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

FORM 10-K

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

For the fiscal year ended December 31, 20012002

[ ][_] 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.GABELLI ASSET MANAGEMENT INC.
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(Exact name of registrant as specified in its charter)

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

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

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

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class Name of each exchange on which registered:

Class A Common Stock, New York Stock Exchange $ .001 Par Value New York Stock Exchange
Income PRIDES(SM)Mandatory convertible securities New York Stock Exchange
- ----------------------------------- -------------------------------------------------------------------------- -----------------------

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X[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 [_].

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, 2002, 6,550,5372003, 6,767,472 shares of Class A common stock and 23,450,00023,150,000
shares of Class B common stock were outstanding. All of the shares of Class B
common stock were held by Gabelli Group Capital Partners, Inc. and two of its
subsidiaries. The aggregate market value of the common stock held by
non-affiliates of the registrant as of March 1, 20022003 was $229,780,000.$189,046,000.

DOCUMENTS INCORPORATED BY REFERENCE: The definitive proxy statement for the 20022003
Annual Meeting of Shareholders to be held May 21, 2002.

113, 2003.
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SPECIAL NOTE REGARDING 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.

PART I

ItemITEM 1: Business
OverviewBUSINESS

OVERVIEW

Gabelli Asset Management Inc. (the "Company"; and where the context
requires, the "Company" includes its predecessors and its consolidated
subsidiaries) is a provider of investment advisory and brokerage services to
mutual fund, institutional and high net worth investors, primarily in the United
States. The Company generally manages assets on a discretionary basis and
invests in a variety of U.S. and international securities through various
investment styles. Unlike many of its competitors, the Company's business is
focused principally on equities in its investment management. As such, the
Company's revenues are largely basedheavily influenced in the short run by stock market
activity on the level of assets under management in its business and the level
of fees associated with its various investment products rather than
total assets of the Company.products. As of December 31,
2001,2002, the Company had approximately $24.8$21.2 billion of assets under management,
88% of which were invested in equity securities.

Organization and Formation TransactionsORGANIZATION AND FORMATION TRANSACTIONS

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

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

The Company's principal executive offices are located at One Corporate
Center, Rye, New York 10580-1422 and the telephone number is (914) 921-3700. On
the Company's Web site, www.gabelli.com, the Company posts the following filings
as soon as reasonably practicable after they are electronically filed with or
furnished to the Securities and Exchange Commission (SEC): the Company's annual
report on Form 10-K, the Company's quarterly reports on Form 10-Q, the Company's
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 the Company's Web site are available free of charge.

Business DescriptionBUSINESS DESCRIPTION

GFI, predecessor to the Company, was originally founded in 1976 as an
institutional broker-dealer and entered the separate accounts business in 1977,
alternative investments in 1985 and the mutual fund business in 1986. ItsOur
initial money management activities centered on the Company's value-oriented
investment philosophy. Starting in the mid-1980s, the Companywe began building upon its
core of 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, the Company has continued to build its franchise by expanding its
investment management capabilities through the addition of industry specific,
international, global, and real estate oriented product offerings. Throughout
its 25-year26-year history, the Company has marketed most of its products under the
"Gabelli" brand name.

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

o Mutual Funds:HIGH NET WORTH AND INSTITUTIONAL SEPARATE ACCOUNTS: At December 31, 2001,2002,
the Company had $12.0 billion of assets
under management in open-end mutual funds and closed-end funds,
representing approximately 48% of the Company's total assets under
management. The Company currently provides advisory services to (i) the
Gabelli family of funds, which consists of 19 open-end mutual funds and 4
closed-end funds; (ii) The Treasurer's Fund, consisting of 3 open-end money
market funds (the "Treasurer's Funds"); and (iii) the Gabelli Westwood
family of funds, consisting of 6 open-end mutual funds, 5 of which are
managed on a day-to-day basis by an unaffiliated subadviser (collectively,
the "Mutual Funds"). The Mutual Funds have a long-term record of achieving
high returns, relative to similar investment products. At December 31,
2001, 97% of the assets under management in the open-end Mutual Funds
having an overall rating from Morningstar, Inc. ("Morningstar") were in
open-end Mutual Funds ranked "three stars" or better, with 41% of such
assets in open-end Mutual Funds ranked "five stars" and 18% of such assets
in open-end Mutual Funds ranked "four stars" on an overall basis (i.e.,
based on three-, five- and ten-year risk adjusted average returns). The
Gabelli family of funds was honored as the top performing mutual fund
family by Mutual Funds Magazine for 1997. There can be no assurance,
however, that these funds will be able to maintain such ratings or that
past performance will be indicative of future results. At December 31,
2001, approximately 40% of the Company's assets under management in
open-end, no-load equity Mutual Funds had been obtained through direct
sales relationships. The Company also sells its open-end Mutual Funds
through Third-Party Distribution Programs, particularly No-Transaction Fee
("NTF") Programs, and has developed additional classes of shares for
several of its mutual funds for sale through additional third- party
distribution channels on a commission basis. Net cash flows from Third
Party Distribution Programs accounted for 86% of all cash flows into
open-end equity funds during 2001 and represented 60% of all assets in
these funds at December 31, 2001.

o High Net Worth and Institutional Separate Accounts: At December 31, 2001,
the Company had $12.2$10.6 billion of assets in approximately 1,7001,750 separate
accounts, representing approximately 50% of the Company's total assets
under management. The Company currently provides advisory services to a
broad range of investors including high net worth individuals.
Historically, the majority of the client accounts are high net worth client
accounts. As of December 31, 2001,2002, high net worth accounts (including the
account assets of individuals and their individual retirement accounts
generally having a minimum account balance of $1 million) comprised
approximately 78% of the number of Separate Accounts and approximately 23%24%
of the assets. Foundation and endowment fund assets represented an
additional 8%9% of the number of Separate Accounts and over 11% of the
assets. The sub-advisory portion of the Separate Accounts (subadvisor(sub advisor to
certain other third-party investment funds) held approximately $2.7$3.1 billion
or 22%30% of total Separate Account assets with less than 1%2% of the number of
accounts. Institutional client accounts, which include corporate pension
and profit sharing plans, jointly-trusteed plans and public funds,
comprised the balance. In general, these accounts are managed to meet the
specific needs and objectives of the particular client by utilizing
investment strategies - traditional "value", "large cap growth", "large cap
value", "global", "international growth" and convertible bonds-techniques
that are within the Company's areas of expertise. The Company distinguishes
between taxable and tax-free assets and manages client portfolios for the
greatest tax benefit within given investment strategies. At December 31,
2001,2002, over 93% of the Company's assets in Separate Accounts (excluding subadvisorysub
advisory assets) had been obtained through direct sales relationships. The
Company believes that an important element of future growth in the Separate
Accounts is dependent on client relationships and client retention. In this
vein, the Company hosts annual client seminars and is establishing and
staffing relationship offices around the country.

o Partnerships:MUTUAL FUNDS: At December 31, 2002, the Company had $10.1 billion of assets
under management in open-end mutual funds and closed-end funds,
representing approximately 47% of the Company's total assets under
management. The Company currently provides advisory services to (a) the
Gabelli family of funds, which consists of twenty open-end mutual funds and
four closed-end funds; (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 an unaffiliated sub advisor
(collectively, the "Mutual Funds"). The Mutual Funds have a long-term
record of achieving high returns, relative to similar investment products.
At December 31, 2002, 98% 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 9% of such assets in open-end Mutual Funds ranked "five stars"
and 51% of such assets in open-end Mutual Funds ranked "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). The Gabelli family of funds was honored as the top performing
mutual fund family by Mutual Funds Magazine for 1997. Mario J. Gabelli, our
Chief Investment Officer, was named by Morningstar, Inc. as the 1997
Domestic Equity Fund Manager of the Year. 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,
2002, 38% of the Company's assets under management in open-end, no-load
equity Mutual Funds had been obtained through direct sales relationships.
The Company also sells its open-end Mutual Funds through Third-Party
Distribution Programs, particularly No-Transaction Fee ("NTF") Programs,
and has developed additional classes of shares for many of its mutual funds
for sale through additional third- party distribution channels on a
commission basis. At December 31, 2002, Third Party Distribution Programs
accounted for 62% of all assets in open-end equity funds.

o PARTNERSHIPS: The Company provides alternative investments through its
rapidly growing (33% CAGR since 1998) majority-owned subsidiary, Gabelli
Securities, Inc. ("GSI"). These alternative investment products consist
primarily of riskmerger arbitrage, merchant bankingglobal and globalregional long/short equitiesequity funds
(U.S., Europe and Japan) (collectively, the "Partnerships"). and merchant
banking. The Partnerships had $573$578 million of assets under management, or
approximately 2%3% of total assets under management, at December 31, 2001.

3
2002.

Investment advisory and incentive fees relating to the Mutual Funds, the
Separate Accounts, and the Partnerships generated approximately 81%83% and 83%84% of
the Company's total revenues for the years ended December 31, 20002001 and 2001,2002,
respectively.

The Company's majority92% owned subsidiary, Gabelli & Company, Inc. ("Gabelli &
Company"), is a registered broker-dealer and a member of the National
Association of Securities Dealers, Inc. ("NASD") and conducts institutional
research activities, acts as an underwriter and distributor of the open-end
Mutual Funds and provides brokerage, trading, underwriting and research
services. On December 22, 2000, the Company acquired,
through its subsidiary GSI, all of the outstanding common stock of Lynch Capital
Corporation, a registered broker dealer. Lynch Capital has been renamed Gabelli
Direct Inc. ("Gabelli Direct").

