.9 million in 2001. Included in other operating costs are distribution
payments to third party intermediaries, which totaled $10.8 million in 2002, a
decrease of $1.5 million, or 11.9%, from $12.3 million in 2001.

OTHER INCOME AND EXPENSE
Net gain from investments, which is principally derived from our proprietary
investment portfolio, was approximately $1.4 million for the year ended December
31, 2002 compared to $5.2 million in 2001. In 2002 a gain of $0.6 million was
realized from the repurchase of 218,200 shares of the mandatory convertible
securities.

Interest and dividend income was $6.8 million in 2002 compared to $9.5 million
in 2001.

Interest expense rose $5.8 million to $12.0 million in 2002, from $6.2 million
in 2001. The increase in interest expense is attributable to the issuance of a
$100 million convertible note in August 2001 and $90 million of mandatory
convertible securities (NYSE: GBL.I) issued in February 2002. The convertible
note paid interest at a rate of 6.5% per year through August 2002 and pays 6%
thereafter. The note is convertible, at the holder's option, into shares of our
class A common stock at $53 per share. The mandatory convertible securities pay
interest at 6% and consist of both a contract to purchase shares of GBL on
February 17, 2005 and 6% senior notes due February 17, 2007.

INCOME TAXES
The effective tax rate for 2002 was 37.6% down from the 2001 effective tax rate
of 38.6% primarily from lower applicable state and local income taxes.

MINORITY INTEREST
Minority interest expense was $0.2 million in 2002 down 84.9% from $1.5 million
in 2001. The decrease in expense is primarily attributable to our increased
ownership in Gabelli Securities, Inc. During 2001 we raised our ownership
interest to 92% from 77% through the issuance of approximately 400,000 shares of
our class A common stock.

NET INCOME
Net income for 2002 was $53.3 million or $1.76 per diluted share versus $61.1
million or $2.03 per diluted share for 2001.

Shares outstanding on a diluted basis at December 31, 2002 were 30.3 million and
did not include any shares from the assumed conversion of our convertible note
for the full year 2002 as under the applicable accounting methodology used to
compute dilution the convertible note was anti-dilutive. The full number of
shares which may be issued upon conversion of this note is approximately 1.9
million. Shares issuable under the mandatory convertible securities are excluded
from the diluted shares calculation under current accounting rules. Shares of
our class A common stock issuable under the mandatory convertible securities
pursuant to the settlement of the purchase contract in February 2005 will be
between 1.8 million and 2.2 million. During 2002, we issued 600,844 shares from
the exercise of stock options and repurchased 547,526 shares.

LIQUIDITY AND CAPITAL RESOURCES

Our principal assets consist of cash, short-term investments, securities held
for investment purposes and investments in mutual funds, and alternative
products,investment
partnerships and offshore funds, both proprietary and external. Short-term
investments are comprised primarily of United States treasury securities with
maturities of less than one year and money market funds managed by Gabelli.GBL. Although
the alternative
investmentsinvestment partnerships and offshore funds are for the most part illiquid,
the underlying investments of such partnerships or funds are for the most part
liquid and the valuations of these products reflect that underlying liquidity.

Summary cash flow data is as follows:

2001 2002 2003 2004
---------- ---------- ----------
(in thousands)

Cash flows provided by (used in):
Operating activities $ 139,573 $ (38,347) $ 38,021 $ (3,395)
Investing activities (375) 18,539 (64,252) (31,540)
Financing activities 96,978 25,791 101,312 (94,480)
---------- ---------- ----------
Increase in cash and cash equivalents 236,176 5,983 75,081 (129,415)
Cash and cash equivalents at beginning of year 69,271 305,447 311,430 386,511
---------- ---------- ----------
Cash and cash equivalents at end of year $ 305,447 $ 311,430 $ 386,511 $ 257,096
========== ========== ==========

Cash and liquidity requirements have historically been met through cash
generated by operating income and our borrowing capacity. At December 31, 2003,2004,
we had cash and cash equivalents of $386.5$257.1 million, an increasea decrease of $75.1$129.4 million
from the prior year end. We have established a collateral account, consisting of
cash and cash equivalents and U.S. treasury securities totaling $102.8$103.2 million,
to secure aan $102.5 million letter of credit issued in favor of the holder of
the $100 million 5% convertible note. The $102.5 million letter of credit was
extended and expires on August 14, 2004, which coincides with the
date of a put option the note holder may exercise.April 9, 2005. Cash and securities held in the
collateral account are restricted from other uses until the $102.5 million
letter of credit expires.

Cash used in operating activities of $3.4 million in 2004 results primarily from
an increase in investments in securities of $52.5 million, a reduction in
payable to brokers of $5.4 million, equity in earnings of partnerships and
affiliates of $4.8 million and an increase in investment advisory fees
receivable of $5.0 million partially offset by $62.6 million of net income. Cash
provided by operating activities of $38.0 million in 2003 results primarily from
$49.8 million of net income partially offset by a reduction in payable to
brokers of $11.4 million, a reduction in securities sold, not yet purchased of
$4.4 million, equity in earnings of partnerships and affiliates of $5.7 million,
an increase in investment advisory fees receivable of $6.0 million and an
increase in notes and other receivables from affiliates of $4.1 million.

Cash used in operatinginvesting activities of $38.3$31.5 million in 2002 results2004 is primarily from
$120.0 million used to purchase equity securities and U.S. Government
obligations which, due to
their maturities, are not classified as cash
equivalents, offset byan increase in available for sale securities of $11.7 million and an increase of
investments, net income of $53.3 million, the cash savings from
recognizing $18.7 milliondistributions, in deferred tax assets related to the repaymentcertain partnerships and affiliates of
the
$50 million note payable and the tax benefit related to the exercise of
non-qualified stock options of $4.5$20.5 million.

33
Cash used in investing activities of $64.3 million in 2003 is
primarily due to an increase in available for sale securities of $55.9 million
and an increase of investments, net of distributions, in certain partnerships
and affiliates of $10.3 million.

Cash provided by investingused in financing activities of $18.5$94.5 million in 2002 is
primarily due to distributions2004 was largely from certain partnershipsthe
purchase of an additional $70.7 million of our class A common stock, $1.7
million of mandatory convertible securities, $2.7 million in dividends paid by
one of our subsidiaries and affiliates of $27.2$34.0 million from dividend payments partially
offset by investments in certain partnerships$11.7 million received for the early settlement of forward contracts
relating to the mandatory convertible securities and affiliates$3.0 million received from
the exercise of $8.1
million.our stock options by employees. Cash provided by financing
activities of $101.3 million in 2003 was largely due to the issuance of $100
million of Senior Notes and $3.9 million received from the exercise of our stock
options by employees partially offset by the purchase of an additional $1.9
million of our class A common stock, $0.5 million of mandatory convertible
securities and $0.1 million from our first dividend payment.

Cash provided by financing activities of $25.8 million in 2002 was
largely due to the issuance of $90 million of mandatory convertible securities
and $10.8 million received from the exercise of stock options on our class A
common stock by employees partially offset by the payment of a $50 million note
in January 2002, the purchase of an additional $17.2 million of our class A
common stock and $5.3 million of mandatory convertible securities.

We continue to maintain our investment grade ratingratings which we have received from
two ratings agencies, Moody's Investors Services and Standard and Poor's Ratings
Services. We believe that our ability to maintain our investment grade ratingratings
will provide greater access to the capital markets, enhance liquidity and lower
overall borrowing costs.

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, 2003 and 2002,2004,
Gabelli & Company had net capital, as defined, of approximately $16.9 million
and $13.5$19.2 million, respectively, exceeding the regulatory requirement by
approximately $16.6 million and $13.2$19.0 million, respectively. Regulatory net
capital requirements increase when Gabelli & Company is involved in underwriting
activities.

Our subsidiary, Gabelli Asset Management (UK) Limited is a registered member of
the Financial Services Authority. In connection with this registration in the
United Kingdom, we have a minimum Liquid Capital Requirement of (pound)267,000,
($475,000514,000 at December 31, 2003)2004) and an Own Funds Requirement of (euro)50,000
($63,00068,000 at December 31, 2003)2004). We have consistently met or exceeded these
minimum requirements.

MARKET RISK

EQUITY PRICE RISK

We are 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. Our exposure to market risk is
directly related to our role as financial intermediary and adviseradvisor for assets
under management in our Mutual Funds, Separate Accounts, and Alternative
InvestmentsInvestment
Partnerships as well as our proprietary investment and trading activities. At
December 31, 2003,2004, our primary market risk exposure was for changes in equity
prices and interest rates. At December 31, 20022003 and 2003,2004, we had equity
investments, including mutual funds largely invested in equity products, of
$69.2$127.7 million and $127.7$143.7 million, respectively. Investments in mutual funds,
$38.5$98.3 million and $98.3$109.1 million at December 31, 20022003 and 2003,2004, respectively,
generally lower market risk through the diversification of financial instruments
within their portfolios. In addition, we may alter our investment holdings from
time to time in response to changes in market risks and other factors considered
appropriate by management. We also hold investments in partnerships and
affiliates which invest primarily in equity securities and which are subject to
changes in equity prices. Investments in partnerships and affiliates totaled
$47.9$64.0 million and $64.0$89.3 million at December 31, 20022003 and 2003,2004, respectively, of
which $35.7$29.1 million and $29.1$43.1 million were invested in partnerships and
affiliates which invest in event-driven merger arbitrage strategies. These
strategies are primarily dependent upon deal closure rather than the overall
market environment.

The following table provides a sensitivity analysis for our investments in
equity securities and partnerships and affiliates which invest primarily in
equity securities excluding arbitrage products, for which the principal exposure
is to deal closure and not overall market conditions, as of December 31, 20022003
and 2003.2004. The sensitivity analysis assumes a 10% increase or decrease in the
value of these investments.

34
(IN THOUSANDS)

(IN THOUSANDS)
FAIR VALUE ASSUMING FAIR VALUE ASSUMING
10% DECREASE IN 10% INCREASE IN
FAIR VALUE EQUITY PRICES EQUITY PRICES
--------------------- ------------- -------------

AT DECEMBER 31, 2002:
Equity price sensitive
investments, at fair value $ 78,905.4 $ 71,014.9 $ 86,795.9
---------- ---------- ----------
AT DECEMBER 31, 2003:
Equity price sensitive investments,
at fair value $156,328.3 $140,695.4 $171,961.1
---------- ---------- ----------value.......................... $ 156,328.3 $ 140,695.4 $ 171,961.1
----------- ----------- -----------
AT DECEMBER 31, 2004:
Equity price sensitive investments,
at fair value.......................... $ 188,753.8 $ 169,878.4 $ 207,629.2
----------- ----------- -----------

Our revenues are largely driven by the market value of our 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 or weekly asset
values. Advisory fees earned on institutional and high net worth separate
accounts, for any given quarter, are generally determined based on asset values
at the beginning of a quarter. Any significant increases or decreases in market
value of assets managed which occur during a quarter will result in a relative
increase or decrease in revenues for the following quarter.

Alternative Investment Partnership advisory fees are computed based on monthly or quarterly
asset values. The incentive allocation or fee of 20% of the economic profit from
alternative investmentsInvestment Partnerships is impacted by changes in the market prices of the
underlying investments of these products.

INTEREST RATE RISK

Our exposure to interest rate risk results, principally, from our investment of
excess cash in government obligations.obligations and money market funds. These investments
are primarily short term in nature and the fair value of these investments
generally approximates market value. Our mandatory convertible securities
includeincluded a provision to reset the interest rate in November 2004. The reset rate
will bewas determined by the rates the notes should bear in order for each note to have
an aggregate market value of 100.5% of the principal amount of the note. If theThe
reset rate werewas determined at December 31, 2003 the interest rate would have been approximately
5%to be 5.22%.

COMMITMENTS AND CONTINGENCIES

We are obligated to make future payments under various contracts such as debt
agreements and capital and operating lease agreements. The following table sets
forth our significant contractual cash obligations as of December 31, 2003. (In2004 (in
thousands):

Total 2004 2005 2006 2007 2008 2009 Thereafter
--------- --------- --------- --------- --------- --------- ----------------- -------- -------- -------- -------- -------- --------

Contractual Obligations:
5.5% Senior notes $ 100,000$100,000 $ -- $ -- $ -- $ -- $ -- $ 100,000$100,000
5% Convertible note 100,000 -- -- -- -- -- 100,000
6.95%-MandatoryMandatory convertible securities
84,030(5.22% Senior Notes) 82,308 -- -- 82,308 -- 84,030 -- --
Capital lease obligations 7,1406,412 802 765 765 765 765 765 3,3152,550
Non-cancelable operating
lease obligations 1,434 486 425 334 168 211,294 576 480 218 20 -- --------- --------- --------- --------- --------- --------- -----------
-------- -------- -------- -------- -------- -------- --------
Total $290,014 $ 292,6041,378 $ 1,2511,245 $ 1,19083,291 $ 1,099785 $ 84,963 $ 786 $ 203,315
========= ========= ========= ========= ========= ========= =========765 $202,550
======== ======== ======== ======== ======== ======== ========

In addition, the 5% convertible note provides the holder certain put rights, at
par plus accrued interest, on August 13, 2004.April 1, 2005. If exercised, we will be required
to pay down the entire principal balance at that time. A collateral account
consisting of cash and securities has been established in the amount of $102.8$103.2
million to secure aan $102.5 million letter of credit in favor of the convertible
note holder. The $102.5 million letter of credit will expire on August 14, 2004.April 9, 2005.

Subsequent to December 31, 2004, we announced an agreement with Cascade
Investment, L.L.C. to amend the terms of the convertible note issued by Gabelli.
The new terms extend the exercise date of Cascade's put option to September 15,
2006, reduce the principal of the convertible note to $50 million from $100
million and remove limitations on the issuance of additional debt. In connection
with this amendment, we will repurchase $50 million of the principal of the
convertible note on April 1, 2005. The $102.5 million letter of credit was
reduced to a $51.3 million letter of credit and extended to September 22, 2006.

In November 2004 we entered into an accelerated stock repurchase program ("ASR")
whereby we repurchased 400,000 shares of stock from an investment bank for
approximately $18.8 million. The ASR permits us to repurchase the shares
immediately, while the investment bank will purchase the shares in the market
over time. The 400,000 shares repurchased under the agreement are subject to a
future contingent price adjustment based on the actual prices paid by the
investment bank to purchase our stock in the market over time. At December 31,
2004 the investment bank had purchased 203,500 shares resulting in a contingent
purchase liability of approximately $120,000 for the Company.

OFF-BALANCE SHEET ARRANGEMENTS

We are the General Partner or co-General Partner of various limited partnerships
whose underlying assets consist primarily of marketable securities. As General
Partner or co-General Partner, we are contingently liable for all of the limited
partnerships' liabilities.