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 TypeASSETS UNDER MANAGEMENT
BY PRODUCT TYPE
(Dollars in millions)
January
JANUARY 1,
1997 to
December1998 TO
DECEMBER 31,
At DecemberAT DECEMBER 31, 2001
-----------------------------------------------------------------
19972002
---------------------------------------------------
1998 1999 2000 2001 CAGR(a)
------------ ------------ ------------ ------------ ------------ -----------
Equity:2002 CAGR(A)
------- ------- ------- ------- ------- -------

EQUITY:
Mutual $ 5,313Funds .......................... $ 7,159 $10,459 $10,680 $10,165 $ 10,459 $ 10,680 $ 10,165 20.7%
Funds.......................................8,091 8.8%
Separate Accounts......................... 6,085Accounts...................... 7,133 9,370 10,142 11,513 17.2
--------- --------- --------- --------- ---------9,990 10.4
------- ------- ------- ------- -------
Total Equity............................ 11,398Equity........................ 14,292 19,829 20,822 21,678 18.8
--------- --------- --------- --------- ---------
Fixed Income:18,081 9.7
------- ------- ------- ------- -------

FIXED INCOME:
Money Market Mutual Funds................. 827Funds.............. 1,030 1,175 1,425 1,781 49.91,963 18.9
Bond Mutual Funds......................... 6Funds...................... 8 6 8 9 12.514 18.5
Separate Accounts......................... 928Accounts...................... 824 694 859 720 n/a
--------- --------- --------- --------- ---------613 (8.0)
------- ------- ------- ------- -------
Total Fixed Income...................... 1,761Income.................. 1,862 1,875 2,292 2,510 59.9
--------- --------- --------- --------- ---------
Partnerships:
Partnerships.............................. 1382,590 8.0
------- ------- ------- ------- -------

PARTNERSHIPS:
Partnerships........................... 146 230 437 573 37.6
--------- --------- --------- --------- ---------578 33.2
------- ------- ------- ------- -------
Total Assets Under Management(b)........ $ 13,297 $ 16,300 $ 21,934 $ 23,551 $ 24,761 21.1
========= ========= ========= ========= =========

Breakdown of Total Assets Under Management:Management....... $16,300 $21,934 $23,551 $24,761 $21,249 9.8
======= ======= ======= ======= =======

BREAKDOWN OF TOTAL ASSETS UNDER MANAGEMENT:
Mutual Funds.............................. $ 6,146Funds........................... $ 8,197 $ 11,640 $ 12,113 $ 11,955 23.2$11,640 $12,113 $11,955 $10,068 10.4
Separate Accounts......................... 7,013Accounts...................... 7,957 10,064 11,001 12,233 18.7
Partnerships.............................. 13810,603 8.6

Partnerships........................... 146 230 437 573 37.6
--------- --------- --------- --------- ---------578 33.2
------- ------- ------- ------- -------
Total Assets Under Management(b)........ $ 13,297 $ 16,300 $ 21,934 $ 23,551 $ 24,761 21.1
========= ========= ========= ========= =========Management....... $16,300 $21,934 $23,551 $24,761 $21,249 9.8
======= ======= ======= ======= =======

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

(b) Effective April 14, 1997, the Company increased its ownership of Gabelli
Fixed Income L.L.C. from 50% to 80.1%, thereby causing Gabelli Fixed Income
L.L.C. to become a consolidated subsidiary of the Company. Accordingly, for
periods after April 14, 1997, the assets managed by Gabelli Fixed Income
L.L.C. are included in the Company's Total Assets Under Management.

Summary of Investment ProductsSUMMARY OF INVESTMENT PRODUCTS

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

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

U.S. Equities: Global and International Equities: Alternative Products:
-------------- ---------------------------------- ---------------------
All Cap Value International Growth RiskMerger Arbitrage
Large Cap Value Global Growth Merchant BankingU.S. Long/Short
Large Cap Growth Global Telecommunications Global equities long/short
Mid Cap Value Global Multimedia European equities long/short
Small Cap Value Gold Japanese long/short
Small Cap Growth "GAMA Select" Sector Funds
Micro Cap Merchant Banking
Real Estate
Utilities
Non MarketNon-Market Correlated

Convertible Securities:CONVERTIBLE SECURITIES: U.S. Balanced:BALANCED: U.S. Fixed Income:FIXED INCOME:
----------------------- -------------- -----------------
U.S. Convertible Securities Balanced GrowthAsset Allocation Corporate
Global Convertible Securities Balanced Growth Government
Balanced Value Government Municipals
Asset-backed
Intermediate
Short-term
- ----------
The Company's long-term strategic goal is to continue to expand its global
asset management capabilities in order to provide a range of products suitable
to meet the diverse requirements of its clients.

The Company believes that its growth to date can be largely creditedis attributable to the
following:following factors:

o Long-Term Fund Performance:STOCK MARKET GAINS: The S & P 500's compound annual total return is 12.1%
since the start of our Company in 1977. Since our initial public offering
in February 1999 the S & P 500's compound annual total return has been a
negative 24.2%.

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

o Widely Recognized "Gabelli" Brand Name:WIDELY RECOGNIZED "GABELLI" BRAND NAME: For much of its history, the
Company has advertised or had its investment products and managers featured
in a variety of financial print media, including both U.S. and
International publications such as The
Wall Street Journal, Money Magazine, Barron'sTHE WALL STREET JOURNAL, FINANCIAL
TIMES, MONEY MAGAZINE, BARRON'S, FORTUNE, BUSINESS WEEK, NIKKEI FINANCIAL
NEWS, and Investor's Business
Daily.INVESTOR'S BUSINESS DAILY. The Company also underwrites
publications written by its investment professionals, including
"Deals...Deals...and More Deals""DEALS...DEALS...AND MORE DEALS" which examines the practice of merger
arbitrage and "Global Convertible Investing: The
Gabelli Way."GLOBAL CONVERTIBLE INVESTING: THE GABELLI WAY," a
comprehensive guide to effective investing in convertible securities.

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

o Strong Industry Fundamentals: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. World equity markets have grown at an
11.2% CAGR through December 31, 2002 to $22.9 trillion since the Company
was founded in 1977. The U.S. equity market comprises $12.0 trillion or 52%
of world equity markets. The Company believes that demographic trends and
the growing role of money managers in the placement of capital compared to
the traditional role played by banks and life insurance companies will
result in continued growth of the investment management industry.

Business StrategyBUSINESS STRATEGY

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

o Broadening and Strengthening the Gabelli Brand.BROADENING AND STRENGTHENING THE GABELLI BRAND. The Company believes that
the Gabelli brand name is one of the more widely recognized brand names in
the U.S. investment management industry. The Company intends to continue to
strengthen its brand name identity by, among other things, increasing its
marketing and advertising to provide a uniform global image. In January
2000 the Company expanded its geographic presence with the addition of a
London office to coordinate marketingresearch and researchmarketing efforts for our European
and Global private fundalternative and mutual fund products. The Company believes that
with its brand name recognition, it has the capacity to create new products
and services around the Gabelli brand to complement its existing product
offerings. New product offerings since the Firm's Public Offeringfirm's initial public offering
include
two open end mutual funds, the Gabelli Blue Chip Value Fund (1999),
Gabelli Utilities Fund (1999) and the Gabelli Utilities Fund;Woodland Small Cap Value Fund
(2003); one closed end fund, The Gabelli Utility Trust; twofive private
limited partnerships, GabelliGemini Global Partners, L.P. and, Gabelli European
Partners, L.P., Gabelli Japanese Value Partners, L.P., Gabelli Associate
Fund II, L.P. and twoGAMCO Performance Partners, L.P. and five offshore funds,
GabelliGemini Global Partners, Ltd. and, Gabelli European Partners Ltd., Gabelli
Japanese Value Partners Ltd., GAMCO Performance Partners, Ltd., and GAMCO
Arbitrage Partners, Ltd. We are also introducing the GAMA Select
portfolios, a series of sector-focused absolute return funds designed to
offer investors a mechanism to diversify their portfolios by global sector
rather than by geographic region.

o Expanding Mutual Fund Distribution.EXPANDING MUTUAL FUND DISTRIBUTION. The Company intends to continue
expanding its distribution network through Third-Party Distribution
Programs, particularlyincluding NTF Programs. In recent years, the Company has realized
significant growth in its mutual fund assets under management through
alliances with "mutual fund supermarkets" and other Third-Party
Distribution Programs, through which its Mutual Funds are made available to
investors. As of December 31, 2001,2002, the Company was participating in
89several Third-Party Distribution Programs, including the Charles Schwab and
Fidelity Investments "mutual fund supermarket" programs. In addition, the
Company intends to develop a marketing strategy to increase its presence in
the 401(k) market for its Mutual Funds. Additionally, the Company now
offers investors the ability to purchase mutual fund shares directly
through the Internet or by telephone. The Company has also entered into
various marketing alliances and distribution arrangements with leading
national brokerage and investment houses and has developed additional
classes of shares for several of its mutual funds for sale through national
brokerage and investment houses and other third-party distribution channels
on a commission basis.

o Increasing Penetration in High Net Worth Market.INCREASING PENETRATION IN HIGH NET WORTH MARKET. The Company's high net
worth business focuses, in general, on serving clients who have established
an account relationship of $1 million or more with the Company. According
to certain industry estimates, the number of households with over $1
million in investable assets will grow from approximately 2.5 million in
1996 to over 15 million by 2010. With the Company's 25-year26-year history of
serving this segment, its long-term performance record and brand name
recognition and the broad array of product offerings the Company believes
that it is well positioned to capitalize on the growth opportunities in
this market.

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

o Attracting and Retaining Experienced Professionals.ATTRACTING AND RETAINING EXPERIENCED PROFESSIONALS. As the Company
continues to increase the breadth of its investment management
capabilities, it plans to add portfolio managers and other investment
personnel in order to foster expansion of its products. The ability to
attract and retain highly experienced investment and other professionals
with a long-term commitment to the Company and its clients has been, and
will continue to be, a significant factor in its long-term growth. In
addition, joining throughFor
example, the acquisitionacquisitions of the Mathers Fund and heading
up the newly formed Non-Market-Correlated group is portfolio managerin 1999, managed by Henry Van
der Eb. With the addition ofEb, and the Comstock Partners Funds we were joinedin 2000, managed by portfolio managers CharlesCharlie Minter
and Martin Weiner.Weiner, have evolved into the formation of the Non-Market
Correlated mutual fund group in 2002. Assets under management in this group
have grown to $674 million at December 31, 2002 from $242 million at
December 31, 2000. Henry Van der Eb has been appointed to oversee this new
division which is currently comprised of the ABC, Gold, Comstock and
Mathers Funds, and may add new funds in the future. Elizabeth Lilly, CFA
joined us upon the acquisition of Woodland Partners, LLC in November 2002.

o Capitalizing on Acquisitions and Strategic Alliances.CAPITALIZING ON ACQUISITIONS AND STRATEGIC ALLIANCES. The Company intends
to selectively and opportunistically pursue acquisitions and alliances that
will broaden its product offerings and add new sources of distribution. On
October 1, 1999 the Company completed its alliance with Mathers and
Company, Inc. and now acts as investment advisor to the Mathers Fund
(renamed Gabelli Mathers Fund). The Gabelli Mathers Fund has $98$81 million in
assets and approximately 4,000 shareholders. In May 2000 the Company added
Comstock Partners Funds, Inc., (renamed Comstock Funds, Inc.), to the
Non-Market Correlated mutual fund product line. The Comstock Funds are
comprised of the Comstock Capital Value Fund, a specialty diversified
equity fund, and Comstock Strategy Fund, a flexible income fund. These
funds are currently positioned to take advantage of a sustained stock
market decline. The Comstock Funds has $95$195 million in assets under
management and 10,00011,600 investors in the Gabelliits open end mutual fund family. In
November 2002 the Company completed its alliance with Woodland Partners
LLC, a Minneapolis based investment adviser with approximately $250 million
in assets under management with institutional, high-net-worth and
sub-advisory accounts. The Company believes that it is well positioned to
pursue acquisitions and alliances because itof its flexibility in
accommodating investment organizations.

The Company's financial strength is one of relatively few publicly traded investment
management firms.

The Company hasunderscored by its having received
investment grade ratings from two well respected ratings agencies, Moody's
Investors Services and Standard and Poor's Ratings Services. In assigning their investment ratings both agencies noted the
Company's strong brand, high operating margins and increasing cash flows in
assets under management. The addition ofWe believe that
maintaining investment grade ratings from two
respected agencies is expected towill provide greater access to the capital
markets, enhance liquidity and enhance liquidity.

Mutuallower overall borrowing costs.

SEPARATE ACCOUNTS

Since 1977, the Company has provided investment management services through
its subsidiary GAMCO Investors, Inc. ("GAMCO") to a broad spectrum of
institutional and high net worth investors. As of December 31, 2002, the Company
had approximately 1,750 Separate Accounts with an aggregate of approximately
$10.6 billion of assets, which represent approximately 50% of the total assets
under management of the Company. The ten largest Separate Accounts comprise
approximately 18% of the Company's total assets under management and 9% of the
Company's total revenues as of and for the period ended December 31, 2002. The
Separate Accounts are invested in U.S. and international equity securities, U.S.
fixed-income securities and convertible securities. At December 31, 2002, high
net worth accounts (accounts of individuals and related parties in general
having a minimum account balance of $1 million) comprised approximately 78% of
the number of Separate Accounts and approximately 24% of the assets, with
institutional investors accounting for the balance.

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

The Company's Separate Accounts business is marketed primarily through the
direct efforts of its in-house sales force. At December 31, 2002, over 93% of
the Company's 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. Clients are generally serviced by a team
of individuals, the core of which remain assigned to a specific client from the
onset of the client relationship. The Company's sales force maintains direct
relationships with corporate pension and profit sharing plans, foundations,
endowment funds, jointly trusteed plans, municipalities and high net worth
individuals that comprise the Company's Separate Accounts business. Sub advisory
relationships are a growing source of assets under management and totaled $3.1
billion at December 31, 2002. The Company acts as a sub advisor on certain funds
for several large and well known fund managers including American Express,
American Skandia, Enterprise Funds and MainStay funds.

MUTUAL FUNDS

The Mutual Funds include 2829 open-end mutual funds and 4 closed-end funds
which had total assets as of December 31, 20012002 of $12.0$10.1 billion. The open-end
Mutual Funds are available to individuals and institutions primarily on both a no-load and
commission basis, while the closed-end funds are listed and traded on the New
York Stock Exchange ("NYSE"). At December 31, 2001,2002, the open-end funds had total
net assets of $10.2$8.5 billion and the closed-end funds had total net assets of $1.8$1.6
billion. The assets managed in the closed-end funds represent approximately 15%16%
of the assets in the Mutual Funds and 7%7.6% of the total assets under management
of the Company at December 31, 2001.2002. The Company's assets under management
consist of a broad range of U.S. and international stock, bond and money market
mutual funds that meet the varied needs and objectives of its Mutual Fund
shareholders. At December 31, 2001,2002, approximately 40%38% of the Company's assets
under management in open-end, no-load equity Mutual Funds had been obtained
through direct sales relationships.

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

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

Gabelli Advisers, Inc., a majority owned subsidiary of Gabelli Asset
Management Inc. and its affiliates, acts as investment adviser to the Gabelli
Westwood family of funds and has retained Westwood Management to act as
subadvisersub-adviser for five of the six portfolios. Westwood Management is a subsidiary
of Westwood Holdings Group which is a wholly owned subsidiary of SWS Group, Inc.(NYSE: "WHG"), a
publicly held financial services firm. Inin its capacity as subadviser,sub-adviser,
Westwood Management makes day-to-day investment decisions and provides the
portfolio management services for five of the six current Gabelli Westwood
portfolios. The Gabelli Westwood Mighty MitesSMMites(SM) Fund, launched in May 1998, is
advised solely by Gabelli Advisers, Inc., using a team investment approach,
without any subadvisers.sub-advisers. Westwood Management owns 100% of the Class A common stock ofan 18.8% equity interest in
Gabelli Advisers, Inc. (representing 18.8% of the economic interest), and is not an affiliate of the Company. The Company believes that Gabelli Advisers, Inc.
will serve as a platform for future growth and diversification of the Company's
product line.

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

The following table lists the Mutual Funds, together with the December 31,
20012002 Morningstar overall rating, where rated (ratings are not available for the
money-market mutual funds and other mutual funds, which collectively represent
17%20% of the assets under management in the Mutual Funds), the portfolio
manager(s) and associate portfolio managers(s) for such mutual fund, and provides a description
of the primary investment objective, fund characteristics, fees, the date that
the mutual fund was initially offered to investors and the assets under
management in the Mutual Funds as of December 31, 2001.2002.

Fund Net Assets as of
(Morningstar Overall Advisory 12b-1 Initial DecemberNET ASSETS AS
OF
FUND ADVISORY 12B-1 INITIAL DECEMBER 31,
Rating)(MORNINGSTAR OVERALL PRIMARY INVESTMENT FUND FEES FEES OFFER 2002
RATING) (1) Primary Investment Fund Fees Fees Offer 2001
Objective CharacteristicsOBJECTIVE CHARACTERISTICS (%) (%) DateDATE ($ in millions)

GABELLI OPEN-END FUNDS:

VALUE:IN MILLIONS)
- ------------------------- ---------------------- --------------- -------- ------- -------- -----------

GABELLI OPEN-END FUNDS:

VALUE:

Gabelli Capital Capital appreciation No-load, .75 n/a 05/01/95 $ 158.9
Asset Fund from equity Open-end,
***** securities of Diversified,
companies selling at Variable Annuity
a significant
discount to their
private market value.

The Gabelli Asset Growth of capital as Class AAA: 1.00 .25 03/03/86 $ 1,909.1$1,498.6
Asset Fund a primary investment No-load,
***** objective, with Open-end,
current income as a Diversified
secondary investment Multi-class shares (2)
objective. Invests in
equity securities of
companies selling at a
significant discount to
their private market value.

The Gabelli Blue Chip Capital appreciation Class AAA: 1.00 .25 08/26/99 $ 42.4
Value Fund through investments No-load,
(Not rated) in equity securities Open-end,
of established companies, Diversified
which are temporarily out
of favor and which have
market capitalizations
in excess of $5 billion.

Gabelli Westwood Capital appreciation Class AAA: 1.00 .25 01/02/87 $ 290.6232.6
Equity Fund through a diversified No-load,
**** portfolio of equity Open-end,
securities using bottom-up Diversified
fundamental research Multi-class shares (2)
with a focus on
identifying well-seasoned
companies.

The Gabelli Capital AssetBlue Capital appreciation through Class AAA: 1.00 .25 08/26/99 $ 25.4
Chip Value Fund investments in equity No-load,
.75 n/a 05/01/95 $ 192.6
Fund from equity Open-end,
***** securities of established Open-end,
companies, which are Diversified
companies selling at Variable Annuity
a significant
discount to their
privatetemporarily out of favor and Multi-class shares (2)
which have market
value.capitalizations in excess
of $5 billion.

FOCUSED VALUE:

The Gabelli Value High level of capital Class A: 1.00 .25 09/29/89 $ 1,275.7$1,043.4
Value Fund appreciation from Load,
***** undervalued equity Open-end
securities that are Non-diversified
held in a concentrated Multi-class shares (2)
portfolio.

SMALL CAP VALUE:

The Gabelli Small Cap High level of capital Class AAA: 1.00 .25 10/22/91 $ 437.2452.2
Growth Fund appreciation from No-load,
**** equity securities of Open-end,
smaller companies Diversified
with market Multi-Class Shares (2)
capitalization of
$1 billion or less.

Fund Net Assets as of
(Morningstar Overall Advisory 12b-1 Initial DecemberNET ASSETS AS
FUND ADVISORY 12B-1 INITIAL OF DECEMBER 31,
Rating)(MORNINGSTAR OVERALL PRIMARY INVESTMENT FUND FEES FEES OFFER 2002
RATING) (1) Primary Investment Fund Fees Fees Offer 2001
Objective CharacteristicsOBJECTIVE CHARACTERISTICS (%) (%) DateDATE ($ in millions)

GROWTH:IN MILLIONS)
- ------------------------- ---------------------- --------------- -------- ------- -------- ------------

The Gabelli Growth Capital appreciationWoodland Long Tern capital Class AAA: 1.00 .25 04/10/8712/31/02 $ 2,949.20.01
Small Cap Value Fund from companies thatappreciation No-load,
*** have favorable, yet(Not rated) investing at least Open-end,
undervalued, Diversified
prospects for
earnings growth.
invests80% of its assets Non-diversified
in equity securities Multi-class shares (2)
of companies that have above-averagewith
market capitalizations
of $1.5 billion or expanding market
shares and profit margins.less.