Our income from these limited partnerships consists of our share of the
management fee and the 20% incentive allocation from the limited partners. We
also receive our pro-rata return on any investment made in the limited
partnership. We earned management fees of $2.0 million in 2002 and $2.3 million in 2003 and $2.0 million
in 2004 and incentive fees of $0.3$1.5 million and $1.5$0.8 million in 20022003 and 2003,2004,
respectively. Our pro-rata lossgain on investments in these limited partnerships
totaled $0.3$2.3 million in 20022003 as compared to a gain of $2.3$1.5 million in 2003.2004.

We do not invest in any other off-balance sheet vehicles that provide financing,
liquidity, market or credit risk support or engage in any leasing activities
that expose us to any liability that is not reflected in the Consolidated
Financial Statements.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following is a summary of certain related party transactions. Further
details regarding these and other relationships appear in our Proxy Statement
for our 2005 Annual Meeting of Shareholders.

GGCP, Inc. ("GGCP"), formerly known as Gabelli Group Capital Partners, Inc., and
two of its subsidiaries own all of GBL's Class B Stock, representing
approximately 97% of the combined voting power and 80% of the outstanding shares
of GBL common stock.

Prior to its initial public offering in February 1999, GBL and GGCP entered into
a Management Services Agreement, with a one-year term and renewable annually,
under which GBL provides certain services for GGCP, including furnishing office
space and equipment, providing insurance coverage, overseeing the administration
of its business and providing personnel to perform certain administrative
services. Pursuant to the Management Services Agreement, GGCP pays GBL for
services provided.

As of December 5, 1997, GGCP entered into a master lease agreement with M4E,
LLC, which is owned by the children of Mr. Gabelli, for a 60,000 square foot
building, of which approximately 9,000 square feet are currently subleased to
other tenants. The master lease for the building and property, which is located
at 401 Theodore Fremd Avenue, Rye, New York (the "Building"), expires on April
30, 2013. As of February 9, 1999, GGCP assigned all of its rights and
obligations under the master lease to GBL. GBL leases space in the Building to a
company for which Mr. Gabelli serves as Chairman and is a significant
stockholder.

Pursuant to the Employment Agreement, Mr. Gabelli has agreed that while he is
employed by GBL he will not provide investment management services outside of
GBL, except for certain permitted accounts managed by MJG Associates, Inc., for
which he serves as Chairman. MJG Associates, Inc., which is wholly-owned by Mr.
Gabelli, serves as a general partner or investment manager of various investment
funds and other accounts.

GAMCO Investors, Inc. ("GAMCO"), a wholly-owned subsidiary of GBL has entered
into agreements to provide advisory and administrative services to MJG
Associates, Inc. and to Gabelli Securities, Inc. ("GSI"), a majority-owned
subsidiary of GBL, with respect to the private investment funds managed by each
of them. Pursuant to such agreements, GSI and MJG Associates, Inc. pay GAMCO for
services provided.

Gabelli Securities International Limited ("Gabelli Securities International")
was formed in 1994 to provide management and investment advisory services to
offshore funds and accounts. Marc Gabelli, a son of Mr. Gabelli, owns 55% of
Gabelli Securities International and GSI owns the remaining 45%.

In April 1999, Gabelli Global Partners, Ltd., an offshore investment fund, was
incorporated. Gabelli Securities International and Gemini Capital Management,
LLC ("Gemini"), an entity owned by Marc Gabelli, were engaged by the fund as
investment advisors as of July 1, 1999. Gemini receives half of the investment
advisory fees as co-investment advisor.

In April 1999, GSI formed Gabelli Global Partners, L.P., an investment limited
partnership for which GSI and Gemini are the general partners. In March 2002,
Gabelli Global Partners, L.P. changed its name to Gemini Global Partners, L.P.
Gemini receives half of the management fee paid by the partnership to the
general partners.

GBL reimburses GGCP for GGCP's incremental costs (but not the fixed costs)
relating to GBL's use of an airplane in which GGCP owns a fractional interest.
Mr. Gabelli's spouse has been employed by GBL since 1984 and has been his spouse
since 2002.

CRITICAL ACCOUNTING POLICIES

In the ordinary course of business, we make a number of estimates and
assumptions relating to the reporting of results of operations and financial
condition in the preparation of our financial statements in conformity with U.S.
generally accepted accounting principles. We base our estimates on historical
experience, when available, and on other various assumptions that are believed
to be reasonable under the circumstances. Actual results could differ
significantly from those estimates under different assumptions and conditions.

We believe the following critical assumptions and estimates are those applied to
revenue recognition, the valuation of investments, goodwill and other long-lived
intangibles, income taxes, stock optionbased compensation accounting and the possible
impact of Financial Interpretation No. 46 ("FIN 46") "Consolidation of Variable
Interest Entities."

REVENUE RECOGNITION

Advisory fees from the Mutual Funds and sub-advisory accounts are computed daily
or weekly, advisory fees from the Separate Accounts are generally computed
quarterly based on account values as of the beginning of a quarter, and
Alternative Investment Partnership fees are computed either monthly or quarterly. Revenues
from our Alternative Investment productsPartnerships also generally include an incentive allocation
or fee of 20% of the economic profit, as defined, which is recorded as earned.
The incentive allocation and fees may increase or decrease during the year as
the profits of the product increase or decrease. Revenues may also include
performance fees and fulcrum fees from certain Separate Accounts and closed-end
funds based upon meeting or exceeding certain contractual investment return
thresholds over a stipulated period of time. Performance and fulcrum fees are
finalized and received when the contract period is completed.

INVESTMENTS

We hold investments in investmentlimited partnerships and offshore funds including
affiliates, whose underlying assets consist mainly of marketable securities,
which are accounted for using the equity method, under which we record our share
of the earnings or losses into income as earned. While manymost of the underlying
investments of these underlying investmentsentities are publicly traded and have readily available
market valuations, some of their investments are non-publicly traded whose value
may be difficult to determine. Investments are written down when management
believes an investment has experienced a decline in value that is other than
temporary. Future adverse changes in market conditions or poor operating results
of the underlying investment could result in an inability to recover the
carrying value of the investment and thereby require an impairment charge to
earnings.

GOODWILL AND OTHER LONG-LIVED INTANGIBLE ASSETS

Prior to the issuance of Statement of Financial Accounting Standards ("SFAS")
No. 142, goodwill and other long-lived intangible assets were amortized each
year. The adoption of SFAS No. 142 at the beginning of 2002 eliminated the
amortization of these assets and established requirements for having them tested
for impairment at least annually. At December 31, 2003November 30, 2004 management assessed the
recoverability of goodwill and other intangible assets and determined that there
was no impairment. In assessing the recoverability of goodwill and other
intangible assets, projections regarding estimated future cash flows and other
factors are made to determine the fair value of the respective assets. If these
estimates or related projections change in the future, it may result in an
impairment charge for these assets to income.

INCOME TAXES

In the ordinary course of business, we prepare a number of tax returns, which
are regularly audited by Federal, state and foreign tax authorities. The
inherent complications in the various tax codes often create the need for
subjective judgments in applying its provisions. While management believes that
tax positions taken comply with tax law and are both reasonable and supported by
the facts and circumstances of the situation, upon audit additional taxes may be
assessed. While assessments may be proposed in the future, both the extent of
and potential impact on financial results cannot be determined at this time.

36
STOCK BASED COMPENSATION

Effective January 1, 2003, we use a fair value based method of accounting for
stock-based compensation provided to our employees in accordance with SFAS No.
123, "Accounting for Stock Based Compensation." The estimated fair value of
option awards is determined using the Black Scholes option-pricing model. This
sophisticated model utilizes a number of assumptions in arriving at its results,
including the estimated life of the option, the risk free interest rate at the
date of grant and the volatility of the underlying common stock. There may be
other factors, which have not been considered, which may have an effect on the
value of the options as well. The effects of changing any of the assumptions or
factors employed by the Black Scholes model may result in a significantly
different valuation for the options and a resulting difference in our net
income.

41
RECENT ACCOUNTING DEVELOPMENTS

In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No.
145, which rescinded SFAS No. 4 "Reporting Gains and Losses from Extinguishment
of Debt". Under SFAS No. 4, all gains and losses from extinguishment of debt
were required to be aggregated and, if material, classified as an extraordinary
item. As a result of the rescission, the criteria in APB Opinion No. 30 is used
to classify gains and losses from debt extinguishments. Since the issuance of
SFAS No. 4, the use of debt extinguishments has become a part of the risk
management strategy of many companies, particularly those who participate in the
secondary lending markets. Debt extinguishment no longer meets the criteria for
classification as extraordinary items in APB Opinion No. 30. Accordingly, gains
from the repurchase of our mandatory convertible securities in 2002, 2003 and
20032004 of $613,000, $96,000 and $96,000,$34,000, respectively, have been included in net
gain from investments and not as an extraordinary item. The adoption of SFAS No.
145 did not have a material impact on our consolidated financial statements in
2002, 2003 and 20032004 and is not expected to have a material impact on future
consolidated financial statements.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others" ("FIN 45"), which provides accounting, and disclosure
requirements for certain guarantees. The disclosure requirements are effective
for financial statements of interim or annual periods ending after December 15,
2002. The Interpretation's initial recognition and initial measurement
provisions are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. We indemnify our clearing brokers for losses
they may sustain from the customer accounts introduced by our broker-dealer
subsidiaries. In accordance with New York Stock Exchange rules customer balances
are typically collateralized by customer securities or supported by other
recourse provisions. In addition, we further limit margin balances to a maximum
of 25% versus 50% permitted under exchange regulations. At December 31, 2003 the
total amount of customer balances subject to indemnification (i.e. margin
debits) was immaterial. The Company also has entered into arrangements with
various other third parties which provide for indemnification against losses,
costs, claims and liabilities arising from the performance of their obligations
under our agreement, except for gross negligence or bad faith. The Company has
had no claims or payments pursuant to these or prior agreements, and we believe
the likelihood of a claim being made is remote. Utilizing the methodology in FIN
45, our estimate of the value of such agreements is de minimis, and therefore an
accrual has not been made in the consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" which provides alternative methods of
transition to SFAS No. 123, "Accounting for Stock-Based Compensation" and also
amends its disclosure provisions. In addition to the Prospective method
originally provided under SFAS No. 123, SFAS No. 148 provides for a modified
prospective and a retroactive restatement method. SFAS No. 148 further expands
the disclosure requirements to require disclosure in condensed consolidated
interim financial statements for any period in which stock-based awards are
outstanding and accounted for using the intrinsic value method of APB Opinion
No. 25. Effective January 1, 2003, we began expensing options on a modified
prospective method using the fair value recognition provisions of SFAS No. 123.

In January 2003, the FASB issued Intepretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46") addresses the application of Accounting
Research Bulletin No. 51, "Consolidated Financial Statements," to variable
interest entities ("VIE") and generally would require that the assets,
liabilities and results of operations of a VIE be consolidated into the
financial statements of the enterprise that has a controlling financial interest
in it. The interpretation provides a framework for determining whether an entity
should be evaluated for consolidation based on voting interests or significant
financial support provided to the entity (i.e., variable interests).

An entity is classified as a VIE if total equity is not sufficient to permit the
entity to finance its activities without additional subordinated financial
support or its equity investors lack the direct or indirect ability to make
decisions about an entity's activities through voting rights, absorb the
expected losses of the entity if they occur or receive the expected residual
returns of the entity if they occur. Once an entity is determined to be a VIE,
its assets, liabilities and results of operations should be consolidated with
those of its primary beneficiary. The primary beneficiary of a VIE is the entity
which either will absorb a majority of the VIE's expected losses or has the
right to receive a majority of the VIE's expected residual returns. The expected
losses and residual returns of a VIE include expected variability in its net
income or loss, fees to decision makers and fees to guarantors of substantially
all VIE assets or liabilities and are calculated in accordance with Statement of
Financial Accounting Concept No. 7, "Using Cash Flow Information and Present
Value in Accounting Measurements."

On December 24, 2003, the FASB issued a revision to FIN 46 to clarify some of
the provisions of this Interpretation and to exempt certain entities from its
requirements.

Application by public entities, other than small business issuers, for all other
types of variable interest entities is required in financial statements for
periods ending after March 15, 2004.

While Gabelli is generally not subject to a majority of the risks of the VIEs,
we may be determined, for certain entities, to receive a majority of the
expected residual returns based on the methodology for determining the primary
beneficiary. Therefore, when implemented, the Interpretation may require
consolidation of certain of our investment in partnerships and affiliates'
assets and liabilities and results of operations with minority interest recorded
for the ownership share applicable to other investors. The difference between
consolidation and the equity method will impact detailed line items reported
within the consolidated financial statements but not overall consolidated net
income or stockholders' equity. Where consolidation is not required additional
disclosures may be required. We anticipate consolidating investments in
partnerships and affiliates, which are deemed to be VIEs and for which we are
the primary beneficiary, in our 10-Q for the quarter ended March 31, 2004.

In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
after June 15, 2003. Under SFAS No. 150 certain financial instruments shall be
classified as a liability on the issuer's financials statements. The Company has
adopted this statement, which did not have a material impact on the Company's
financial statements.

SEASONALITY AND INFLATION

We do not believe our operations are subject to significant seasonal
fluctuations. We do not believe inflation will significantly affect our
compensation costs, as they are substantially variable in nature. However, the
rate of inflation may affect our 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 our
financial position and results of operations by reducing our assets under
management, revenues or otherwise.

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 Gabelli and the Notes thereto contained herein.

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GABELLI ASSET MANANAGEMENT INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

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

CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Statements of Operations for the years
ended December 31, 2001, 2002 and 2003................................. F-3
Consolidated Statements of Financial Condition at
December 31, 2002 and 2003............................................. F-4
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 2001, 2002 and 2003....................... F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 2001, 2002 and 2003................................. F-6
Notes to Consolidated Financial Statements............................... F-7

- --------

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.

F-1

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, 2002 and
2003 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
2003. 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, 2002 and 2003, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2003, in conformity with accounting
principles generally accepted in the United States.

As discussed in Note A to the financial statements, in 2003, the Company changed
its method of accounting for stock-based employee compensation.