GROWTH:

Gabelli International Capital appreciation Class AAA: 1.00 .25 06/30/95 $ 47.135.4
Growth Fund by investing No-load,
**** primarily in equity Open-end,
securities of foreign Diversified
companies with rapid Multi-class shares (2)
growth in revenues and
earnings.

The Gabelli Capital appreciation Class AAA: 1.00 .25 04/10/87 $1,675.4
Growth Fund from companies that No-load,
*** have favorable, yet Open-end,
undervalued, Diversified
prospects for Multi-Class Shares (2)
earnings growth.
Invests in equity
securities of companies
that have above-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 $ 178.9
capital105.4
Growth Fund appreciation through No load,
*** investment in a Open-end,
portfolio of equity Non-diversified
securities focused on Multi-class shares (2)
companies involved
in the global marketplace.

MICRO-CAP:

Gabelli Westwood Long-term capital Class AAA:, 1.00 .25 05/11/98 $ 20.127.6
Mighty MitesSMMites(SM) Fund appreciation by No-load,
***** investing primarily Open-end,
in equity securities Diversified
with market Multi-class shares (2)
capitalization of
$300 million or less.

EQUITY INCOME:

The Gabelli Equity High level of total Class AAA: 1.00 .25 01/02/92 $ 151.4
Income Fund return with an No-load,
**** emphasis on income Open-end,
producing equities Diversified
with yields greater
than the S&P 500
average.

Gabelli Westwood Both capital Class AAA: .75 .25 10/01/91 $ 169.4155.2
Balanced Fund appreciation and No-load,
***** current income using Open-end,
portfolios containing Diversified
stocks, bonds, and Multi-class shares (2)
cash as appropriate in
light of current economic
and business conditions.

The Gabelli Equity High level of total Class AAA: 1.00 .25 01/02/92 $ 196.5
Income Fund return with an No-load,
**** emphasis on income Open-end,
producing equities Diversified
with yields greater than Multi-Class Shares (2)
the S&P 500 average.

NET ASSETS AS
OF
FUND ADVISORY 12B-1 INITIAL DECEMBER 31,
(MORNINGSTAR OVERALL PRIMARY INVESTMENT FUND FEES FEES OFFER 2002
RATING) (1) OBJECTIVE CHARACTERISTICS (%) (%) DATE ($ IN MILLIONS)
- ------------------------- ---------------------- --------------- -------- ------- -------- ------------
Gabelli Westwood Long-term capital Class AAA: 1.00 .25 09/30/97 $ 3.610.0
Realty Fund appreciation as well No-load,
**** as current income, Open-end,
investing in equity Diversified
securities that are Multi-class shares (2)
primarily engaged in
equity Diversified
securities that are Multi-class shares (2)
primarily engaged in
or related to the
real estate industry.

Fund Net Assets as of
(Morningstar Overall Advisory 12b-1 Initial December 31,
Rating)(1) Primary Investment Fund Fees Fees Offer 2001
Objective Characteristics (%) (%) Date ($ in millions)

SPECIALTY EQUITY:

The Gabelli Global High level of total Class AAA: 1.00 .25 02/03/94 $ 8.39.3
Convertible return through a No-load,
Securities Fund combination of Open-end,
*** current income and Non-diversified
capital appreciation Multi-class shares (2)
through investment in
convertible
securities of U.S.
and non-U.S. issuers.

The Gabelli Global High level of capital Class AAA: 1.00 .25 05/11/98 $ 18.615.1
Opportunity Fund appreciation through No-load,
**** worldwide investments Open-end,
in equity securities. Non-diversified
Multi-class shares (2)

SECTOR:

The Gabelli Utilities High level of total Class AAA: 1.00 .25 08/31/99 $ 13.2
Fund return through a No-load,
***** combination of capital Open-end,
appreciation and Diversified
current income from Multi-class shares (2)
investments in utility
companies.

The Gabelli Global High level of capital Class AAA: 1.00 .25 11/01/93 $ 235.4139.5
Telecommunications appreciation through No-load,
Fund worldwide investments Open-end,
**** in equity securities, Non-diversified
including the U.S., Multi-class shares (2)
primarily in the
telecommunications
industry.

Gabelli Gold Seeks capital Class AAA: 1.00 .25 07/11/94 $ 15.5137.2
Fund appreciation and No-load,
**** employs a value Open-end,
approach to investing Diversified
primarily in equity Multi-class shares (2)
securities of gold-
related companies
worldwide.

The Gabelli Utilities High level of total return Class AAA: 1.00 .25 08/31/99 $ 9.7
through a combination No-load,
Fund of capital appreciation Open-end,
(Not rated) and current income from Diversified
investments in
utility companies.

MERGER AND ARBITRAGE:

The Gabelli ABC Fund Total returns from No-load, 1.00 .25 05/14/93 $ 158.4260.5
***** equity and debt Open-end,
securities that are Non-diversified
attractive to
investors in various
market conditions
without excessive
risk of capital loss.

CONTRARIAN:

The Comstock Capital appreciation Class A 1.00 .25 10/10/85 $ 148.6
Capital Value Fund and current income Load,
*** through investment Open-end,
in a highly Diversified
diversified portfolio Multi-class shares (2)
of securities.

The Comstock Capital appreciation Class A .85 .25 05/5/88 $ 46.6
Strategy Fund and current income Load,
*** through investment Open-end,
in a portfolio of Non-Diversified
debt securities. Multi-class shares (2)

The Gabelli Mathers Long-term capital appreciation Class AAA: 1.00 .25 8/19/65 $ 97.980.8
Mathers Fund appreciation in No-load,
** various market Open-end,
conditions No-load,
** without Diversified
excess risk of
capital Open-end,
loss.
Non-diversified

The Comstock Capital appreciation and Class A 1.00 .25 10/10/85 $ 52.4
Capital Value Fund current income through Load,
* investment in a Open-end,
highly diversified portfolio Diversified
of securities. Multi-class shares (2)

Fund Net Assets as of
(Morningstar Overall Advisory 12b-1 Initial December 31,
Rating)(1) Primary Investment Fund Fees Fees Offer 2001
Objective Characteristics (%) (%) Date ($ in millions)

The Comstock Capital appreciation and Class A .85 .25 05/5/88 $ 43.9
Strategy Fund current income through Load,
* investment in a portfolio Open-end,
of debt securities. Non-Diversified
Multi-class shares (2)

SMALL CAP GROWTH:

Gabelli Westwood Long-term capital Class AAA: 1.00 .25 04/15/97 $ 26.7
SmallCap14.8
Small Cap appreciation, No-load,
Equity Fund investing at least Open-end,
*** 65%80% of its assets in Diversified
equity securities of Multi-class shares (2)
companies with market
capitalizations of $1$1.5
billion or less.

FIXED INCOME:

Gabelli Westwood Total return and Class AAA: .60 .25 04/06/93 $ 8.613.5
Intermediate Bond current income, while No-load,
Fund limiting risk to Open-end,
*** principal. Pursues Diversified
higher yields than Multi-class shares (2)
shorter maturity funds,
and has more price
stability than generally
higher yielding
long-term funds.

CASH MANAGEMENT-MONEY MARKET:

Gabelli U.S. Treasury High current income Money Market, .30 n/a 10/01/92 $ 899.4$1,010.7
Money Market Fund with preservation of Open-end,
(Not rated) 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 n/a 01/01/88 $ 527.2609.3
Inc.-- Domestic preservation of Open-end,
Prime Money Market principal and Diversified
Portfolio liquidity through Dual class
(Not rated) investment in U.S.
Treasury securities
and corporate bonds.

The Treasurer's Current income with No-load, .30 n/a 12/18/87 $ 269.2259.6
Fund, Inc.-- Tax preservation of Open-end,
Exempt Money Market principal and Non-diversifiedDiversified
Portfolio liquidity through Dual class
(Not rated) investment in U.S.
municipal bond
securities.

The Treasurer's Current income with No-load, .30 n/a 07/25/90 $ 84.984.0
Fund, Inc.-- U.S. preservation of Open-end,
Treasury Money Market principal and Diversified
Portfolio liquidity through Dual class
(Not rated) investment in U.S.
Treasury securities.

Fund Net Assets as of
(Morningstar Overall Advisory 12b-1 Initial December 31,
Rating)(1) Primary Investment Fund Fees Fees Offer 2001
Objective Characteristics (%) (%) Date ($ in millions)

GABELLI CLOSED-END FUNDS:
The Gabelli Global Long-term capital Closed-end, 1.00 n/a 11/15/94 $ 181.6
Multimedia Trust appreciation from Non-diversified
Inc. (3) equity investments in NYSE Symbol: GGT
**** global telecommunications,
media, publishing and
Entertainment holdings.

The Gabelli Equity Long-term growth of Closed-end, 1.00 n/a 08/14/86 $ 1,457.5$1,271.9
Trust Inc. capital by investing Non-diversified
*** in equity securities. NYSE Symbol: GAB

The Gabelli High total return Closed-end, 1.00 n/a 07/03/89 $ 109.3108.8
Convertible from investing Diversified
Securities Fund, Inc. primarily in NYSE Symbol: GCV
Inc. (4) convertible
**** instruments.

The Gabelli Global Long-term capital Closed-end, 1.00 n/a 11/15/94 $ 132.7
Multimedia Trust Inc. appreciation from Non-diversified
(3) equity investments in NYSE Symbol: GGT
** global telecommunications,
media, publishing and
entertainment holdings.

The Gabelli High total return from Closed-end, 1.00 n/a 07/09/99 $ 82.295.1
Utility Trust (5) investments primarily in Non-Diversified
(not rated) securities of companies NYSE Symbol: GUT
involved in Non-Diversified
(not rated) securities of companies NYSE Symbol: GUT
involved in gas, electricity
and water industries.