ERNST & YOUNG LLP

New York, New York
March 11, 2004

F-2

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31,
------------------------------------------------
2001 2002 2003
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

REVENUES
Investment advisory and incentive fees ......... $ 186,124 $ 177,077 $ 176,943
Commission revenue ............................. 15,939 13,883 12,863
Distribution fees and other income ............. 22,351 18,999 17,631
------------ ------------ ------------
Total revenues ............................ 224,414 209,959 207,437
------------ ------------ ------------

EXPENSES
Compensation costs ............................. 85,754 80,387 89,169
Management fee ................................. 11,325 9,533 9,002
Other operating expenses ....................... 33,887 30,377 34,552
------------ ------------ ------------
Total expenses ............................ 130,966 120,297 132,723
------------ ------------ ------------
Operating income ............................... 93,448 89,662 74,714
------------ ------------ ------------

OTHER INCOME (EXPENSE)
Net gain from investments ...................... 5,187 1,353 15,610
Interest and dividend income ................... 9,461 6,757 5,530
Interest expense ............................... (6,174) (11,977) (14,838)
------------ ------------ ------------
Total other income (expense), net ......... 8,474 (3,867) 6,302
------------ ------------ ------------

Income before income taxes and minority
interest...................................... 101,922 85,795 81,016
Income taxes ................................... 39,342 32,259 30,339
Minority interest .............................. 1,482 224 833
------------ ------------ ------------
Net income ..................................... $ 61,098 $ 53,312 $ 49,844
============ ============ ============

Net income per share:
Basic .......................................... $ 2.06 $ 1.77 $ 1.66
============ ============ ============

Diluted ........................................ $ 2.03 $ 1.76 $ 1.65
============ ============ ============

Weighted average shares outstanding:
Basic .......................................... 29,666 30,092 30,018
============ ============ ============

Diluted ........................................ 30,783 30,302 32,081
============ ============ ============

See accompanying notes.

F-3

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31,
------------------------------
2002 2003
------------ ------------
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

Cash and cash equivalents, including restricted cash of $265 and $682 ...... $ 311,430 $ 386,511
Investments in securities, including restricted securities of $102,768
and $102,132 .......................................................... 175,466 231,400
Investments in partnerships and affiliates ................................. 47,932 64,012
Receivable from brokers .................................................... 4,919 1,232
Investment advisory fees receivable ........................................ 15,603 21,565
Notes and other receivables from affiliates ................................ 10,440 14,547
Capital lease .............................................................. 2,446 2,199
Intangible assets .......................................................... 4,650 4,650
Other assets ............................................................... 9,845 10,395
------------ ------------
Total assets .......................................................... $ 582,731 $ 736,511
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Payable to brokers ......................................................... $ 17,138 $ 5,691
Income taxes payable ....................................................... 9,196 12,323
Capital lease obligation ................................................... 3,433 3,058
Compensation payable ....................................................... 18,459 25,552
Securities sold, not yet purchased ......................................... 5,022 664
Accrued expenses and other liabilities ..................................... 15,583 18,487
------------ ------------
Total operating liabilities ........................................... 68,831 65,775
------------ ------------

5.5% Senior notes .......................................................... -- 100,000
5% Convertible note ........................................................ 100,000 100,000
6.95% Mandatory convertible securities ..................................... 84,545 84,030
------------ ------------

Total liabilities ..................................................... 253,376 349,805

Minority interest .......................................................... 7,562 8,395

Stockholders' equity:
Class A Common Stock, $.001 par value; 100,000,000 shares authorized;
7,450,844 and 7,697,600 shares issued and outstanding, respectively..... 8 8
Class B Common Stock, $.001 par value; 100,000,000 shares authorized;
23,150,000 and 23,128,500 shares issued and outstanding, respectively... 23 23
Additional paid-in capital ............................................... 136,835 143,475
Retained earnings ........................................................ 207,561 257,266
Accumulated comprehensive (loss) / gain .................................. (638) 1,480
Treasury stock, at cost (719,622 and 776,544 shares, respectively) ....... (21,996) (23,941)
------------ ------------
Total stockholders' equity ............................................ 321,793 378,311
------------ ------------
Total liabilities and stockholders' equity ............................ $ 582,731 $ 736,511
============ ============

See accompanying notes.

F-4

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
(DOLLARS IN THOUSANDS)

ACCUMULATED
OTHER
ADDITIONAL COMPRE-
COMMON PAID-IN RETAINED HENSIVE TREASURY
STOCK CAPITAL EARNINGS (LOSS)/GAIN STOCK TOTAL
---------- ---------- ---------- ---------- ---------- ----------

Balance at December 31, 2000 ......... $ 30 $ 117,046 $ 93,151 $ -- $ (8,030) $ 202,197
---------- ---------- ---------- ---------- ---------- ----------
Comprehensive income:
Net income ....................... -- -- 61,098 -- -- 61,098
Other comprehensive loss:
Net unrealized losses on
securities available for sale,
net of management fees and
income tax benefit of $136 ... -- -- -- (168) -- (168)
----------
Total comprehensive income ....... 60,930
Exchange of treasury stock for
minority interests in a
subsidiary ................... -- 8,955 -- -- 6,268 15,223
Purchase of treasury stock ......... -- -- -- -- (3,053) (3,053)
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2001 ......... 30 126,001 154,249 (168) (4,815) 275,297
---------- ---------- ---------- ---------- ---------- ----------

Comprehensive income:
Net income ....................... -- -- 53,312 -- -- 53,312
Other comprehensive loss:
Net unrealized losses on
securities available for sale,
net of management fees and
income tax benefit of $362.... -- -- -- (470) -- (470)
----------
Total comprehensive income ....... 52,842
Issuance of mandatory convertible
securities ................... -- (4,615) -- -- -- (4,615)
Purchase and retirement of mandatory
convertible securities ....... -- 143 -- -- -- 143
Exercise of stock options including
tax benefit .................. 1 15,306 -- -- -- 15,307
Purchase of treasury stock ......... -- -- -- -- (17,181) (17,181)
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2002 ......... 31 136,835 207,561 (638) (21,996) 321,793
---------- ---------- ---------- ---------- ---------- ----------

Comprehensive income:
Net income ....................... -- -- 49,844 -- -- 49,844
Other comprehensive gain:
Net unrealized gains on
securities available for sale,
net of management fees and
income tax expense of $1,656.. -- -- -- 2,118 -- 2,118
----------
Total comprehensive income ....... 51,962
Dividends paid ..................... -- -- (139) -- -- (139)
Stock option expense ............... -- 1,506 -- -- -- 1,506
Purchase and retirement of mandatory
convertible securities ....... -- 13 -- -- -- 13
Exercise of stock options including
tax benefit .................. -- 5,121 -- -- -- 5,121
Purchase of treasury stock ......... -- -- -- -- (1,945) (1,945)
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2003 ......... $ 31 $ 143,475 $ 257,266 $ 1,480 $ (23,941) $ 378,311
========== ========== ========== ========== ========== ==========

See accompanying notes.

F-5

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

YEAR ENDED DECEMBER 31
--------------------------------------------
2001 2002 2003
------------ ------------ ------------
(IN THOUSANDS)

OPERATING ACTIVITIES
Net income ...................................................... $ 61,098 $ 53,312 $ 49,844
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in earnings of partnerships and affiliates ............. (1,949) (1,135) (5,729)
Depreciation and amortization ................................. 769 897 967
Stock based compensation expense .............................. -- -- 1,506
Deferred income taxes ......................................... 721 19,882 1,079
Tax benefit from stock options exercised ...................... -- 4,488 1,223
Minority interest in income of subsidiaries ................... 1,482 224 833
Realized losses (gains) on available for sale securities....... 320 20 (31)
Market value of donated securities ............................ -- 412 --
(Increase) decrease in operating assets:
Investments in securities .................................. 70,635 (119,935) 1,774
Investment advisory fees receivable ........................ 656 (953) (5,962)
Notes and other receivables from affiliates ................ (276) 1,419 (4,107)
Other receivables .......................................... (650) 417 (1,046)
Receivable from broker ..................................... 3,817 (4,883) 3,686
Other assets ............................................... (2,919) (4,647) (223)
Increase (decrease) in operating liabilities:
Payable to broker .......................................... 8,554 8,584 (11,447)
Income taxes payable ....................................... (2,629) 3,521 771
Compensation payable ....................................... (4,457) (2,641) 6,716
Securities sold, but not yet purchased ..................... -- 5,022 (4,358)
Accrued expenses and other liabilities ..................... 4,401 (2,351) 2,525
------------ ------------ ------------
Total adjustments ............................................... 78,475 (91,659) (11,823)
------------ ------------ ------------
Net cash provided by (used in) operating activities ............. 139,573 (38,347) 38,021
------------ ------------ ------------
INVESTING ACTIVITIES
Purchases of available for sale securities ...................... (1,394) (1,237) (55,851)
Proceeds from sales of available for sale securities ... ........ 8,362 735 1,949
Distributions from partnerships and affiliates .................. 26,241 27,154 15,180
Investments in partnerships and affiliates ...................... (33,584) (8,113) (25,530)
------------ ------------ ------------
Net cash provided by (used in) investing activities ............. (375) 18,539 (64,252)
------------ ------------ ------------
FINANCING ACTIVITIES
Purchase of minority stockholders' interest ..................... 31 (273) --
Proceeds from issuance of convertible note ...................... 100,000 -- --
Proceeds from issuance of mandatory convertible securities....... -- 87,738 --
Repayment of note payable ....................................... -- (50,000) --
Issuance of Senior Notes ........................................ -- -- 100,000
Proceeds from exercise of stock options ......................... -- 10,819 3,898
Dividends paid .................................................. -- -- (139)
Purchase of mandatory convertible securities .................... -- (5,312) (502)
Purchase of treasury stock ...................................... (3,053) (17,181) (1,945)
------------ ------------ ------------
Net cash provided by financing activities ....................... 96,978 25,791 101,312
------------ ------------ ------------

Net increase in cash and cash equivalents ....................... 236,176 5,983 75,081
Cash and cash equivalents at beginning of year .................. 69,271 305,447 311,430
------------ ------------ ------------
Cash and cash equivalents at end of year ........................ $ 305,447 $ 311,430 $ 386,511
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest .......................................... $ 6,174 $ 11,977 $ 14,838
------------ ------------ ------------
Cash paid for income taxes ...................................... $ 41,421 $ 4,464 $ 27,345
------------ ------------ ------------
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES
Treasury stock exchanged for subsidiary stock held by
minority stockholders ......................................... $ 15,223 $ -- $ --
------------ ------------ ------------
Securities reclassified to available for sale ................... $ 14,278 $ -- $ 3,788
------------ ------------ ------------

See accompanying notes

F-6

A. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

Gabelli 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 our shares. On
February 9, 1999, we exchanged 24 million shares of our class B common stock,
representing all of our 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"). Gabelli 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, we completed our 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 Gabelli. In addition, with the completion of the
Offering, we became a "C" Corporation for Federal and state income tax purposes
and are subject to substantially higher income tax rates.

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

At December 31, 2001, 2002 and 2003, we owned approximately 92% of GSI, 80% of
Fixed Income and a 51% voting interest in Advisers (41% economic interest.) 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, Funds Adviser, Fixed Income and Advisers are registered investment
advisers under the Investment Advisers Act of 1940. Gabelli & Company, Inc.
("Gabelli & Company") and Gabelli Direct Inc. ("Gabelli Direct"), both
wholly-owned subsidiaries of GSI, and Gabelli Fixed Income Distributors, Inc.
("Fixed Income Distributors"), a majority owned subsidiary of Fixed Income, are
registered broker-dealers with the Securities and Exchange Commission ("SEC")
and are members 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. Gabelli Direct and Fixed Income Distributors do not
currently have any customers.

CASH AND CASH EQUIVALENTS

Cash equivalents consist of highly liquid investments with a maturity of three
months or less at the time of purchase. At December 31, 2003 approximately $0.7
million of cash and cash equivalents was held as collateral to secure a letter
of credit issued August 14, 2002 in favor of the holder of the $100 million
convertible note. The letter of credit is due to expire on August 14, 2004.

F-7

SECURITIES TRANSACTIONS

Investments in securities are accounted for as either "trading securities" or
"available for sale" and are stated at quoted market values. Securities that are
not readily marketable are stated at their estimated fair values as determined
by our management. The resulting unrealized gains and losses for trading
securities are included in net gain from investments and the unrealized gains
and losses for available for sale securities, net of management fees and tax,
are reported as a separate component of stockholders' equity. 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.

At December 31, 2003 approximately $102.1 million of investments in securities
was held as collateral to secure a letter of credit issued August 14, 2002 in
favor of the holder of the $100 million convertible note. The letter of credit
is due to expire on August 14, 2004.

Securities sold, but not yet purchased are stated at quoted market values and
represent obligations of Gabelli 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 and affiliates, whose underlying assets consist
mainly of marketable securities, are accounted for using the equity method,
under which our 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 and affiliates
for which market values are not readily available are stated at their estimated
fair values as determined by our management.

RECEIVABLES FROM AND PAYABLES TO BROKERS

Receivables from and payables to brokers consist of amounts arising primarily
from the purchases and sales of securities.

REVENUE RECOGNITION

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. Investment advisory and distribution fees from
the Mutual Funds are computed on average daily net assets and charged to the
Funds monthly. Advisory fees earned from institutional and high net worth
Separate Accounts are generally computed quarterly based on account values as of
the end of the preceding quarter. Performance fees are based upon either the
absolute gain in a portfolio or the amount in excess of a specific benchmark
index or indices and recognized when earned.

DEPRECIATION AND AMORTIZATION

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

INTANGIBLE ASSETS

Intangible assets consist primarily of the cost in excess of net assets acquired
(i.e. goodwill). In July 2001, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 142, "Goodwill and Other Intangible Assets," which established
new accounting and reporting standards for goodwill and other intangible assets.
Under the new rules, goodwill and other intangible assets deemed to have
indefinite lives are no longer amortized, but are instead reviewed at least
annually for impairment in accordance with the provisions of the Statement.
Those intangibles which are separately identifiable and have finite lives will
continue to be amortized over their useful lives. The adoption of SFAS No. 142
did not have a material impact on our consolidated financial statements.

F-8

INCOME TAXES

We account for income taxes under the liability method prescribed by SFAS No.
109, "Accounting for Income Taxes." Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to the differences
between the financial statement carrying amount of existing assets and
liabilities and their respective tax 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. With the exception of GSI, these minority stockholders
are principally employees, officers and directors of Gabelli.

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

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 in the period.

Diluted net income per share, in addition to the weighted average determined for
basic net income per share, includes common stock equivalents which would arise
from the exercise of stock options using the treasury stock method and, if
dilutive, assumes the conversion of our convertible note for the period
outstanding since its issuance in August 2001. An average of 398,000, 210,000
and 141,000 incremental shares were included as the dilutive effect of stock
options in 2001, 2002 and 2003, respectively. In 2001 net income is adjusted for
interest expense, net of management fees and taxes, of $1,365,000 and the
weighted average shares outstanding includes 719,000 incremental shares as the
dilutive effect of the convertible note from its date of issuance in August
2001. In 2002 the assumed conversion of the convertible note would be
anti-dilutive and, accordingly, has not been included in computing diluted net
income per share. In 2003 net income is adjusted for interest expense, net of
management fees and taxes, of $3,157,000 and the weighted average shares
outstanding includes 1,923,000 incremental shares as the dilutive effect of the
convertible note from its date of issuance in August 2001.

STOCK BASED COMPENSATION

We currently sponsor stock option plans previously adopted and approved by our
shareholders as a means to attract, retain and motivate employees. Effective
January 1, 2003 we adopted the fair value recognition provisions of SFAS No. 123
in accordance with the transition and disclosure provisions under the recently
issued SFAS No. 148, "Accounting for Stock Based Compensation - Transition and
Disclosure". Previously we had elected to use the intrinsic value method
prescribed in Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations. Accordingly, no
compensation expense was recognized where the exercise price equaled or exceeded
the market price of the underlying stock on the date of grant. In 2003 we have
recognized $1,554,000 in option expense. Refer also to Notes F and O.

BUSINESS SEGMENTS

We operate predominantly in one business segment, the investment advisory and
asset management industry.

DISTRIBUTION COSTS

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

F-9

RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No.
145, which rescinded SFAS No. 4 "Reporting Gains and Losses from Extinguishment
of Debt". Under SFAS No. 4, all gains and losses from extinguishment of debt
were required to be aggregated and, if material, classified as an extraordinary
item. As a result of the rescission, the criteria in APB Opinion No. 30 is used
to classify gains and losses from debt extinguishments. Since the issuance of
SFAS No. 4, the use of debt extinguishments has become a part of the risk
management strategy of many companies, particularly those who participate in the
secondary lending markets. Debt extinguishment no longer meets the criteria for
classification as extraordinary items in APB Opinion No. 30. Accordingly, gains
from the repurchase of our mandatory convertible securities in 2002 and 2003 of
$613,000 and $96,000, respectively, have been included in net gain from
investments and not as an extraordinary item. The adoption of SFAS No. 145 did
not have a material impact on our consolidated financial statements in 2002 and
2003 and is not expected to have a material impact on future consolidated
financial statements.

InOn December 2002,16, 2004, the Financial Accounting Standards Board (FASB) issued
FASB issued SFASStatement No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure"123 (R) (revised 2004), Share-Based Payment, which provides alternative methodsis a
revision of transition to SFASFASB Statement No. 123, "Accounting for Stock-Based Compensation" and also
amends its disclosure provisions. In addition to the Prospective method
originally provided under SFAS No. 123, SFAS No. 148 provides for a modified
prospective and a retroactive restatement method. SFAS No. 148 further expands
the disclosure requirements to require disclosure in condensed consolidated
interim financial statements for any period in which stock-based awards are
outstanding and accounted for using the intrinsic value method ofCompensation."
Statement 123(R) supersedes APB Opinion No. 25. Effective25, "Accounting for Stock Issued to
Employees," and amends FASB Statement No. 95, "Statement of Cash Flows."
Generally, the approach in Statement 123(R) is similar to the approach described
in Statement 123. However, Statement 123(R) requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the
statement of operations based on their fair values. Pro forma disclosure is no
longer an alternative. Statement 123(R) must be adopted no later than July 1,
2005. We expect to adopt Statement 123(R) on January 1, 2003, we began expensing options on a modified2005. In light of our
prospective method usingadoption of the fair value recognition provisions of SFAS No. 123.Statement
123(R) for all grants of employee stock options subsequent to January 1, 2002,
the adoption of Statement 123(R) is not expected to have a material impact on
future consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46") addresses the application of Accounting
Research Bulletin No. 51, "Consolidated Financial Statements," to variable
interest entities ("VIE") and generally would require that the assets,
liabilities and results of operations of a VIE be consolidated into the
financial statements of the enterprise that has a controlling financial interest
in it. The interpretation provides a framework for determining whether an entity
should be evaluated for consolidation based on voting interests or significant
financial support provided to the entity (i.e., variable interests).

42
On December 24, 2003, the FASB issued a revision to FIN 46 to clarify some of
the provisions of this Interpretation and to exempt certain entities from its
requirements. Application by public entities, other than small business issuers,
for all other types of variable interest entities iswas required in financial
statements for periods ending after March 15, 2004.

While GBL is generally not subject to a majority of the risks of the VIEs, it
may be determined, for certain entities, that we receive a majority of the
expected residual returns based on the methodology for determining the primary
beneficiary. Therefore, when implemented, the Interpretation may require
consolidation of certain of our investment in partnerships and affiliates'
assets and liabilities and results of operations with minority interest recorded
for the ownership share applicable to other investors. The difference between
consolidation and the equity method will impact detailed line items reported
within the consolidated financial statements but not overall consolidated net
income or stockholders' equity. Where consolidation is not required additional
disclosures may be required.

SEASONALITY AND INFLATION

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 Gabelli and the Notes thereto contained herein.

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GABELLI ASSET MANANAGEMENT INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Report of Independent Registered Public Accounting Firm...................... F-2
Report of Independent Registered Public Accounting Firm on
Effectiveness of Internal Control over Financial Reporting................. F-3
Management's Assessment of Internal Control over Financial Reporting ........ F-4

CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Statements of Income for the years ended
December 31, 2002, 2003 and 2004........................................... F-5
Consolidated Statements of Financial Condition at December 31, 2003
and 2004................................................................... F-6
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2002, 2003 and 2004........................................... F-7
Consolidated Statements of Cash Flows for the years ended December
31, 2002, 2003 and 2004.................................................... F-8
Notes to Consolidated Financial Statements................................... F-9

- --------

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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 ("Gabelli") as of December 31,
2004 and 2003, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 2004. These financial statements are the responsibility of
Gabelli's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (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, 2004 and 2003, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2004, in conformity with U.S.
generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Gabelli Asset
Management Inc.'s internal control over financial reporting as of December 31,
2004, based on criteria established in Internal Control--Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated March 10, 2005, expressed an unqualified opinion thereon.

ERNST & YOUNG LLP

New York, New York
March 10, 2005

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON EFFECTIVENESS OF
INTERNAL CONTROL OVER FINANCIAL REPORTING

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

We have audited management's assessment, included in the accompanying
Management's Report, that Gabelli Asset Management Inc. and Subsidiaries (the
"Company") maintained effective internal control over financial reporting as of
December 31, 2004, based on criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Gabelli Asset Management Inc. and Subsidiaries'
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the Company's
internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assessment that Gabelli Asset Management Inc. and
Subsidiaries maintained effective internal control over financial reporting as
of December 31, 2004, is fairly stated, in all material respects, based on the
COSO criteria. Also, in our opinion, Gabelli Asset Management Inc. and
Subsidiaries maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2004, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated statements of
financial condition of Gabelli Asset Management Inc. and Subsidiaries as of
December 31, 2004 and 2003, and the related consolidated statements of income,
changes in stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 2004, of Gabelli Asset Management Inc. and
Subsidiaries and our report dated March 10, 2005, expressed an unqualified
opinion thereon.

ERNST & YOUNG LLP

New York, New York
March 10, 2005

F-3

MANAGEMENT'S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING

Gabelli Asset Management Inc.'s ("GBL") management is responsible for the
preparation, integrity and fair presentation of the consolidated financial
statements. These consolidated financial statements and notes have been prepared
in conformity with U.S. generally accepted accounting principles from accounting
records which management believes fairly and accurately reflect GBL's operations
and financial position. The consolidated financial statements include amounts
based on management's best estimates and judgments considering currently
available information and management's view of current conditions and
circumstances.

Management is responsible for establishing and maintaining adequate internal
control over financial reporting that is designed to provide reasonable
assurance of the reliability of financial reporting and the preparation of
financial statements in accordance with U.S. generally accepted accounting
principles. The system of internal control over financial reporting as it
relates to the financial statements is evaluated for effectiveness by management
and tested for reliability. Actions are taken to correct potential deficiencies
as they are identified. Any system of internal control, no matter how well
designed, has inherent limitations, including the possibility that a control can
be circumvented or overridden and misstatements due to error or fraud may occur
and not be detected. Also, because of changes in conditions, internal control
effectiveness may vary over time. Accordingly, even an effective system of
internal control will provide only reasonable assurance with respect to
financial statement preparation.

Management assessed the effectiveness of GBL's internal control over financial
reporting as of December 31, 2004, in relation to criteria for effective
internal control over financial reporting as described in "Internal Control -
Integrated Framework," issued by the Committee of Sponsoring Organizations of
the Treadway Commission. Based on this assessment, management concluded that, as
of December 31, 2004, its systems of internal control over financial reporting
is properly designed and operating effectively to achieve the criteria of the
"Internal Control - Integrated Framework." Ernst & Young LLP, independent
registered public accounting firm, has audited the consolidated financial
statements included in this annual report and has issued an audit report on
management's assessment of GBL's internal control over financial reporting.

Mario J. Gabelli Michael R. Anastasio
Chairman and Chief Executive Officer Vice President and Chief Financial Officer

March 10, 2005

F-4

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31,
--------------------------------------
2002 2003 2004
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

REVENUES
Investment advisory and incentive fees ................ $ 177,077 $ 176,943 $ 219,939
Commission revenue .................................... 13,883 12,863 15,573
Distribution fees and other income .................... 18,999 17,631 19,651
---------- ---------- ----------
Total revenues ................................... 209,959 207,437 255,163
---------- ---------- ----------
EXPENSES

Compensation costs .................................... 80,387 89,169 104,091
Management fee ........................................ 9,533 9,002 11,017
Distribution costs .................................... 14,979 16,096 20,004
Other operating expenses .............................. 15,398 18,456 20,983
---------- ---------- ----------
Total expenses ................................... 120,297 132,723 156,095
---------- ---------- ----------
Operating income ...................................... 89,662 74,714 99,068
---------- ---------- ----------
OTHER INCOME (EXPENSE)

Net gain from investments ............................. 1,353 15,610 5,627
Interest and dividend income .......................... 6,757 5,530 10,481
Interest expense ...................................... (11,977) (14,838) (16,027)
---------- ---------- ----------
Total other income (expense), net ................ (3,867) 6,302 81
---------- ---------- ----------
Income before income taxes and minority interest....... 85,795 81,016 99,149
Income taxes .......................................... 32,259 30,339 36,097
Minority interest ..................................... 224 833 493
---------- ---------- ----------
Net income ............................................ $ 53,312 $ 49,844 $ 62,559
========== ========== ==========
Net income per share:
Basic ............................................ $ 1.77 $ 1.66 $ 2.11
========== ========== ==========
Diluted .......................................... $ 1.76 $ 1.65 $ 2.06
========== ========== ==========

Weighted average shares outstanding:
Basic ............................................ 30,092 30,018 29,673
========== ========== ==========
Diluted .......................................... 30,302 32,081 31,804
========== ========== ==========
Dividends declared ............................... $ 0.00 $ 0.02 $ 1.76
========== ========== ==========

See accompanying notes.

F-5

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31,
------------------------
2003 2004
---------- ----------
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

Cash and cash equivalents, including restricted cash of $682 and $1,054......... $ 386,511 $ 257,096
Investments in securities, including restricted securities of $102,132
and $102,111 .............................................................. 231,400 292,350
Investments in partnerships and affiliates ..................................... 64,012 89,339
Receivable from brokers ........................................................ 1,232 5,539
Investment advisory fees receivable ............................................ 21,565 26,567
Other receivables from affiliates .............................................. 14,547 13,169
Capital lease .................................................................. 2,199 1,953
Intangible assets .............................................................. 4,650 4,650
Other assets ................................................................... 10,395 8,309
---------- ----------
Total assets .............................................................. $ 736,511 $ 698,972
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Payable to brokers ............................................................. $ 5,691 $ 302
Income taxes payable ........................................................... 12,323 8,526
Capital lease obligation ....................................................... 3,058 3,167
Compensation payable ........................................................... 25,552 27,645
Securities sold, not yet purchased ............................................. 664 1,088
Dividends payable .............................................................. -- 17,302
Accrued expenses and other liabilities ......................................... 18,487 17,585
---------- ----------
Total operating liabilities ............................................... 65,775 75,615
---------- ----------

5.5% Senior notes .............................................................. 100,000 100,000
5% Convertible note ............................................................ 100,000 100,000
Mandatory convertible securities ............................................... 84,030 82,308
---------- ----------

Total liabilities ......................................................... 349,805 357,923

Minority interest .............................................................. 8,395 6,171

Stockholders' equity:
Class A Common Stock, $.001 par value; 100,000,000 shares authorized;
7,697,600 and 8,081,356 shares issued and outstanding, respectively ....... 8 8
Class B Common Stock, $.001 par value; 100,000,000 shares authorized;
23,128,500 shares issued and outstanding, ................................. 23 23
Additional paid-in capital ................................................... 143,475 161,053
Retained earnings ............................................................ 257,266 268,519
Accumulated other comprehensive gain / (loss) ............................... 1,480 (53)
Treasury stock, at cost (776,544 and 2,372,822 shares, respectively) ......... (23,941) (94,672)
---------- ----------
Total stockholders' equity ................................................ 378,311 334,878
---------- ----------
Total liabilities and stockholders' equity ................................ $ 736,511 $ 698,972
========== ==========

See accompanying notes.

F-6

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004
(DOLLARS IN THOUSANDS)

ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN RETAINED COMPREHENSIVE TREASURY
STOCK CAPITAL EARNINGS (LOSS)/GAIN STOCK TOTAL
--------- --------- --------- --------- --------- ---------

Balance at December 31, 2001 ..................... $ 30 $ 126,001 $ 154,249 $ (168) $ (4,815) $ 275,297
--------- --------- --------- --------- --------- ---------
Comprehensive income:
Net income ................................... -- -- 53,312 -- -- 53,312
Other comprehensive loss:
Net unrealized losses on securities
available for sale, net of management
Fees and income tax benefit of $362 ...... -- -- -- (470) -- (470)
---------
Total comprehensive income ................... 52,842
Issuance of mandatory convertible securities.... -- (4,615) -- -- -- (4,615)
Purchase and retirement of mandatory
convertible securities ................... -- 143 -- -- -- 143
Exercise of stock options including tax
benefit .................................. 1 15,306 -- -- -- 15,307
Purchase of treasury stock ..................... -- -- -- -- (17,181) (17,181)
--------- --------- --------- --------- --------- ---------
Balance at December 31, 2002 ..................... 31 136,835 207,561 (638) (21,996) 321,793
========= ========= ========= ========= ========= =========

Comprehensive income:
Net income ................................... -- -- 49,844 -- -- 49,844
Other comprehensive gain:
Net unrealized gains on securities
available for sale, net of management
fees and income tax expense of $1,656 .... -- -- -- 2,118 -- 2,118
---------
Total comprehensive income ................... 51,962
Dividends paid ................................. -- -- (139) -- -- (139)
Stock based compensation expense ............... -- 1,506 -- -- -- 1,506
Purchase and retirement of mandatory
convertible securities ................... -- 13 -- -- -- 13
Exercise of stock options including tax
benefit .................................. -- 5,121 -- -- -- 5,121
Purchase of treasury stock ..................... -- -- -- -- (1,945) (1,945)
--------- --------- --------- --------- --------- ---------
Balance at December 31, 2003 ..................... 31 143,475 257,266 1,480 (23,941) 378,311
========= ========= ========= ========= ========= =========

Comprehensive income:
Net income ................................... -- -- 62,559 -- -- 62,559
Other comprehensive gain:
Net unrealized losses on securities
available for sale, net of management
fees and income tax benefit of $1,198 .... -- -- -- (1,533) -- (1,533)
---------
Total comprehensive income ................... 61,026
Dividends paid and declared .................... -- -- (51,306) -- -- (51,306)
Stock based compensation expense ............... -- 1,819 -- -- -- 1,819
Purchase and retirement of mandatory
convertible securities ................... -- 45 -- -- -- 45
Exercise of stock options including tax
benefit .................................. -- 4,090 -- -- -- 4,090
Proceeds from early settlement of purchase
contracts ................................ -- 11,740 -- -- -- 11,740
Capitalized costs .............................. -- (116) -- -- -- (116)
Purchase of treasury stock ..................... -- -- -- -- (70,731) (70,731)
--------- --------- --------- --------- --------- ---------
Balance at December 31, 2004 ..................... $ 31 $ 161,053 $ 268,519 $ (53) $ (94,672) $ 334,878
========= ========= ========= ========= ========= =========

See accompanying notes.