- ----------

- -----------
(1) For each fund with at least a three-year history, Morningstar calculates a
Morningstar RatingTM metric each month by subtracting the returnbased on a 90
day U.S. Treasury Bill fromMorningstar risk-adjusted return measure
that accounts for variation in a fund's monthly performance (including the
Fund's load-adjusted return for the same
period,effects of sales charges, loads and then adjusting this excess return for risk.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 4,823 U.S. domiciled equity721 Domestic Hybrid funds rated for three
years, 3,165549 funds for five years and 898139 funds for ten years. There were 1,351 international
equity631
Large Value funds rated for three years, 899480 funds for five years and 166162
funds for ten years. There were 1,861516 Intermediate Term Bond funds rated for
three years, 401 funds for five years and 145 funds for ten years. There
were 191 Small Value funds rated for three years, 127 funds for five years
and 31 funds for ten years. There were 433 Small Growth funds rated for
three years, 295 funds for five years and 65 funds for ten years. There
were 181 Mid-Cap Value funds rated for three years, 127 funds for five
years and 44 funds for ten years. There were 167 Mid-Cap Blend funds rated
for three years, 105 funds for five years and 34 funds for ten years.

There were 64 Convertible funds rated for three years, 50 funds for five
years and 18 funds for ten years. There were 516 bond funds rated for three
years, 1,407401 funds for five years and 449145 funds for ten years. There were 255
World Stock funds rated for three years, 191 funds for five years and 39
funds for ten years. There were 802 Large Growth funds rated for three
years, 545 funds for five years and 167 funds for ten years. There were 664
Foreign Stock funds rated for three years, 491 funds for five years and 102
funds for ten years. There were 516 bond funds rated for three years, 401
funds for five years and 145 funds for ten years. There were 23
Specialty-Communications funds rated for three years, 15 funds for five
years and 6 funds for ten years. There were 30 Specialty-Precious Metals
funds rated for three years, 25 funds for five years and 16 funds for ten
years. There were 79 Specialty-Utilities funds rated for three years, 74
funds for five years and 22 funds for ten years. There were 116
Specialty-Real Estate funds rated for three years, 78 funds for five years
and 6 funds for ten years. (a) 2002 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 the 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 and Class C shares
are subject to a 1% back-end contingent deferred sales charge. Comstock
Strategy Fund Class R shares, which are no-load, are available only for
retirement and certain institutional accounts and the Classaccounts. Comstock Strategy Fund class
O shares which are no longer offered to the public.

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

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

(5) The Gabelli Utility Trust was formed in 1999 through a spin off of assets
previously held infrom the Gabelli Equity Trust.

1214

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. The Company periodically introduces new
mutual funds designed to complement and expand its investment product offerings,
respond to competitive developments in the financial marketplace and meet the
changing needs of clients.

The Company's marketing efforts for the Mutual Funds are currently focused
on increasing the distribution and sales of its existing funds as well as
creating new products for sale through its distribution channels. The Company
believes that its marketing efforts for the Mutual Funds will continue to
generate additional revenues from investment advisory fees. The Company has
traditionally distributed most of its open-end Mutual Funds by using a variety
of direct response marketing techniques, including telemarketing and
advertising, and as a result the Company maintains direct relationships with a
high percentage of its no-load open-end Mutual Fund customers. Beginning in late
1995, the Company expanded its product distribution by offering additionalseveral of its
open-end Mutual Funds through Third-Party Distribution Programs, including NTF
Programs. In 1998 and 1999, the Company further expanded these efforts to
include substantially all of its open-end Mutual Funds in eighty eightseveral Third-Party
Distribution Programs. More than 40%38% of the assets under management in the
open-end Mutual Funds are still attributable to the Company's direct response
marketing efforts. Third-Party Distribution Programs, particularly NTF Programs,
have become an increasingly important source of asset growth for the Company. Of
the $8.3$6.5 billion of assets under management in the open-end equity Mutual Funds
as of December 31, 2001,2002, approximately 29%62% were generated from NTF Programs.
During 2000, the Company completed development of additional classes of shares
for severalmany of its mutual funds for sale through national brokerage and investment
houses and other third-party distribution channels on a commission basis. The
multi-class shares are available in the global series of Gabelli mutual funds,
the Gabelli International Growth Fund, the Gabelli Value Fund, The Comstock
Funds, the Gabelli Gold Fund, the Gabelli Utilities Fund, the Gabelli Woodland
Small Cap Value Fund and the Gabelli Westwood funds. 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. In 2001, approximately 17% of all U.S. equity mutual
fund inflows came through this sector. The 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 and Class C shares are
subject to a 1% back-end contingent deferred sales charge. During 2003, the
Company will introduce Class I shares, which are no load shares without
distribution fees available to Institutional and Retirement Plan Accounts. The
existing class of no-load shares is designated as Class AAA shares and remains
available for new and current investors. In general, distributiondistributions through
Third-Party Distribution Programs have greater variable cost components and
lower fixed cost components than distribution through the Company's traditional
direct sales methods.

The Company through its affiliated broker-dealer Gabelli & Company, Inc.
also offers its open-end mutual fund products through our internet site,
www.gabelli.com,WWW.GABELLI.COM, where 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. Our "Meet the Managers" program provides a regular forum to chat
with our portfolio manages on a wide variety of investment issues. A feature
unique to Gabelli is the "Online Real Time Chat Support" which provides clients
with access to a "live" client representative to assist with investment or
account questions. As part of our efforts to educate investors, we introduced
Gabelli University with its initial publications "Deals, Deals..."DEALS, DEALS... AND MORE
DEALS" and More
Deals" and "Global Convertible Investing: The Gabelli Way."GLOBAL CONVERTIBLE INVESTING: THE GABELLI WAY." Our website
continues to be an active, informative and valuable resource which we believe
will become an increasingly important feature of our client service efforts in
the ensuing years.

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

The Company provides the Mutual Funds with administrative services pursuant
to management contracts. Most of these administrative services are provided
through subcontracts with unaffiliated third parties. Such services include,
without limitation, 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. Transfer agency and custodial services are provided directly to the
Mutual Funds by unaffiliated third parties.

1315

The Company's Mutual Fund investment management agreements may continue in
effect from year to year only if specifically approved at least annually by (i)
the Mutual Fund's board of directors or trustees or (ii) the Mutual Fund's
shareholders and, in either case, the vote of a majority of the Mutual Fund's
directors or trustees who are not parties to the agreement or "interested
persons" of any such party, within the meaning of the Investment Company Act of
1940 as amended (the "Investment Company Act"). Each Mutual Fund may terminate
its investment management agreement at any time upon 60 days' written notice by
(i) a vote of the majority of the board of directors or trustees cast in person
at a meeting called for the purpose of voting on such termination or (ii) a vote
at a meeting of shareholders of the lesser of either 67% of the voting shares
represented in person or by proxy or 50% of the outstanding voting shares of
such Mutual Fund. Each investment management agreement automatically terminates
in the event of its assignment, as defined in the Investment Company Act. The
Company may terminate an investment management agreement without penalty on 60
days' written notice.

Separate Accounts

Since 1977, the Company has provided investment management services through
its subsidiary GAMCO Investors, Inc. ("GAMCO") to a broad spectrum of
institutional and high net worth investors. As of December 31, 2001, the Company
had approximately 1,700 Separate Accounts with an aggregate of approximately
$12.2 billion of assets, which represent approximately 50% of the total assets
under management of the Company. The ten largest Separate Accounts comprise
approximately 18% of the Company's total assets under management and 7% of the
Company's total revenues as of and for the period ended December 31, 2001. The
Separate Accounts are invested in U.S. and international equity securities, U.S.
fixed-income securities and convertible securities. At December 31, 2001, high
net worth accounts (accounts of individuals and related parties in general
having a minimum account balance of $1 million) comprised approximately 78% of
the number of Separate Accounts and approximately 23% of the assets, with
institutional investors accounting for the balance.

The Company's Separate Accounts business is marketed primarily through the
direct efforts of its in-house sales force. At December 31, 2001, over 93% of
the Company's assets in Separate Accounts (excluding subadvisory assets) were
obtained through direct sales relationships. Sales efforts are conducted on a
regional and product specialist basis. Clients are generally serviced by a team
of individuals, the core of which remain assigned to a specific client from the
onset of the client relationship. The Company's sales force maintains direct
relationships with corporate pension and profit sharing plans, foundations,
endowment funds, jointly trusteed plans, municipalities and high net worth
individuals that comprise the Company's Separate Accounts business. Subadvisory
relationships are a growing source of assets under management and totaled $2.7
billion at December 31, 2001. The Company acts as a subadvisor on certain funds
for several large and well known fund managers including American Skandia,
Aegon/Transamerica, MainStay funds, Enterprise funds and, beginning in 2002,
American Express.

PartnershipsPARTNERSHIPS

The Company offers alternative investment products principally through its
majority-owned subsidiary, GSI. The alternative investment products consist
primarily of partnerships, offshore investment companiesfunds, separate accounts and separate accounts.
The alternative investment products principally utilize merger arbitrage and
regional event-driven strategies.sub-advisory
relationships. The Company managed $573$578 million of alternative investment assets
at December 31, 2001.2002. We introduced our first targeted portfolio, our merger
arbitrage fund in 1985. A second fund was added in 1986 focusing on U.S. special
situations, followed by two offshore funds in 1989. Building on the Company's
strengths in global event-driven value investing, several new hedge funds have
been added to balance investors' geographic, strategy and sector needs. Today we
offer a whole family of absolute return products. Within its merger arbitrage
strategy, the Company managedmanages approximately $449$400 million of assets through Gabelli
Associates Fund, Gabelli Associates Limitedfor investors
who seek positive returns not associated with fluctuations of the general market
environment. The funds seek to drive returns by investing in announced merger
and certain separate accounts as of
December 31, 2001.acquisition transactions that are primarily dependent on the deal closure
and less on the overall market environment. We have extended our product line to
include event-driven long/short and sector strategies. In regional event-driven
strategies, the Company manages assets through Gabelli Global Partnersfocused on the U.S., European, Japanese
and Gabelli European Partners, which
focus on global and European equities, respectively.markets. In addition, severalwe also manage separate accounts are managed in accordance
with these regional event-driven products.