F-7

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

YEAR ENDED DECEMBER 31
--------------------------------------
2002 2003 2004
---------- ---------- ----------
(IN THOUSANDS)

OPERATING ACTIVITIES
Net income ..................................................... $ 53,312 $ 49,844 $ 62,559
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Equity in earnings of partnerships and affiliates ............ (1,135) (5,729) (4,843)
Depreciation and amortization ................................ 897 967 980
Stock based compensation expense ............................. -- 1,506 1,819
Deferred income taxes ........................................ 19,882 1,079 (1,769)
Tax benefit from stock options exercised ..................... 4,488 1,223 1,064
Minority interest in income of subsidiaries .................. 224 833 493
Realized losses (gains) on available for sale securities ..... 20 (31) (101)
Market value of donated securities ........................... 412 -- --
(Increase) decrease in operating assets:
Investments in securities ................................. (119,935) 1,774 (52,525)
Investment advisory fees receivable ....................... (953) (5,962) (5,002)
Other receivables from affiliates ......................... 1,419 (4,107) 1,378
Receivable from broker .................................... (4,883) 3,686 (4,307)
Other assets .............................................. (4,230) (1,269) 1,351
Increase (decrease) in operating liabilities:
Payable to broker ......................................... 8,584 (11,447) (5,389)
Income taxes payable ...................................... 3,521 771 (1,103)
Compensation payable ...................................... (2,641) 6,716 2,366
Securities sold, not yet purchased ........................ 5,022 (4,358) 424
Accrued expenses and other liabilities .................... (2,351) 2,525 (790)
---------- ---------- ----------
Total adjustments .............................................. (91,659) (11,823) (65,954)
---------- ---------- ----------
Net cash provided by (used in) operating activities ............ (38,347) 38,021 (3,395)
---------- ---------- ----------
INVESTING ACTIVITIES
Purchases of available for sale securities ..................... (1,237) (55,851) (11,656)
Proceeds from sales of available for sale securities ........... 735 1,949 600
Distributions from partnerships and affiliates ................. 27,154 15,180 20,793
Investments in partnerships and affiliates ..................... (8,113) (25,530) (41,277)
---------- ---------- ----------
Net cash provided by (used in) investing activities ............ 18,539 (64,252) (31,540)
---------- ---------- ----------
FINANCING ACTIVITIES
Distributions to minority stockholders ......................... (273) -- (2,718)
Proceeds from issuance of mandatory convertible securities ..... 87,738 -- --
Repayment of note payable ...................................... (50,000) -- --
Issuance of 5.5% Senior notes .................................. -- 100,000 --
Proceeds from exercise of stock options ........................ 10,819 3,898 3,026
Dividends payable .............................................. -- -- 17,302
Dividends paid and declared .................................... -- (139) (51,306)
Purchase and retirement of mandatory convertible securities..... (5,312) (502) (1,677)
Proceeds from early settlement of purchase contracts ........... -- -- 11,740
Capitalized costs .............................................. -- -- (116)
Purchase of treasury stock ..................................... (17,181) (1,945) (70,731)
---------- ---------- ----------
Net cash provided by (used in) financing activities ............ 25,791 101,312 (94,480)
---------- ---------- ----------

Net increase (decrease) in cash and cash equivalents ........... 5,983 75,081 (129,415)
Cash and cash equivalents at beginning of year ................. 305,447 311,430 386,511
---------- ---------- ----------
Cash and cash equivalents at end of year ....................... $ 311,430 $ 386,511 $ 257,096
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest ......................................... $ 11,908 $ 15,116 $ 16,662
---------- ---------- ----------
Cash paid for income taxes ..................................... $ 4,464 $ 27,345 $ 37,881
---------- ---------- ----------
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES
Securities reclassified to available for sale .................. $ -- $ 3,788 $ --
---------- ---------- ----------

See accompanying notes

F-8

A. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

On February 17, 1999, we completed our 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 Gabelli. In addition, with the completion of the
Offering, we became a "C" Corporation for Federal and state income tax purposes
and are subject to substantially higher income tax rates.

The accompanying consolidated financial statements include the assets,
liabilities and earnings of:

o Gabelli; and
o Our wholly-owned subsidiaries: Gabelli Funds, LLC ("Funds Adviser"), GAMCO
Investors, Inc. ("GAMCO"), Gabelli Asset Management (UK) Limited, Gabelli
Fixed Income, Inc. ("Fixed Income") and its subsidiaries; and
o Our majority-owned or majority-controlled subsidiaries: Gabelli
Securities, Inc. ("GSI") and its subsidiaries and Gabelli Advisers, Inc.
("Advisers").

At December 31, 2002, 2003 and 2004, we owned approximately 92% of GSI and had a
51% voting interest in Advisers (41% economic interest.) All significant
intercompany transactions and balances have been eliminated.

USE OF ESTIMATES

The preparation of the consolidated financial statements in conformity with U.S.
generally accepted accounting principles 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, Funds Adviser, Gabelli Fixed Income LLC ("Fixed Income LLC), a
majority-owned subsidiary of Fixed Income, and Advisers are registered
investment advisors under the Investment Advisers Act of 1940. Gabelli &
Company, Inc. ("Gabelli & Company") and Gabelli Direct, Inc. ("Gabelli Direct"),
both wholly-owned subsidiaries of GSI, and Gabelli Fixed Income Distributors,
Inc. ("Fixed Income Distributors"), a wholly-owned subsidiary of Fixed Income
LLC, are registered broker-dealers with the Securities and Exchange Commission
("SEC") and are members 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. Gabelli Direct and Fixed Income Distributors do not
currently have any customers.

CASH AND CASH EQUIVALENTS

Cash equivalents consist of highly liquid investments with a maturity of three
months or less at the time of purchase. At December 31, 2004, approximately $1.1
million of cash and cash equivalents was held as part of the collateral to
secure a $102.5 million letter of credit originally issued August 14, 2002, in
favor of the holder of the $100 million 5% convertible note. The $102.5 million
letter of credit is due to expire on April 9, 2005.

F-9

SECURITIES TRANSACTIONS

At December 31, 2004, approximately $102.1 million of investments in securities
were held as collateral to secure a $102.5 million letter of credit originally
issued August 14, 2002 in favor of the holder of the $100 million 5% convertible
note. The $102.5 million letter of credit is due to expire on April 9, 2005.

Securities sold, but not yet purchased are recorded at trade date, stated at
quoted market values and represent obligations of Gabelli 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 and affiliates, whose underlying assets consist
mainly of marketable securities, are accounted for using the equity method under
which our share of net earnings or losses of these partnerships and affiliated
entities is reflected in income as earned, capital contributions are recorded
when paid, and distributions received are reductions of the investments.
Investments in partnerships and affiliates for which market values are not
readily available are stated at their estimated fair values as determined by our
management.

RECEIVABLES FROM AND PAYABLES TO BROKERS

Receivables from and payables to brokers consist of amounts arising primarily
from the purchases and sales of securities.

REVENUE RECOGNITION

Investment advisory and distribution 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. Investment advisory and
distribution fees from the open-end and closed-end mutual funds ("Mutual Funds")
are computed on average daily net assets and charged to the Funds monthly.
Advisory fees earned from institutional and high net worth separate accounts
("Separate Accounts") are generally computed quarterly based on account values
as of the end of the preceding quarter. Performance fees are based upon either
the absolute gain in a portfolio or the amount in excess of a specific benchmark
index or indices and recognized when earned.

DISTRIBUTION COSTS

We incur certain promotion and distribution costs, which are expensed as
incurred, principally related to the sale of shares of open-end mutual funds,
shares sold in the initial public offerings of our closed-end funds, and
after-market support services related to our closed-end funds. Distribution
costs relating to closed-end funds were approximately $298,000 and $4,365,000
for 2003 and 2004, respectively.

DIVIDENDS AND INTEREST INCOME AND INTEREST EXPENSE

Dividends are recorded on the ex-dividend date. Interest income and interest
expense are accrued as earned or incurred.

F-10

DEPRECIATION AND AMORTIZATION

Fixed assets, which are included in other assets, are recorded at cost and
depreciated using the straight-line method over their estimated useful lives.
Leasehold improvements, which are included in other assets, are recorded at cost
and amortized using the straight-line method over their estimated useful lives
or lease terms, whichever is shorter. Property under our capital lease is
amortized using the straight-line method over the life of the lease.

INTANGIBLE ASSETS

Intangible assets consist primarily of the cost in excess of net assets acquired
(i.e. goodwill). Goodwill and other intangible assets are deemed to have
indefinite lives and, therefore, are not subject to amortization, but are
instead reviewed at least annually for impairment in accordance with SFAS No.
142, "Goodwill and Other Intangible Assets".

INCOME TAXES

MINORITY INTEREST

FAIR VALUES OF FINANCIAL INSTRUMENTS

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

EARNINGS PER SHARE

Diluted net income per share, in addition to the weighted average determined for
basic net income per share, includes common stock equivalents which would arise
from the exercise of stock options using the treasury stock method and, if
dilutive, assumes the conversion of our convertible note for the period
outstanding since its issuance in August 2001. An average of 210,000, 141,000
and 208,000 incremental shares were included as the dilutive effect of stock
options in 2002, 2003 and 2004, respectively. In 2002 the assumed conversion of
the convertible note would be anti-dilutive and, accordingly, has not been
included in computing diluted net income per share. In 2003 net income is
adjusted for interest expense, net of management fees and taxes, of $3,157,000
and the weighted average shares outstanding includes 1,923,000 incremental
shares as the convertible note had a dilutive effect. In 2004 net income is
adjusted for interest expense, net of management fees and taxes, of $2,862,000
and the weighted average shares outstanding includes 1,923,000 incremental
shares as the convertible note had a dilutive effect.

STOCK BASED COMPENSATION

We currently sponsor stock option plans previously adopted and approved by our
shareholders as a means to attract, retain and motivate employees. Effective
January 1, 2003, we adopted the fair value recognition provisions of SFAS No.
123 in accordance with the transition and disclosure provisions under the
recently issued SFAS No. 148, "Accounting for Stock Based Compensation -
Transition and Disclosure". Previously we had elected to use the intrinsic value
method prescribed in Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations.
Accordingly, no compensation expense was recognized where the exercise price
equaled or exceeded the market price of the underlying stock on the date of
grant. In 2004, we have recognized $1,819,000 in option expense. Refer also to
Note F.

F-11

BUSINESS SEGMENTS

We operate predominantly in one business segment, the investment advisory and
asset management industry.

RECLASSIFICATIONS

Certain prior period amounts reflect reclassifications to conform to the current
year's presentation.

RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No.
145, which rescinded SFAS No. 4 "Reporting Gains and Losses from Extinguishment
of Debt". Under SFAS No. 4, all gains and losses from extinguishment of debt
were required to be aggregated and, if material, classified as an extraordinary
item. As a result of the rescission, the criteria in APB Opinion No. 30 is used
to classify gains and losses from debt extinguishments. Since the issuance of
SFAS No. 4, the use of debt extinguishments has become a part of the risk
management strategy of many companies, particularly those who participate in the
secondary lending markets. Debt extinguishment no longer meets the criteria for
classification as extraordinary items in APB Opinion No. 30. Accordingly, gains
from the repurchase of our mandatory convertible securities in 2002, 2003 and
2004 of $613,000, $96,000 and $34,000, respectively, have been included in net
gain from investments and not as an extraordinary item. The adoption of SFAS No.
145 did not have a material impact on our consolidated financial statements in
2002, 2003 and 2004 and is not expected to have a material impact on future
consolidated financial statements.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others" ("FIN 45"), which provides accounting, and disclosure
requirements for certain guarantees. The disclosure requirements are effective
for financial statements of interim or annual periods ending after December 15,
2002. The Interpretation's initial recognition and initial measurement
provisions are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. We indemnify our clearing brokers for losses
they may sustain from the customer accounts introduced by our broker-dealer
subsidiaries. In accordance with New York Stock Exchange rules customer balances
are typically collateralized by customer securities or supported by other
recourse provisions. In addition, we further limit margin balances to a maximum
of 25% versus 50% permitted under exchange regulations. At December 31, 2004 the
total amount of customer balances subject to indemnification (i.e. margin
debits) was immaterial. The Company also has entered into arrangements with
various other third parties which provide for indemnification against losses,
costs, claims and liabilities arising from the performance of their obligations
under our agreement, except for gross negligence or bad faith. The Company has
had no claims or payments pursuant to these or prior agreements, and we believe
the likelihood of a claim being made is remote. Utilizing the methodology in FIN
45, our estimate of the value of such agreements is de minimis, and therefore an
accrual has not been made in the financial statements.

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued
FASB Statement No. 123 (R) (revised 2004), Share-Based Payment, which is a
revision of FASB Statement No. 123, "Accounting for Stock-Based Compensation."
Statement 123(R) supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and amends FASB Statement No. 95, "Statement of Cash Flows."
Generally, the approach in Statement 123(R) is similar to the approach described
in Statement 123. However, Statement 123(R) requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the
statement of operations based on their fair values. Pro forma disclosure is no
longer an alternative. Statement 123(R) must be adopted no later than July 1,
2005. We expect to adopt Statement 123(R) on January 1, 2005. In light of our
prospective adoption of the fair value recognition provisions of Statement
123(R) for all grants of employee stock options subsequent to January 1, 2002,
the adoption of Statement 123(R) is not expected to have a material impact on
future consolidated financial statements.

F-12

On December 24, 2003, the FASB issued a revision to FIN 46 to clarify some of
the provisions of this Interpretation and to exempt certain entities from its
requirements. Application by public entities, other than small business issuers,
for all other types of variable interest entities was required in financial
statements for periods ending after March 15, 2004.

While Gabelli is generally not subject to a majority of the risks of the VIEs,
weit may be determined, for certain entities, tothat we receive a majority of the
expected residual returns based on the methodology for determining the primary
beneficiary. Therefore, when implemented, the Interpretation may require
consolidation of certain of our investment in partnerships and affiliates'
assets and liabilities and results of operations with minority interest recorded
for the ownership share applicable to other investors. The difference between
consolidation and the equity method will impact detailed line items reported
within the consolidated financial statements but not overall consolidated net
income or stockholders' equity. Where consolidation is not required, additional
disclosures may be required. Financial information pertaining to our investments
in partnerships and affiliates is presented in Note C.

In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
after June 15, 2003. Under SFAS No. 150, certain financial instruments shall be
classified as a liability on the issuer's financials statements. The Company has
adopted this statement, which did not have a material impact on the Company's
financial statements.

B. INVESTMENTS IN SECURITIES

Investments in securities at December 31, 20022003 and 20032004 consisted of the
following:

2002 2003 ----------------------- -----------------------2004
---- ----
MARKET MARKET
COST VALUE COST VALUE
---------- ---------- ---------- ------------------- --------- --------- ---------
(IN THOUSANDS)

Trading securities:
U.S. Government obligations ....... $ 104,323 $ 104,706.............. $ 103,412 $ 103,684 $ 148,344 $ 148,610
Common stocks ..................... 28,859 28,231............................ 10,204 11,584 12,406 14,509
Mutual funds ...................... 32,726 32,582............................. 41,806 42,415 Corporate bonds ................... 1,598 1,59950,774 51,560
Preferred stocks ......................... -- -- 497 585
Other investments ................. 2,425 2,425........................ 2,425 6,297 ---------- ---------- ---------- ----------543 1,241
--------- --------- --------- ---------
Total trading securities .......... 169,931 169,543................. 157,847 163,980 ---------- ---------- ---------- ----------212,564 216,505
--------- --------- --------- ---------

Available for sale securities:
Common stocks ..................... -- --............................ 10,781 11,570 15,692 18,271
Mutual funds ...................... 7,059 5,923............................. 52,829 55,850 ---------- ---------- ---------- ----------59,075 57,574
--------- --------- --------- ---------
Total available for sale securities 7,059 5,923...... 63,610 67,420 ---------- ---------- ---------- ----------74,767 75,845
--------- --------- --------- ---------

Total investments in securities ... $ 176,990 $ 175,466.......... $ 221,457 $ 231,400 ========== ========== ========== ==========$ 287,331 $ 292,350
========= ========= ========= =========

At December 31, 20022003 and 20032004, the market value of investments available for
sale was $5.9$67.4 million and $67.4$75.8 million, respectively. An unrealized holdingAt December 31, 2003 and
2004, there were five and six holdings in loss net of management fees and taxes, of $0.6 million in 2002 and anpositions, respectively. An
unrealized holding gain, net of management fees and taxes, of $1.5 million in
2003 and an unrealized holding loss, net of management fees and taxes of $0.1
million in 2004 has been included in stockholders' equity. Proceeds from sales
of investments available for sale were approximately $0.7$1.9 million and $1.9$0.6
million for the years ended December 31, 20022003 and 2003,2004, respectively. Realized
gains on the sale of investments available for sale amounted to $0.1$0.2 million and
$0.2$0.1 million and realized losses were $0.1 million and $0.2 million during 2002in 2003. There were no
realized losses in 2004.

F-13

Management determines the appropriate classification of debt and 2003,
respectively.equity
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. A substantial portion of investments in securities are held
for resale in anticipation of short-term market movements and classified as
trading securities. Available for sale investments are stated at fair value,
with any unrealized gains or losses, net of deferred taxes, reported as a
component of stockholders' equity.

C. INVESTMENTS IN PARTNERSHIPS AND AFFILIATES

We are General Partner or co-General Partner of various limited partnerships
whose underlying assets consist primarily of marketable securities. As General
Partner or co-General Partner, we are contingently liable for all of the
partnerships' liabilities. Summary financial information, including our carrying
value and income from these partnerships at December 31, 20022003 and 20032004 and for
the years then ended, is as follows (in thousands):

2002 2003 ---------- ----------2004
---- ----
Total assets.................................. $ 271,764assets ................ $ 285,024 $ 272,533
Total liabilities............................. 44,577liabilities ........... 52,447 Equity........................................ 227,18765,754
Equity ...................... 232,577 206,779
Net earnings.................................. 774earnings ................ 18,989 13,244
Company's carrying value...................... 28,300value .... 30,575 25,722
Company's income.............................. 25income ............ 3,635 2,047

Income from the above partnerships for the year ended December 31, 20012002 was
approximately $94,000.
F-11
$25,000.

Our income from these partnerships consists of our pro rata capital allocation
and our 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, 2001, 2002, 2003
and 2003,2004, we earned administrative fees of approximately $2,193,000, $2,041,000, $2,259,000,
and $2,259,000,$2,029,000, respectively.

At December 31, 20022003 and 2003,2004, we had various limited partner interests in
unaffiliated limited partnerships, offshore funds and other investments
aggregating approximately $1,596,000$21,564,000 and $21,564,000,$33,818,000, respectively. For the
years ended December 31, 2001, 2002, 2003 and 2003,2004, the net gains recorded by us in
these investments approximated $100,000,
$423,000, $1,112,000, and $1,112,000,$2,047,000,
respectively.

At December 31, 20022003 and 2003,2004, we had investments in various affiliated offshore
funds aggregating $18,036,000$11,873,000 and $11,873,000,$29,780,000, respectively. As the investment
manager, we earn an annual administrative fee based on a percentage of net
assets and are entitled to a performancean incentive fee based on the absolute gain in the
portfolio. For the years ended December 31, 2001, 2002, 2003 and 2003,2004, we earned
administrative and performanceincentive fees of $4,311,000, $3,613,000, $4,718,000 and $4,718,000,$3,871,000,
respectively.

D. INCOME TAXES

We account for income taxes under the liability method prescribed by Financial
Accounting Standards Board Statement No. 109 ("SFAS 109"). Under SFAS 109,
deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial accounting purposes
and the amounts used for income tax purposes.

Gabelli and our greater than 80% owned subsidiaries file a consolidated federal
income tax return. Advisers, our less than 80% owned subsidiary files a separate
federal income tax return. Accordingly, the income tax provision represents the
aggregate of the amounts provided for all companies.

The provision (benefit) for income taxes for the years ended December 31, 2001,
2002,
2003 and 20032004 consisted of the following:

2001 2002 2003 2004
---------- ---------- ----------
(IN THOUSANDS)
Federal:
Current ...................... $ 33,089.......... $ 10,284 $ 24,915 $ 31,778
Deferred ..................... 842......... 17,027 1,108 (1,198)
State and local:
Current ...................... 5,426.......... 2,093 4,345 6,088
Deferred ..................... (15)......... 2,855 (29) (571)
---------- ---------- ----------
$ 39,342 $ 32,259 $ 30,339 $ 36,097
========== ========== ==========

F-14

Our effective tax rate for each of the years ended December 31, 2001, 2002, 2003 and
20032004 was 38.6%37.6%, 37.6%37.4% and 37.4%36.4%, respectively. A reconciliation of the Federal
statutory income tax rate to the effective tax rate is set forth below:

2001 2002 2003
-------- -------- --------
Statutory Federal income tax rate........... 35.0% 35.0% 35.0%
State income tax, net of Federal benefit.... 3.4 3.7 3.4
Other....................................... 0.2 (1.1) (1.0)
-------- -------- --------
Effective income tax rate................... 38.6%
2002 2003 2004
-------- -------- --------

Statutory Federal income tax rate ........... 35.0% 35.0% 35.0%
State income tax, net of Federal benefit .... 3.7 3.4 3.6
Other ....................................... (1.1) (1.0) (2.2)
-------- -------- --------
Effective income tax rate ................... 37.6% 37.4% 36.4%
======== ======== ========

Significant components of our deferred tax assets and liabilities were as
follows:

2002 2003
-------- --------
(in thousands)
Deferred tax assets:
Investments in securities available for sale....... $ (400) $ 1,426
Other ............................................. (523) (1,344)
-------- --------
Total deferred tax assets ......................... (923) 82
-------- --------
Deferred tax liabilities:
Investments in securities and partnerships......... 1,290 2,677
Other ............................................. 470 983
-------- --------
Total deferred tax liabilities .................... 1,760 3,660
-------- --------
Net deferred tax liabilities ......................... $ 837 $ 3,742
======== ========
F-12

2003 2004
---------- ----------
Deferred tax assets: (IN THOUSANDS)

Stock option expense ............................ $ -- $ (1,268)
Deferred compensation ........................... -- (2,298)
Other ........................................... (1,344) (442)
---------- ----------
Total deferred tax assets ....................... (1,344) (4,008)
---------- ----------
Deferred tax liabilities:
Investments in securities available for sale .... 1,426 392
Investments in securities and partnerships ...... 2,677 3,721
Other ........................................... 983 834
---------- ----------
Total deferred tax liabilities .................. 5,086 4,947
---------- ----------

Net deferred tax liabilities ....................... $ 3,742 $ 939
========== ==========

E. DEBT

Debt consists of the following:

2002 2003 2004
---------- ----------

5.5% Senior Notes...................................... $ --notes ................... $ 100,000 $ 100,000
5% Convertible note .................................................. 100,000 100,000
Mandatory convertible securities ................. 84,545.... 84,030 82,308
---------- ----------
Total.............................................Total ............................... $ 184,545284,030 $ 284,030282,308
========== ==========

NOTE PAYABLE

In conjunction with the Reorganization, we entered into an Employment Agreement
with our Chairman and Chief Executive Officer ("Chairman") which, in part,
provides that the Chairman would be paid $50 million on January 2, 2002.
Interest was 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.
The note was paid in full on January 2, 2002.

Interest expense recorded on this
note was $3,000,000 for the year ended December 31, 2001.5.5% SENIOR NOTES

On May 15, 2003, we issued 10-year, $100 million senior notes. The senior notes,
due May 15, 2013, pay interest semi-annually at 5.5%.

F-15

CONVERTIBLE NOTE

On August 13, 2001, we issued a 10-year, $100 million convertible note to
Cascade Investment LLC ("Cascade"). The convertible note, due August 14, 2011,
payspaid interest semi-annually at 6.5% for the first year and 6% thereafter and iswas
convertible into our class A common stock at $53 per share. In August 2003, the
interest rate on the note was lowered to 5% and the conversion price was lowered
by $1 per share to $52 per share. The note provides the holder with certain put
rights, at par plus accrued interest, on August 13, 2004.April 1, 2005. If this note were
converted, Cascade would own approximately 6% of our aggregate outstanding
common stock.

On August 9, 2002, the Board of Directors authorized Gabelli to establish a
collateral account consisting of cash or securities totaling $103 million,
lowered to $102.5 million in August 2003, to secure a $102.5 million letter of
credit in favor of Cascade. We have paid $79,000 in 2002, $234,000 in 2003,
$282,000 in 2004 and expect to pay fees of approximately $175,000$63,000 in 20042005 for the
$102.5 million letter of credit which will expire August 14, 2004.April 9, 2005. At that time
the collateral account will be closed and any cash or securities held will be
available for general corporate use.

COMPANY OBLIGATIONS UNDER MANDATORY CONVERTIBLE SECURITIES

On February 6, 2002, we completed our public offering of 3.6 million mandatory
convertible securities. The securities are listed on the New York Stock Exchange
under the symbol "GBL.I". These securities initially consist of (a) a purchase
contract under which the holder will purchase shares of our class A common stock
on February 17, 2005 and (b) senior notes due February 17, 2007. The notes pay
interest quarterly at a rate of 6% per year, which rate is expected to be reset
on or about November 17, 2004. Each purchase contract obligates its holder to
purchase, on February 17, 2005, newly issued shares of our class A common stock.
The total number of shares to be issued will be between 1.8 million and 2.2
million, subject to adjustment in certain circumstances and depends upon the
applicable market value at that date. In connection
with the offering, we received $90,000,000 before underwriting and other
expenses of approximately $3,100,000. For accounting purposes, the net present
value of the purchase contract adjustments and their related offering costs,
totaling $4.6 million, have been recorded as a reduction to additional paid in
capital. Costs incurred in connection with the issuance of the senior notes have
been capitalized as deferred financing costs and will be amortized as an
adjustment to interest expense over the term of the notes. During 2002, 2003 and
20032004, approximately $81,000, $93,000 and $93,000,$95,000, respectively, have been
amortized to interest expense.

F-13
The notes pay interest quarterly at a rate of 6% per year, which rate was reset
on November 17, 2004 to 5.22%. Each purchase contract obligates its holder to
purchase, on February 17, 2005, newly issued shares of our class A common stock.
During December 2004, a holder of 469,600 purchase contracts purchased 252,456
shares of our class A common stock through early settlement. The total number of
purchase contracts outstanding at December 31, 2004 was 2,822,700. The total
number of shares to be issued will be between 1.5 million and 1.8 million,
subject to adjustment in certain circumstances and depends upon the "applicable
market value" at that date. The "applicable market value" is determined by
taking the average of the closing price per share of our class A common stock on
each of the twenty consecutive trading days ending on the third trading day
immediately preceding February 17, 2005. At December 31, 2004, the Company would
have had to issue approximately 1,517,000 shares to settle the purchase
contracts.

In May 2002, the Board of Directors approved the repurchase of up to 200,000
shares of the mandatory convertible securities from time to time in the open
market. On August 9, 2002, the Board of Directors increased the number of shares
authorized to be repurchased by an additional 200,000. In May 2004, the Board of
Directors increased the number of shares authorized to be repurchased by an
additional 200,000. In August 2004, the Board of Directors changed the
authorization to $25 million. Through December 31, 20032004, we repurchased 238,800307,700
shares at an average price of $21.92$22.54 per share and an aggregate cost of $5.2$6.9
million. In 2002, 2003 and 20032004, a gain of approximately $613,000, $96,000 and
$96,000,$34,000, respectively, attributable to the extinguishment of the debt component
of each mandatory convertible security repurchased has been included in net gain
from investments.

F. STOCKHOLDERS' EQUITY

STOCK AWARD AND INCENTIVE PLAN

We maintain two Stock Award and Incentive Plans (the "Plans"), approved by the
shareholders, which are designed to provide incentives which will attract and
retain individuals key to the success of Gabelli through direct or indirect
ownership of our common stock. Benefits under the Plans 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 of class A common
stock have been reserved for issuance under each of the Plans by a committee of
the Board of Directors responsible for administering the Plans. Under the Plans,
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 Plans vest 75% after
three years and 100% after four years from the date of grant and expire after
ten years.