At December 31, 2001,2002, assets managed in regional event-driven long/short
products totaled $101$150 million. 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. Recently we introduced the GAMA Select portfolios,
a series of sector-focused absolute return funds designed to offer investors a
mechanism to diversify their portfolios by global sector rather than by
geographic region. We currently offer two GAMA Select portfolios; the Gabelli
International Gold Fund Ltd. and Energy Plus+ fund. The Company's alternative
investment products are marketed primarily by its direct sales force to
high-net-worth individuals and institutions and through wholesale relationships.
The Company intends to expand product offerings, both domestic and
international, and the geographic composition of its customer base in
alternative investment products and expects that the assets invested in these
products will provide a growing source of revenues in the future.

Brokerage and Mutual Fund DistributionINSTITUTIONAL RESEARCH AND MUTUAL FUND DISTRIBUTION

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

The Company distributes the open-end Mutual Funds pursuant to distribution
agreements with each open-end Mutual Fund. Under each distribution agreement
with an open-end Mutual Fund, the Company offers and sells such open-end Mutual
Fund's shares on a 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 sales personnel
of the Company. The 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 $16.2 million, $22.9 million, $21.4 million and $21.4$18.4 million for the years ended
December 31, 1999, 2000, 2001 and 2001,2002, respectively. The Company is the principal
underwriter for several funds distributed with a sales charge, including shares
of The Gabelli Value Fund, The Gabelli Utilities Fund, The Gabelli Gold Fund,
The Comstock Funds, The Gabelli Woodland Small Cap Value Fund, the Gabelli
Westwood Funds and the multi-class series of shares which were added to the
global and international series of the Gabelli mutual funds.

Under the distribution plans, the open-end no load (Class AAA shares)
Mutual Funds (except the Treasurer's Funds, the Gabelli U.S. Treasury Money
Market Fund and the Gabelli Capital Asset Fund) and the Class A shares of
various funds pay the Company a distribution 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%. The Company's
distribution agreements with the Mutual Funds may continue in effect from year
to year only if specifically approved at least annually by (i) the Mutual Fund's
board of directors or trustees or (ii) the Mutual Fund's shareholders and, in
either case, the vote of a majority of the Mutual Fund's directors or trustees
who are not parties to the agreement or "interested persons" of any such party,
within the meaning of the Investment Company Act. Each Mutual Fund may terminate
its distribution agreement, or any agreement thereunder, at any time upon 60
days' written notice by (i) a vote of the majority of its directors or trustees
cast in person at a meeting called for the purpose of voting on such termination
or (ii) a vote at a meeting of shareholders of the lesser of either 67% of the
voting shares represented in person or by proxy or 50% of the outstanding voting
shares of such Mutual Fund. Each distribution agreement automatically terminates
in the event of its assignment, as defined in the Investment Company Act. The
Company may terminate a distribution agreement without penalty upon 60 days'
written notice.

Underwriting ActivitiesUNDERWRITING ACTIVITIES

Gabelli & Company is involved in external syndicated underwriting
activities. In 1999, 2000, 2001 and 20012002 Gabelli & Company participated in 35, 16, 7 and
710 syndicated underwritings of public equity and debt offerings managed by major
investment banks with commitments of $64.2 million, $42.4 million, and $33.7 million and $34.9
million, respectively.

CompetitionCOMPETITION

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

The market for providing investment management services to institutional
and high net worth Separate Accounts is also highly competitive. Approximately
39%43% of the Company's investment management fee revenues for the year ended
December 31, 20012002 were derived from its Separate Accounts. Selection of
investment advisers by U.S. institutional investors is often subject to a
screening process and to favorable recommendation by investment industry
consultants. Many of these investors require their investment advisers to have a
successful and sustained performance record, often five years or longer, and
also focus on one and three year performance records. The Company has
significantly increased its assets under management on behalf of U.S.
institutional investors since its entry into the institutional asset management
business in 1977. At the current time, the Company believes that its investment
performance record would be attractive to potential new institutional and high
net worth clients and the Company has determined to devote additional resources
to the institutional and high net worth investor markets. However, no assurance
can be given that the Company's efforts to obtain new business will be
successful.

Intellectual Property17

INTELLECTUAL PROPERTY

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

RegulationREGULATION

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

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

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

The Company derives a substantial majority of its revenues from investment
advisory services through its investment management agreements. Under the
Investment Advisers Act, the Company's investment management agreements
terminate automatically if assigned without the client's consent. Under the
Investment Company Act, advisory agreements with registered investment companies
such as the Mutual Funds terminate automatically upon assignment. The term
"assignment" is broadly defined and includes direct assignments as well as
assignments that may be deemed to occur, under certain circumstances, upon the
transfer, directly or indirectly, of a controlling interest in the Company.

16
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 its customers.
Gabelli & Company and Gabelli Fixed Income Distributors, Inc. net capital, as
defined, has consistently met or exceeded all minimum requirements. Gabelli
Direct, Inc. which was acquired on December 22, 2000 has consistently met or
exceeded all minimum requirements. Under the rules and regulations of the
Commission promulgated pursuant to the federal securities laws, the Company is
subject to periodic examination by the Commission and the NASD. Gabelli & Company, Gabelli Fixed Income
Distributors, Inc. and Gabelli Direct, Inc. are also subject to periodic
examination by the NASD.

Subsidiaries of the Company are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and to regulations promulgated thereunder,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. The failure of the Company to comply with these requirements could have
a material adverse effect on the Company.

Investments by the Company on behalf of its clients often represent a
significant equity ownership position in an issuer's class of stock. As of
December 31, 2001,2002, the Company had five percent or more beneficial ownership
with respect to 121141 equity securities. This activity raises frequent regulatory
and legal issues regarding the Company's aggregate beneficial ownership level
with respect to portfolio securities, including issues relating to issuers'
shareholder rights plans or "poison pills," state gaming laws and regulations,
federal communications laws and regulations, public utility holding company laws
and regulations, federal proxy rules governing shareholder communications and
federal laws and regulations regarding the reporting of beneficial ownership
positions. The failure of the Company to comply with these requirements could
have a material adverse effect on the Company.

The 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.
The failure of the Company to comply with these requirements could have a
material adverse effect on the Company.

The Company and certain of its affiliates are subject to the laws of
non-U.S. jurisdictions and non-U.S. regulatory agencies or bodies. In
particular, the Company is subject to requirements in numerous jurisdictions
regarding reporting of beneficial ownership positions in securities issued by
companies whose securities are publicly traded in those countries. In addition,
GAMCO is registered as an international adviser, investment counsel and
portfolio manager with the Ontario Securities Commission in Canada in order to
market its services to prospective clients which reside in Ontario. Gabelli
Associates Limited is organized under the laws of the British Virgin Islands and
Gabelli International Gold Fund Limited is organized under the laws of Bermuda.
In connection with the Company's opening of an office in London and its plans to
market certain products in Europe the Company is required to comply with the
laws of the United Kingdom and other European countries regarding these
activities. In 2001 the Company applied for and received admission to the
Investment Management Regulatory Organization ("IMRO") the then regulatory
agency of the United Kingdom. Subsequent to December 1, 2001 the regulatory
authority of IMRO was transferred to the Financial Services Authority. StaffIn
connection with its registration in the United Kingdom the Company has a minimum
Liquid Capital Requirement of (pound)267,000, ($430,000 at December 31, 2002)
and an Own Funds Requirement of (euro)50,000 ($52,500 at December 31, 2002).

STAFF

At March 1, 2002,2003, the Company had a full-time staff of approximately 169184
individuals, of whom 7079 served in the portfolio management, research and trading
areas, 6062 served in the marketing and shareholder servicing areas and 3943 served
in the administrative area. As part of its staff, the Company employs elevenseventeen
portfolio managers for the Mutual Funds, Separate Accounts and Partnerships.Alternate
Investment products. Additionally, Westwood Management employs five portfolio
managers who advise five of the six portfolios of the Gabelli Westwood family of
funds.

1719

ItemITEM 2: Properties

As ofPROPERTIES

At December 31, 2001, the principal properties leased by2002 the Company for use
inleased its business were as follows:

Location Lease Expiration Square Footage
- -------- ------------------ ----------------principal offices which
consisted of a single 60,000 square foot building located at 401 Theodore Fremd
Avenue, April 30, 2013 60,055
Rye, NY 10580

165 West Liberty Street month-to-month 1,599
Reno, NV 89501

Plaza Center, Suite 503 & 504 May 31, 2004
249 Royal Palm Way 2,784
Palm Beach, FL 33480

100 Corporate North January 31, 2006 1,052
Suite 201
Bannockburn, IL 60015

283 Greenwich Avenue April 14, 2003 4,066
Greenwich, CT 06830

140 Greenwich Avenue July 31, 2003 3,271
Greenwich, CT 06830

5 Prince's Gate January 20, 2005 1,700
London, SW7
United Kingdom

All of these properties are used by the Company as office space. TheNew York. This building and property at 401 Theodore Fremd Avenue was leased in December 1997 (prior to the
IPO) from an entity controlled by members of Mr. Gabelli's family, and
approximately 9,000 square feet are currently subleased to other tenants. The
Company receives rental payments under the sublease agreements, which totaled
approximately $384,000$260,000 in 20012002 and were used to offset operating expenses
incurred for the property. As the Company moves its offices into this facility
the number of tenants under sublease agreements will be reduced and the rental
payments under sublease agreements is expected to decrease to approximately
$225,000 in 2002. The lease provides that all operating expenses
related to the property, which are estimated at $600,000 annually, are to be
paid by the Company.

DuringThe Company has also entered into leases for office space in both the fourth quarterU.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 2001 the
Company relocated substantially all of its operations including its principal
executive offices to these premises.

Itemfive years or less.

ITEM 3: Legal ProceedingsLEGAL PROCEEDINGS

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

ItemITEM 4: Submission of Matters to a Vote of Security HoldersSUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 2001.

182002.

PART II

ItemITEM 5: Market for the Registrant's Common Equity and Related Stockholder
MattersMARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

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

As of March 1, 20022003 there were 10694 Class A common stockholders of record and
3 Class B common stockholders of record (GGCP and two wholly-owned
subsidiaries). These figures do not include stockholders with shares held under
beneficial ownership in nominee name which are estimated to be in excess of
4,000.

The following table sets forth the high and low prices of the Company's
Class A common stock for each quarter of 2002 and 2001 as reported by the New
York Stock Exchange.

Quarter Ended High Low
------------- ---- ---

QUARTER ENDED HIGH LOW
------------- ---- ---
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

March 31, 2001 $ 36.46 $ 27.75
June 30, 2001 $ 43.65 $ 30.80
September 30, 2001 $ 48.90 $ 31.23
December 31, 2001 $ 44.95 $ 35.55

March 31, 2000 $17.88 $15.38
June 30, 2000 $25.13 $16.88
September 30, 2000 $31.25 $22.25
December 31, 2000 $36.00 $25.82

The Company has not paid any dividends since its inception but is
constantly reviewing its dividend policy in light of a number of factors
including its capital condition, operating profits and does not
presently anticipate paying dividendsstock market conditions.

The information set forth under the caption "Equity Compensation Plan
Information" in the foreseeable future.

19Proxy Statement is incorporated herein by reference.

ItemITEM 6: Selected Financial Data

GeneralSELECTED FINANCIAL DATA

GENERAL

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

The Company has not presented historical earnings per share for periods
prior to 19991998 due to
the significant changes in its operations that are not reflected in those
historical financial statements (see Note A to the Consolidated Financial
Statements).

Year Ended DecemberYEAR ENDED DECEMBER 31,
(In thousands, except per share data)
1997
1998 1999 2000 2001 ------------ ------------ ------------ ------------ --------
Income Statement Data
Revenues:2002
---------- ---------- ---------- ---------- ----------

INCOME STATEMENT DATA
Revenues:
Investment advisory and
incentive fees.......................... $ 89,684fees ........... $ 116,358 $ 147,414 $ 190,200 $ 186,124 $ 177,077
Commission revenue........................ 7,496revenue ......... 8,673 11,856 16,805 15,939 13,883
Distribution fees and
other income........ 8,096income ............. 13,156 16,992 26,913 22,351 18,999
---------- ---------- ---------- ---------- ----------
Total revenues.......................... 105,276revenues ........... 138,187 176,262 233,918 224,414 209,959
---------- ---------- ---------- ---------- ----------
Expenses:
Compensation costs........................ 45,260costs ......... 56,046 71,860 97,055 85,754 80,387
Management fee............................ 10,580fee ............. 12,246 10,153 11,296 11,325 9,533
Other operating expenses.................. 18,690expenses.... 24,883 28,917 36,653 33,887 30,377
Non-recurring charge........... - -charge ....... -- 50,725 - --- -- --
---------- ---------- ------------------ ---------- ----------
Total expenses.......................... 74,530expenses ........... 93,175 161,655 145,004 130,966 120,297
---------- ---------- ------------------ ---------- ----------
Operating income............................ 30,746income ............. 45,012 14,607 88,914 93,448 89,662
---------- ---------- ---------- ---------- ----------
Other income (expense), net:
Net gain (loss) from
investments.......... 7,888investments .............. (1,103) 14,253 6,716 5,187 1,353
Gain on sale of PCS
licenses, net......... -net ............ 17,614 - - --- -- -- --
Interest and dividend
income.............. 4,634income ................... 5,117 6,850 9,745 9,461 6,757
Interest expense.......................... (1,876)expense ........... (2,212) (3,438) (3,714) (6,174) Other..................................... (109) - - - -(11,977)
---------- ---------- ---------- ---------- ----------
Total other income
net................. 10,537(expense), net ........... 19,416 17,665 12,747 8,474 (3,867)
---------- ---------- ---------- ---------- ----------
Income before income taxes
and minority interest..................... 41,283interest ...... 64,428 32,272 101,661 101,922 85,795
Income taxes.............................. 3,077taxes ............... 5,451 10,467 40,257 39,342 32,259
Minority interest......................... 1,529interest .......... 1,710 3,270 3,409 1,482 224
---------- ---------- ---------- ---------- ----------
Net income.................................. $ 36,677income ................... $ 57,267 $ 18,535 $ 57,995 $ 61,098 $ 53,312
========== ========== ========== ========== ==========

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

Weighted average shares outstanding:
Basic ........................ 29,117 29,575 29,666 ========= ========= =========
Basic....................................30,092
========== ========== ========== ==========
Diluted ...................... 29,117 29,914 30,783 ========= ========= =========
Diluted..................................30,302
========== ========== ========== ==========
Actual shares outstanding at
December 31st .............. 29,699 29,519 29,828 29,881
========== ========== ========== ==========

2022

DecemberDECEMBER 31,
1997--------------------------------------------------------------------------
1998 1999 2000 2001 ----------- ----------- ----------- ----------- --------
(In thousands, except assets under management)2002
---------- ---------- ---------- ---------- ----------

Balance Sheet Data(IN THOUSANDS, EXCEPT ASSETS UNDER MANAGEMENT)

BALANCE SHEET DATA
Total assets................................. $ 232,736assets ............... $ 254,675 $ 243,062 $ 317,804 $ 486,394 $ 582,731
Total liabilities and
minority interest......................... 69,117interest ........ 59,775 95,486 115,607 211,097 260,938
---------- ---------- ---------- ---------- ----------
Total stockholders' equity................... $ 163,619equity.. $ 194,900 $ 147,576 $ 202,197 $ 275,297 $ 321,793
========== ========== ========== ========== ==========

Assets Under Management (unaudited)ASSETS UNDER MANAGEMENT (UNAUDITED)
(at periodyear end, in millions):
Separate Accounts .......... $ 7,957 $ 10,064 $ 11,001 $ 12,233 $ 10,603
Mutual Funds............................. $ 6,146 $Funds ............... 8,197 $ 11,640 $ 12,113 $ 11,955 Separate Accounts........................ 7,013 7,957 10,064 11,001 12,233

Partnerships............................. 13810,068
Partnerships ............... 146 230 437 573 578
---------- ---------- ---------- ---------- ----------
Total (a)............................ $ 13,297.................... $ 16,300 $ 21,934 $ 23,551 $ 24,761 $ 21,249
========== ========== ========== ========== ==========

Year Ended DecemberYEAR ENDED DECEMBER 31, 1999
(In thousands, except per share data)
Unaudited Pro Forma Income Statement Data

Revenues:----------------------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)

UNAUDITED PRO FORMA INCOME STATEMENT DATA

Revenues:
Investment advisory and incentive fees...................................................fees................... $ 147,414
Commission revenue.......................................................................revenue....................................... 11,856
Distribution fees and other income.......................................................income....................... 16,992
----------
Total revenues.......................................................................revenues......................................... 176,262
----------
Expenses:
Compensation costs.......................................................................costs....................................... 71,860
Management fee...........................................................................fee........................................... 9,057
Other operating expenses.................................................................expenses................................. 28,894
Non-recurring charge.....................................................................charge..................................... 50,725
----------
Total expenses.......................................................................expenses......................................... 160,536
-------------------

Operating income.........................................................................income......................................... 15,726
----------
Other income:
Net gain from investments................................................................investments................................ 12,350
Interest and dividend income.............................................................income............................. 6,374
Interest expense.........................................................................expense......................................... (3,653)
----------
Total other income, net..............................................................net................................ 15,071
----------
Income before income taxes and minority interest 30,797
Income taxes.............................................................................taxes........................................... 12,728
Minority interest........................................................................interest...................................... 3,270
----------
Net income..................................................................................income................................................. $ 14,799 (b)(a)
==========
Net income per share:
Basic and diluted........................................................................diluted...................................... $ 0.50 (b)
===========(a)
==========
Weighted average shares outstanding:
Basic and diluted........................................................................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.

21
The unaudited pro forma adjustments are based upon available information
and certain assumptions that management of the Company believes are reasonable
under the circumstances. The pro forma financial data does not purport to
represent the results of operations or the financial position of the Company
which actually would have occurred had the Reorganization been consummated on
the aforesaid dates, or project the results of operations or the financial
position of the Company for any future date or period.

- --------------------------------------------------------------------------------
(a) Effective April 14, 1997, Gabelli Fixed Income L.L.C. was restructured such
that the Company's ownership increased from 50% to 80.1%, thereby causing
Gabelli Fixed Income L.L.C. to become a consolidated subsidiary of the
Company. Accordingly, for periods after April 14, 1997, the assets managed
by Gabelli Fixed Income L.L.C. are included in the Company's assets under
management.

(b) 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.

2224

ItemITEM 7: Management's Discussion and Analysis of Financial Condition and Results
of OperationsMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
Consolidated Financial Statements and the notes thereto included in Item 8 to
this report.

Basis of PresentationBACKGROUND- BASIS OF PRESENTATION

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

Immediately following the Reorganization, the Company sold 6 million shares
of its Class A Common Stock in an initial public offering. On February 17, 1999
the Offering was completed and the Company received proceeds, net of fees and
expenses, of approximately $96 million. Following the Offering, GFI owned 80% of
the outstanding common stock of the Company. For periods after the Offering, the
Company's financial statements will reflect the financial condition and results
of operations of Gabelli Asset Management Inc. and the historical results of GFI
will be shown as predecessor financial statements.