F-16
A summary of the stock option activity for the years ended December 31, 20022003 and
20032004 is as follows:

WEIGHTED AVERAGE
SHARES EXERCISE PRICE
---------- ----------
Outstanding, December 31, 2001................. 1,246,000 $ 18.34
Granted........................................ 10,000 $ 30.40
Forfeited...................................... (39,750) $ 23.73
Exercised...................................... (600,844) $ 16.28
----------
Outstanding, December 31, 2002................. 615,406 $ 20.21
Granted........................................ 633,000 $ 28.96
Forfeited...................................... (73,500) $ 29.36
Exercised...................................... (225,256) $ 16.24
----------
Outstanding, December 31, 2003................. 949,650 $ 22.45
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
---------- --------------

Outstanding, December 31, 2002 .......... 615,406 $ 20.21
Granted ................................. 633,000 $ 28.96
Forfeited ............................... (73,500) $ 29.36
Exercised ............................... (225,256) $ 16.24
----------
Outstanding, December 31, 2003 .......... 949,650 $ 26.27
Granted ................................. 40,000 $ 39.65
Forfeited ............................... (59,025) $ 29.06
Exercised ............................... (131,300) $ 22.57
----------
Outstanding, December 31, 2004 .......... 799,325 $ 27.34
==========

Shares available for future issuance
at December 31, 2004 .................. 1,243,275
==========
Shares available for future issuance
at December 31, 2003......................... 1,224,250
==========

At December 31, 20022003 and 20032004 there were 104,344211,444 and 211,444,212,431, respectively,
exercisable outstanding stock options with a weighted average exercise price of
$16.28$16.44 per share and $16.44$20.62 per share, respectively.

The weighted average estimated fair value of the options granted at their grant
date using the Black-Scholes option-pricing model was as follows:

2001 2002 2003
---- ---- ----
2002 2003 2004
-------- -------- --------

Weighted average fair value of
options granted: ............... $ 15.19 $ 10.96 $ 13.04

Assumptions made:
Expected volatility ............ 39% 38% 33%
Risk free interest rate ........ 3.54% 2.99% 2.50%
Expected life .................. 8 years 5 years 5 years
Dividend yield ................. 0% 0% 0.2%

The expected life reflected an estimate of the length of time the employees are
expected to hold the options, granted: $ 18.29 $ 15.19 $ 10.96

Assumptions made:
Expected volatility................... 45% 39% 38%
Risk free interest rate............... 5.00% 3.54% 2.99%
Expected life......................... 8 years 8 years 5 years
Dividend yield........................ 0% 0% 0%

F-14
including the vesting period, and is based, in
part, on actual experience with other grants. The dividend yield for the
February 18, 2003 and May 13, 2003 grants reflected the assumption at that time that no or an
immaterial payout would be made in the foreseeable future.future at that time. The
expected life is an estimate established atdividend yield for the dateMay 11, 2004 grant reflected the assumption that we would
continue our current policy of grant and is not necessarily indicative of exercise patterns which
may, in fact, occur.a $0.02 per share quarterly dividend. The
weighted average remaining contractual life of the outstanding options at
December 31, 20032004 was 7.97.34 years.

Prior to January 1, 2003, we applied Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for our stock option plan. Accordingly, no compensation expense was
recognized where the exercise price equals or exceeds the market price of the
underlying stock on the date of grant.

Effective January 1, 2003, we adopted the fair value recognition provisions of
SFAS No. 123 in accordance with the transition and disclosure provisions under
the recently issued SFAS No. 148, "Accounting for Stock Based Compensation -
Transition and Disclosure".

F-17
If we had elected for 2001 and 2002 to account for our stock options under the
fair value method of SFAS No. 123 "Accounting for Stock Based Compensation," our
net income and net income per share would have been reduced to the pro forma
amounts indicated below:

2001 2002
---------- ----------
Net income (in thousands):
As reported............................. $ 61,098 $ 53,312
Pro forma............................... $ 59,318 $ 52,614

Net income per share - Basic
As reported.............................
2002 2003 2004
---------- ---------- ----------

Net income (in thousands):
As reported ..................... $ 53,312 $ 49,844 $ 62,559
Pro forma ....................... $ 52,614 $ 49,414 $ 62,473

Net income per share - Basic
As reported ..................... $ 1.77 $ 1.66 $ 2.11

Pro forma ....................... $ 1.74 $ 1.65 $ 2.11

Net income per share - Diluted
As reported ..................... $ 1.76 $ 1.65 $ 2.06

Pro forma ....................... $ 1.73 $ 1.64 $ 2.06
$ 1.77
Pro forma............................... $ 2.00 $ 1.74

Net income per share - Diluted
As reported............................. $ 2.03 $ 1.76
Pro forma............................... $ 1.97 $ 1.73

STOCK REPURCHASE PROGRAM

In 1999, the Board of Directors established the Stock Repurchase Program through
which we have been authorized to purchase up to $9 million of our class A common
stock. We completed the Stock Repurchase Program during the first quarter of
2001 and on March 2, 2001 the Board of Directors authorized the repurchase of an
additional $3 million of our class A common stock. On September 17, 2001, the
Board of Directors raised the amount authorized to repurchase shares to $10
million. In 2002, the Board of Directors raised the amount authorized by $5
million in July and an additional $10 million in December. In 2004, the Board of
Directors raised the amount authorized by $12 million in May, an additional $25
million in August and by an additional 1 million shares in October. In addition,
the Board of Directors also authorized $25 million to be used for an accelerated
stock repurchase program. We also repurchased 300,000 shares of our class B
common stock held by GGCP, our parent, which was converted to class A common
stock in December 2002 at $28.20 per share and an aggregate cost of $8.46
million. The repurchase of these shares are not included in determining the
total dollars available under the Stock Repurchase Program. In 2003 and 2004 we
repurchased 56,922 and 1,596,277 shares at an average price of $34.20 per share
and $44.29 per share, respectively. There remains $12.1 millionremain approximately 944,000 shares
available under this program, exclusive of any ASR authorization, at December
31, 2003.2004. Under the program, we have repurchased 877,3482,473,626 shares at an average
price of $24.78$37.37 per share and an aggregate cost of $21.7$92.4 million through
December 31, 2003.2004.

In November 2004, we entered into an accelerated stock repurchase program
("ASR") whereby we repurchased 400,000 shares of stock from an investment bank
for approximately $18.8 million. The ASR permits us to repurchase the shares
immediately, while the investment bank will purchase the shares in the market
over time. The 400,000 shares repurchased under the agreement are subject to a
future contingent price adjustment based on the actual prices paid by the
investment bank to purchase our stock in the market over time. At December 31,
2004, the investment bank had purchased 203,500 shares resulting in a contingent
purchase liability of approximately $120,000 for the Company. There remains
approximately $6.2 million authorized for future purchases under ASRs.

DIVIDENDS

During 2003, we paid dividends of $0.02 per share to all class A shareholders
totaling $138,537. During 2004, we paid dividends of $1.16 per share to class A
and class B shareholders totaling $33,600,810. Our Board of Directors also
declared a special dividend of $0.60 per share in November 2004 which was
payable on January 18, 2005 to all shareholders of record on January 3, 2005.

SHELF REGISTRATION

On December 28, 2001, we filed a "shelf" registration statement registering $400
million in aggregate amount of debt and other securities. The issuance of the
mandatory convertible securities used $180 million and the issuance of the 5.5%
Senior Notes used $100 million of the shelf registration leaving $120 million
for future use. Such securities may be issued as debt securities, trust
preferred securities or class A common stock.

F-15F-18

EXCHANGE OF COMMON STOCK FOR MINORITY STOCKHOLDERS' INTERESTS IN SUBSIDIARY

In May 2001, the Board of Directors, in an effort to simplify our capital
structure, authorized an offer to exchange four shares of our class A common
stock for each share of Common Stock of our majority owned subsidiary GSI we did
not already own. Under the terms of the exchange offer, which ended on August
31, 2001, all shares of Gabelli issued were restricted from sale for two years
from the date of issuance. In connection with this offer we issued 400,504
shares of our class A common stock held in treasury and increased our ownership
interest in GSI from 77% to 92%. The transaction was accounted for under the
purchase method of accounting. The cost in excess of net assets acquired was
approximately $3.5 million and has been included in intangible assets.

Certain shareholders of GSI are required to sell, upon disassociation with us,
their shares to GSI at book value (approximately $2.1 million at December 31,
2003).

G. CAPITAL LEASE

We lease office space from a company ownedan entity controlled by stockholdersmembers of GGCP.the Chairman's
family. We have recorded a capital lease asset and liability for the fair value
of the leased property. Amortization of the capital lease obligation is computed
on the interest rate method while the leased property is depreciated utilizing
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, Gabelli. Accumulated amortization on the leased property was
approximately $1,501,000 and $1,747,000 at December 31, 2003 and 2004,
respectively.

Future minimum lease payments for this capitalized lease at December 31, 20032004
are as follows:

(IN THOUSANDS)
2004..................................................2005.................................... $ 802
2006.................................... 765
2005..................................................2007.................................... 765
2006..................................................2008.................................... 765
2007..................................................2009.................................... 765
2008.................................................. 765
Thereafter............................................ 3,315
-------Thereafter.............................. 2,550
--------
Total minimum obligations............................. 7,140
Interest.............................................. 1,908
-------obligations............... 6,412
Interest................................ 3,231
--------
Present value of net obligations......................obligations........ $ 5,232
=======3,181
========

Lease payments under this agreement amounted to approximately $720,000$756,000 and
$756,000$772,000 for each of the years ended December 31, 20022003 and 2003,2004, respectively.
Future minimum lease payments have not been reduced by related minimum future
sublease rentals of approximately $260,000,$619,000, of which approximately $103,000$320,000 is
due from an affiliated entity. Total minimum obligations exclude the operating
expenses to be borne by us, which are estimated to be approximately $650,000$675,000 per
year.

H. COMMITMENTS

We rent office space under leases which expire at various dates through May
2008. Future minimum lease commitments under these operating leases as of
December 31, 20032004 are as follows:

(IN THOUSANDS)
2004..................................................2005......... $ 486
2005.................................................. 425
2006.................................................. 334
2007.................................................. 168
2008.................................................. 21
Thereafter............................................ --576
2006......... 480
2007......... 218
2008......... 20
Thereafter... -
-------
$ 1,4341,294
=======

Equipment rentals and occupancy expense amounted to approximately $1,656,000,
$1,165,000,
$1,143,000 and $1,143,000,$1,752,000, respectively, for the years ended December 31, 2001,
2002,
2003 and 2003.

F-162004.

F-19

I. RELATED PARTY TRANSACTIONS

We serve as the investment adviseradvisor for the Funds and earn 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 from the Funds or reimbursement from the investment adviser.advisor. Gabelli &
Company earns a majority of its commission revenue from transactions executed on
behalf of clients of affiliated companies. Advisory and distribution fees
receivable from the Funds were approximately $15,135,000 and $17,330,000 at
December 31, 2003 and 2004, respectively.

We had an aggregate investment in the Funds of approximately $342,153,000$475,384,000 and
$475,384,000$363,518,000 at December 31, 20022003 and 2003,2004, respectively, of which approximately
$305,339,000$378,637,000 and $378,637,000 is$254,614,000 was invested in money market mutual funds,
included in cash and cash equivalents, at December 31, 20022003 and 2003,2004,
respectively.

Prior to the Reorganization, we were required to pay the Chairman a management
fee, which was equal to 20% of the pretax profits of each of our operating
divisions before consideration of this management fee. Immediately preceding the
Offering and in conjunction with the Reorganization, Gabelli and our Chairman
entered into an Employment Agreement. We have anUnder the Employment Agreement, with our
Chairman, which provides that we will
pay the Chairman 10% of our aggregate pre-tax profits while he is an executive
of Gabelli and devoting the substantial majority of his working time to the
business of Gabelli. The Employment Agreement further provided that we pay the
Chairman $50 million on January 2, 2002. The management fee was approximately
$11,325,000, $9,533,000, $9,002,000, and $9,002,000$11,017,000 for the years ended December 31, 2001, 2002,
2003 and 2003,2004, respectively. The Chairman also receivedearned portfolio management
compensation and account executive fees of approximately $35,790,000, $28,195,000,$28,453,000,
$29,641,000, and $28,618,000,$43,961,000, respectively, for the years ended December 31,
2001, 2002, 2003 and 2003,2004, which have been included in compensation costs.

We had approximately $1,216,000 in various notes receivable (including accrued
interest) outstanding at December 31, 2001 from certain executive officers and
employees in connection with the acquisition of ownership interests in our
various subsidiaries and affiliates. Interest rates on these notes ranged from
5% to 10%. All employee notes receivable (including accrued interest) were
repaid in full during 2002.

J. FINANCIAL REQUIREMENTS

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. We have
consistently met or exceeded this requirement.

In connection with the registration of our subsidiary, Gabelli Asset Management
(UK) Limited with the Financial Services Authority, we are required to maintain
a minimum Liquid Capital Requirement of (pound)267,000, ($475,000514,000 at December
31, 2003)2004) and an Own Funds Requirement of (euro)50,000 ($63,00068,000 at December 31,
2003)2004). We have consistently met or exceeded these requirements.

K. ADMINISTRATION FEES

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

L. PROFIT SHARING PLAN AND INCENTIVE SAVINGS PLAN

We have 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. We
accrued contributions of approximately $60,000, $50,000, $63,000 and $63,000,$62,000, to the
plans for the years ended December 31, 2001, 2002, 2003 and 2003,2004, respectively.

F-17F-20

M. DERIVATIVE FINANCIAL INSTRUMENTS

In 2002, our trading activities included transactions in domestic equity index
futures contracts and foreign currency contracts. These financial instruments
represent future commitments to purchase or sell an underlying index or currency
for specified amounts at specified future dates. Such contracts create
off-balance sheet risk for us as the future satisfaction of these contracts may
be for amounts in excess of the amounts recognized in the consolidated
statements of financial condition.

In connection with these activities, we incurredhad gains of approximately $122,000,
during the year ended December 31, 2002. There were no gains or losses for the
years ended December 31, 20012003 and 2003.2004. Such gains and losses were reflected as
part of net gain from investments in the consolidated statements of operations.

N. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Quarterly financial information for the years ended December 31, 20032004 and 20022003
is presented below.

20032004 QUARTER
---------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data) 1ST 2ND 3RD 4TH FULL YEAR
--------- --------- --------- ------------ --- --- --- ---------

Revenues................................Revenues ................................. $ 63,539 $ 60,204 $ 57,237 $ 74,183 $ 255,163
Operating income ......................... 25,277 24,434 21,951 27,406 99,068
Net income ............................... 16,071 13,918 13,031 19,539 62,559
Net income per share:
Basic ................................. 0.53 0.47 0.44 0.67 2.11
Diluted ............................... 0.52 0.46 0.43 0.65 2.06

2003 QUARTER (a)
----------------------------------------------------------------------

Revenues ................................. $ 46,053 $ 47,956 $ 51,823 $ 61,605 $ 207,437
Operating income (a).................... 18,009 18,502 21,596 25,609 83,716......................... 16,340 16,405 19,403 22,566 74,714
Net income..............................income ............................... 9,327 11,557 12,302 16,658 49,844
Net income per share:
Basic................................Basic ................................. 0.31 0.38 0.41 0.55 1.66
Diluted..............................Diluted ............................... 0.31 0.38 0.41 0.54 1.65

2002 QUARTER
-----------------------------------------------------
Revenues................................ $ 58,032 $ 57,402 $ 47,320 $ 47,205 $ 209,959
Operating income (a).................... 28,117 26,869 22,275 21,934 99,195
Net income.............................. 15,389 13,941 11,493 12,489 53,312
Net income per share:
Basic................................ 0.51 0.46 0.38 0.42 1.77
Diluted.............................. 0.51 0.46 0.38 0.41 1.760.54 1.65

(a) Excludes management fee expense whichResults for the fourth quarter 2003 included a $1.8 million gain from the
partial harvesting of a $100,000 venture capital investment made in 2001.

O. OTHER MATTERS

Gabelli Asset Management Inc. and certain of its subsidiaries have received
subpoenas from the Attorney General of the State of New York and the SEC
requesting information on mutual fund share trading practices. Gabelli is
basedresponding to these requests and does not believe that these matters will have a
material adverse effect on income before income taxes
and minority interest.

O.Gabelli's financial position or the results of its
operations.

F-21

P. SUBSEQUENT EVENTS

InOn January 2004,18, 2005, the Company paid a special dividend of $0.60 per share to
all of its Class A and Class B shareholders of record on January 3, 2005.

On February 10, 2005, the Company announced the Board of Directors of GSI, our majority owned subsidiary,
authorizeddeclared a
regular quarterly dividend of $50$0.02 per share which was paidto all of its Class A and Class B
shareholders, payable on March 15, 200428, 2005 to shareholders of record on March 14,
2005.

On February 14, 2005, the Company announced the Board of Directors authorized a
plan to file a "shelf" registration statement on Form S-3. The shelf process
will enable Gabelli to sell any combination of senior and subordinate debt
securities, convertible debt securities and equity securities (including common
and preferred securities) up to a total amount to $400 million. This
authorization is in addition to the remaining $120 million available under
Gabelli's "shelf" registration filed in 2001.

During February 2005, the Board of Directors approved a corporate name change to
GAMCO Investors, Inc., which is subject to shareholder approval at Gabelli's
annual meeting of shareholders on May 10, 2005. The Company's ticker symbol on
the New York Stock Exchange will remain GBL. Additionally, our existing
subsidiary named GAMCO Investors, Inc. will be renamed.

On February 17, 2005, the Company issued approximately 1,517,000 shares of class
A common stock in settlement of the 2,822,700 purchase contracts issued pursuant
to its mandatory convertible securities resulting in proceeds of $70.6 million
to the Company. The settlement rate of 0.5376 was determined based on the
average closing price per share of class A common stock for the twenty
consecutive trading days ending February 14, 2005.

On March 1, 2005, the Company announced an agreement with Cascade Investment,
L.L.C. to amend the terms of the convertible note issued by Gabelli. The new
terms extend the exercise date of Cascade's put option to September 15, 2006,
reduce the principal of the convertible note to $50 million from $100 million
and remove limitations on the issuance of additional debt. In connection with
this amendment, Gabelli will repurchase $50 million of the principal of the
convertible note on April 1, 2005. Effective April 1, 2005, the $102.5 million
letter of credit will be reduced to $51.3 million and extended to September 22,
2006. The Company expects to pay total fees of approximately $160,000 relating
to the letters of credit for 2005 versus $282,000 in 2004.

F-18The Company has repurchased 8,800 shares at an average investment of $44.84 per
share as of March 1, 2005. This brings the remaining authorization under the
stock repurchase program to approximately 935,000 shares at March 1, 2005.

As of March 1, 2005, the investment bank had purchased 290,900 shares relating
to the ASR of which 87,400 were purchased in 2005 reducing the contingent
purchase liability to approximately $57,000.

During January 2005, one of the companies within GSI's proprietary investment
portfolio completed an initial public offering. As a result, the market value of
the investment has increased from December 31, 2004 by approximately $2.5
million as of March 1, 2005. This investment is held as available for sale and
the resulting change in market value will be reflected in stockholders' equity
in 2005.

F-22

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A: CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this report, an evaluation was
carried out under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief AccountingFinancial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of
1934). Based upon that evaluation, the Chief Executive Officer and Chief
AccountingFinancial Officer concluded that the design and operation of these disclosure
controls and procedures were effective. No significant changes were made in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.

PART III

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding the Directors and Executive Officers of GabelliGBL and compliance
with Section 16(a) of the Securities Exchange Act of 1934 is incorporated herein
by reference from the sections captioned "Election of Directors", "Information
Regarding Executive Officers", "Section 16(a) Beneficial Ownership Reporting
Compliance" in our definitive proxy statement for our 2004 Annual Meeting of
Shareholders (the "Proxy Statement").

GabelliGBL has adopted a Code of Business Conduct (the "Code of Conduct") that applies to all of our officers,
directors, full-time and part-time employees and a Code of Conduct that sets
forth additional requirements for our principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions.functions (together, the "Codes of Conduct"). The CodeCodes of
Conduct isare posted on our website (www.gabelli.com) and available in print free
of charge to any shareholder who requests a copy. Interested parties may address
a written request for a printed copy of the CodeCodes of Conduct to: Secretary,
Gabelli Asset Management Inc., One Corporate Center, Rye, New York 10580-1422.
We intend to satisfy the disclosure requirement regarding any amendment to, or a
waiver of, a provision of the CodeCodes of Conduct by posting such information on
our website.

In addition to the certifications attached as Exhibits to this Form 10-K,
following its 2004 Annual Meeting, GBL also submitted to the New York Stock
Exchange ("NYSE") a certification by its Chief Executive Officer that he is not
aware of any violations by GBL of the NYSE corporate governance listing
standards as of the date of the certification.

ITEM 11: EXECUTIVE COMPENSATION

The information set forth under the captions "Compensation of Executive
Officers" 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 caption "Certain Ownership of Gabelli's
Stock" in the Proxy Statement is incorporated herein by reference.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information set forth under the caption "Certain Relationships and Related
Transactions" in the Proxy Statement is incorporated herein by reference.

ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information set forth under the caption "Independent Accountants"Registered Public
Accounting Firm" in the Proxy Statement is incorporated herein by reference.

II-1

PART IV

ITEM 15: 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'Registered
Public Accounting Firm's 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).
4.2 -- Convertible Promissory Note, dated August 14, 2001, of the
Company (Incorporated by reference to Exhibit 1.299.4 to the
Company's Report on Form 10-Q/A for the
quarter ended September 30, 20018-K dated March 1, 2005 filed with the
Securities and Exchange Commission on November 16, 2001) and as amended (Incorporated
by reference to Exhibit 4.2 to the Company's Form 10-Q for the quarter
ended June 31, 2003 filed with the Securities and Exchange Commission
on August 14, 2003)March 2, 2005).
4.3 -- Indenture, dated as of February 6, 2002, between Gabelli Asset
Management Inc. and The Bank of New York, as Trustee.
(Incorporated by reference to Exhibit 4.1 to the Company's
Report on Form 8-K dated February 8, 2002 filed with the
Securities and Exchange Commission on February 8, 2002).
4.4 -- First Supplemental Indenture, dated as of February 6, 2002,
between Gabelli Asset Management Inc. and The Bank of New York,
as Trustee. (Incorporated by reference to Exhibit 4.2 to the
Company's Report on Form 8-K dated February 8, 2002 filed with
the Securities and Exchange Commission on February 8, 2002).
4.5 -- Form of Note (included in Exhibit 4.4). (Incorporated by
reference to Exhibit 4.3 to the Company's Report on Form 8-K
dated February 8, 2002 filed with the Securities and Exchange
Commission on February 8, 2002).
4.6 -- Purchase Contract Agreement, dated as of February 6, 2002, between
Gabelli Asset Management Inc. and The Bank of New York, as Purchase
Contract Agent. (Incorporated by reference to Exhibit 4.4 to the
Company's Report on Form 8-K dated February 8, 2002 filed with the
Securities and Exchange Commission on February 8, 2002).

4.7 -- Form of Income PRIDES Certificate (included in Exhibit 4.6).
(Incorporated by reference to Exhibit 4.5 to the Company's Report on
Form 8-K dated February 8, 2002 filed with the Securities and Exchange
Commission on February 8, 2002).

4.8 -- Form of Growth PRIDES Certificate (included in Exhibit 4.6).
(Incorporated by reference to Exhibit 4.6 to the Company's Report on
Form 8-K dated February 8, 2002 filed with the Securities and Exchange
Commission on February 8, 2002).

4.9 -- Pledge Agreement, dated as of February 6, 2002, among Gabelli Asset
Management Inc., JPMorgan Chase Bank, as Collateral Agent, and The
Bank of New York, as Purchase Contract Agent. (Incorporated by
reference to Exhibit 4.7 to the Company's Report on Form 8-K dated
February 8, 2002 filed with the Securities and Exchange Commission on
February 8, 2002).

II-2

4.10 -- Remarketing Agreement, dated as of February 6, 2002, among Gabelli
Asset Management Inc., The Bank of New York, as Purchase Contract
Agent, and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as Remarketing Agent. (Incorporated by reference to
Exhibit 4.8 to the Company's Report on Form 8-K dated February 8, 2002
filed with the Securities and Exchange Commission on February 8,
2002).

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.
(Incorporated by reference to Exhibit 10.2 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).
10.3 -- Lock-Up Agreement between the Company and GFI. (Incorporated by
reference to Exhibit 10.3 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).

10.4 -- Gabelli Asset Management Inc. 1999 Stock Award and Incentive
Plan. (Incorporated by reference to Exhibit 10.4 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).
10.510.4 -- Gabelli Asset Management Inc. 1999 Annual Performance Incentive
Plan. (Incorporated by reference to Exhibit 10.5 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).

II-2

10.5 -- Gabelli Asset Management Inc. 2002 Stock Award and Incentive
Plan (Incorporated by reference to Exhibit A to the Company's
definitive proxy statement on Schedule 14A filed with the
Securities and Exchange Commission on April 30, 2002).
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).
10.7 -- Registration Rights Agreement, dated August 14, 2001, between
the Company and Cascade Investment LLC. (Incorporated by
reference to Exhibit 4.1 to the Company's Form 10-Q/A for the
quarter ended September 30, 2001 filed with the Securities and
Exchange Commission on November 16, 2001).
10.8 -- FIRST AMENDMENT, dated as of July 1, 2003, to the Note Purchase Agreement, dated as of August 10, 2001, by and
among Cascade Investment LLC, a Washington limited liability
company, Gabelli Asset Management Inc., a New York corporation,
Mario J. Gabelli, , Gabelli Group Capital Partners, Inc., a New
York corporation, and Rye Holdings, Inc., a New York
corporation, and Rye Capital Partners, Inc., a Delaware
corporation (Incorporated by reference to Exhibit 4.11.1 to the
Company's Form 10-Q10-Q/A for the quarter ended JuneSeptember 30, 2003,2001,
filed with the Securities and Exchange Commission on August 14, 2003)November
16, 2001), as amended by the Third Amendment, dated as of
February 28, 2005 (Incorporated by reference to Exhibit 99.2 to
the Company's Report on Form 8-K dated March 1, 2005 filed with
the Securities and Exchange Commission on March 2, 2005).
12.1 -- Computation of Ratios of Earnings to Fixed Charges.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Ernst & Young, LLP.Independent Registered Public Accounting Firm
24.1 -- Powers of Attorney (included on page II-3 of this Report).
31.1 -- Certification of CEO pursuant to Rule 13a-14(a).
31.2 -- Certification of CAOCFO pursuant to Rule 13a-14(a).
32.1 -- Certification of CEO pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 -- Certification of CAOCFO pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes- Oxley Act of
2002.
- -------------------------------------

(B) REPORTS ON FORM 8-K:

We filed the following Current Reports on Form 8-K during the three months ended
December 31, 2003.2004.

1. Current Report on Form 8-K dated October 15, 20035, 2004 containing
the press release disclosing our preliminary estimates for
the third quarter ended September 30, 2004.
2. Current Report on Form 8-K/A dated October 6, 2004
containing the press release disclosing our preliminary
estimates for the third quarter ended September 30, 2004.
3. Current Report on Form 8-K dated October 25, 2004 containing
the press release disclosing our operating results for the
third quarter ended September 30, 2003.30,2004.

II-3

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 15, 2004.12, 2005.
GABELLI ASSET MANAGEMENT INC.

By:/s/ /s/ Michael R. Anastasio
-------------------------------------
Name: Michael R. Anastasio
Title: Chief AccountingFinancial Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
Michael R. Anastasio 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.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ Mario J. Gabelli Chairman of the Board, March 15, 2004
- ------------------------- Chief Executive Officer
Mario J. Gabelli and Chief Investment Officer
(Principal Executive Officer)

/s/ Michael R. Anastasio Chief Accounting Officer March 15, 2004
- ------------------------- (Principal Financial Officer
Michael R. Anastasio and Principal Accounting
Officer)

/s/ Raymond C. Avansino Director March 15, 2004
- -------------------------
Raymond C. Avansino

/s/ John C. Ferrara Director March 15, 2004
- -------------------------
John C. Ferrara

/s/ John D. Gabelli Director March 15, 2004
- -------------------------
John D. Gabelli

/s/ Paul B. Guenther Director March 15, 2004
- -------------------------
Paul B. Guenther

/s/ Eamon M. Kelly Director March 15, 2004
- -------------------------
Eamon M. Kelly

/s/ Karl Otto Pohl Director March 15, 2004
- -------------------------
SIGNATURE TITLE DATE
--------- ----- ----

/s/ Mario J. Gabelli Chairman of the Board, March 16, 2005
- ------------------------------------ Chief Executive Officer
Mario J. Gabelli and Chief Investment Officer
(Principal Executive Officer)

/s/ Michael R. Anastasio Chief Financial Officer March 16, 2005
- ------------------------------------ (Principal Financial Officer and
Michael R. Anastasio Principal Accounting Officer)

/s/ Edwin L. Artzt Director March 16, 2005
- ------------------------------------
Edwin L. Artzt

/s/ Raymond C. Avansino Director March 16, 2005
- ------------------------------------
Raymond C. Avansino

/s/ John C. Ferrara Director March 16, 2005
- ------------------------------------
John C. Ferrara

/s/ John D. Gabelli Director March 16, 2005
- ------------------------------------
John D. Gabelli

/s/ Alan C. Heuberger Director March 16, 2005
- ------------------------------------
Alan C. Heuberger

/s/ Robert S. Prather Director March 16, 2005
- ------------------------------------
Robert S. Prather

/s/ Karl Otto Pohl Director March 16, 2005
- ------------------------------------
Karl Otto Pohl

/s/ Frederic V. Salerno Director March 16, 2005
- ------------------------------------
Frederic V. Salerno
Director March 15, 2004
- -------------------------
Frederic V. Salerno

II-4

/s/ Vincent S. Tese Director March 16, 2005
- ------------------------------------
Vincent S. Tese

Director March 15, 2004
- -------------------------
Vincent Tese

II-4

II-5