OverviewOVERVIEW

The Company's revenues are largely based on the level of assets under
management in its businesses as well as the level of fees associated with its
various investment products. Growth in revenues generally depends on the general
level and trends of the stock market, good investment performance, which
increasesinfluences assets under management by increasing the value of existing assets
under management, contributing to higher investment and lower redemption rates
and facilitating the ability to attract additional investors while maintaining
current fee levels. Growth in assets under management is also dependent on being
able to access various distribution channels, which is usually based on several
factors, including performance and service. Historically, the Company depended
primarily on direct distribution of its products and services, but since 1995
has increasingly participated in Third-Party Distribution Programs, particularlyincluding NTF Programs. A
majority of the Company's cash inflows to mutual fund products have come through
these channels since 1998. In recent years the Company has been engaged to act
as a sub 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 business has come through this
channel. Fluctuations in financial markets also have a substantial effect on
assets under management and results of operations, although the Company's
extensive use of variable compensation programs tends to moderate the effects of
fluctuations in revenues. The Company's largest source of revenues is investment
advisory fees, which are based on the amount and composition of assets under
management in its Mutual Funds and Separate Accounts. Advisory fees from the
Mutual Funds and sub-advisory accounts are computed daily or weekly, while
advisory fees from the Separate Accounts and certain alternative investment
products are generally computed quarterly based on account values as of the end
of the preceding quarter. These revenues vary depending upon the level of sales
compared with redemptions, financial market conditions and the fee structure for
assets under management. Revenues derived from the equity orientedequity-oriented portfolios
generally have higher management fee rates than fixed income portfolios.
Revenues from our alternative investment products generally include an incentive
allocation of 20% of the economic profit, as defined. The incentive allocation
is recorded as earned with the related compensation expense accrued. The
incentive allocation fees and related compensation expense may increase or
decrease during the year depending upon the performance of the underlying
alternative investment products. At the end of the year a final accounting is
prepared by product and payment is received. We receive fulcrum fees from
certain Separate Accounts based upon meeting or exceeding certain contractual
investment return thresholds over a stipulated period of time. Performance fees
are finalized and received when the contract period is completed. Certain fees
in our closed end funds are only earned if the funds total return is greater
than a specified total return. A total of $465 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 fees
payable in accordance with Rule 12b-1 ("12b-1") of the Investment Company Act of
1940, as amended (the "Investment Company Act"), along with sales charges and
underwriting fees associated with the sale of the Mutual Funds plus other
revenues. Distribution fees fluctuate based on the level of assets under
management and the amount and type of Mutual Funds sold directly by the Company
and through various distribution channels. During 1997, the 12b-1 plans for 15
of the open-end Mutual Funds were restructured as compensation plans with annual
fees set at 25 basis points of average assets under management. Previously,
these plans reimbursed the Company for actual distribution expenses incurred, up
to 25 basis points of average assets under management.

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

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

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

As a result of the Offering, the Company became taxable as a "C"
corporation for Federal and state income tax purposes and paid taxes at an
effective rate considerably higher than when Gabelli Asset Management Inc. and
certain of its subsidiaries were treated as Subchapter "S" corporations.

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

Operating ResultsASSET HIGHLIGHTS

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

Inc(Dec)
1998 1999 2000 2001 2002 2002/2001 % CAGR (a)
------- ------- ------- ------- ------- ------- -------

Mutual Funds
Open-End $ 5,533 $ 8,509 $ 8,979 $ 8,334 $ 6,482 (22.2%) 11.0%
Closed-End 1,626 1,950 1,709 1,831 1,609 (12.1) 1.9
Fixed Income 1,038 1,181 1,425 1,790 1,977 10.4 18.9
------- ------- ------- ------- -------
Total Mutual Funds 8,197 11,640 12,113 11,955 10,068 (15.8) 10.4

Institutional & Separate Accounts
Equities 7,133 9,370 10,142 11,513 9,990 (13.2) 10.4
Fixed Income 824 694 859 720 613 (14.9) (8.0)
------- ------- ------- ------- -------
Total Institutional & Separate Accounts 7,957 10,064 11,001 12,233 10,603 (13.3) 8.6
Alternative Investments 146 230 437 573 578 0.9 33.2
------- ------- ------- ------- -------
Total Assets Under Management $16,300 $21,934 $23,551 $24,761 $21,249 (14.2) 9.8
======= ======= ======= ======= =======

(a) the % CAGR is computed for the Year Endedfive year period December 31, 1997 through
December 31, 2002

New cash inflows (sales less redemptions) in 2000 and 2001 were $2.9
billion and $2.7 billion, respectively. In 2002 there was a net cash outflow of
$61 million. The 2002 cash flows do not include $248 million in assets under
management added through our affiliation with Woodland Partners LLC in November
2002. For the three years ended December 31, 2000, 2001 and 2002 our net cash in
(out) flows by product line were as follows (in millions):

2000 2001 2002
-------- -------- --------
Mutual Funds
Equities ........................... $ 1,472 $ 846 $ (188)
Fixed Income ....................... 204 310 156
-------- -------- --------
Total Mutual Funds .................... 1,676 1,156 (32)
-------- -------- --------
Institutional & Separate Accounts
Equities ........................... 898 1,600 97
Fixed Income ....................... 128 (171) (120)
-------- -------- --------
Total Institutional & Separate Accounts 1,026 1,429 (23)
-------- -------- --------
Alternative Investments
Equities ........................... 165 136 (6)
Fixed Income ....................... -- -- --
-------- -------- --------
Total Alternative Investments ......... 165 136 (6)
-------- -------- --------

Total Equities ........................ 2,535 2,582 (97)
Total Fixed Income .................... 332 139 36
-------- -------- --------
Total Net Cash In (Out) Flows ......... $ 2,867 $ 2,721 $ (61)
======== ======== ========

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

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 are directly influenced by the level and mix of
assets under management. Nearly 88% of assets managed by the Company 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 Standard
& Poor's, 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 Comparedportfolio gains were impacted by the world equity
markets.

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 the Mutual Funds and Separate Accounts clients totaled $11.9 million, or
approximately 86% of total commission revenues in 2002.

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.

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
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 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, 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.

Net gain from investments, which is principally derived from the Company's
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 Year
Endedissuance 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 the Company's 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.

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 expense was $0.2 million in 2002 down 84.9% from $1.5
million in 2001. The decrease in expense is primarily attributable to the
Company's increased ownership in Gabelli Securities, Inc. During 2001 the
Company raised its ownership interest to 92% from 77% through the issuance of
approximately 400,000 shares of its Class A common stock.

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 the
Company's 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 also excluded from the diluted shares calculation
under current accounting rules. Shares issuable under the mandatory convertible
securities, which convert into Class A Common Stock in February 2005, will be
between 1.8 and 2.2.million. During 2002 the Company issued 600,844 shares from
the exercise of stock options and repurchased 547,526 shares.

OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2001 AS COMPARED TO THE YEAR
ENDED DECEMBER 31, 2000

Total revenues for the year ended December 31, 2001 were $224.4 million
versus $233.9 million for the year ended December 31, 2000. Assets under
management ended the year at $24.8 billion, a 5% increase over prior year end
assets under management of $23.6 billion. The growth in assets under management
of $1.2 billion in 2001 was driven by net new cash flows of $2.7 billion, which
was partially offset by the overall decline in equity market valuations.

Investment advisory and incentive fees, which comprised 83% of total
revenues in 2001, were $186.1 million, $4.1 million or 2% below the comparable
2000 revenues of $190.2 million. The increase in advisory fees for our
institutional and high net worth Separate Accounts and Alternative Investment
accounts were more than offset by lower Mutual Fund revenues and incentive
performance fees from Alternative Investment products. Revenues from
institutional and high net worth Separate Accounts rose 10% or $6.4 million as
assets under management in these accounts grew 11% to $12.2 billion in 2001
versus $11.0 billion in 2000. Net cash flows into Separate Accounts for 2001
were $1.4 billion. Although Mutual Fund assets under management remained
virtually unchanged, at $12.0 billion at December 31, 2001 versus $12.1 billion
at December 31, 2000, revenues declined $7.4 million or 7% due to lower average
assets under management in our open end equity funds and resulting shift in
product mix from higher fee equity products to fixed income products.

The average assets under management in the open end equity mutual funds
were $8.6 billion in 2001, 7.7% lower than the prior year average of $9.3
billion. Net cash flows into Mutual Funds were $1.2 billion during 2001,
including $800 million into equity products. The positive cash flows into equity
products in 2001 were offset by a decline of $1.4 billion in equity market
valuations which impacted the overall revenue mix. Revenues from Alternative
Investment products benefited from a 31% increase in assets under management
which increased advisory fees $1.8 million in 2001 over the prior year. The
increase in managed assets was primarily the result of net cash inflows for the
year as overall market performance in 2001 was flat. Performance fees, as a
result, were $4.9 million or 62% lower in 2001 versus the prior year.

Commission revenues in 2001 were $15.9 million, a decrease of $0.9 million,
or 5%, from commission revenues of $16.8 million in 2000. 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 the Mutual Funds and Separate Accounts clients totaled $13.5 million, or
approximately 86% of total commission revenues in 2001.

Distribution fees and other income declined 17% to $22.4 million in 2001
from $26.9 million in 2000. Included in 2000 revenues was a one time $3.1
million investment banking fee. Excluding this fee the year to year decline was
6% or $1.4 million principally the result of lower distribution fees and
reflecting the lower average assets under management in open end mutual funds.

Total expenses were $131.0 million in 2001, a decrease of $14.0 million, or
10%, from total expenses of $145.0 million in 2000. Operating income as a
percentage of total revenues rose to 42% in 2001 from 38% in 2000. Compensation
costs, which are largely variable in nature and increase or decrease as revenues
grow or decline, decreased approximately $11.3 million, or 12%, to $85.8 million
in 2001 from $97.1 million in 2000. Management fee expense, which is totally
variable and increases or decreases as pre-tax profits grow or decline, was
$11.3 million in both 2000 and 2001. Other operating expenses, which include
marketing, promotion and distribution costs as well as general operating
expenses were $33.9 million in 2001, a decrease of approximately $2.8 million,
or 8%, from $36.7 million in 2000. Included in other operating costs are
distribution payments to third party intermediaries which totaled $12.3 million
in 2001, an increase of $0.2 million, or 2%, from $12.1 million in 2000. Mutual
fund administration and distribution expenses and brokerage clearing charges
accounted for more than $1.0 million of the decrease in the remaining costs on a
year to year basis.

24
Net gain from investments, which is derived from the Company's proprietary
investment portfolio, was approximately $5.2 million for the year ended December
31, 2001 compared to a net gain of $6.7 million for 2000. Interest and dividend
income was $9.5 million in 2001 compared to $9.7 million in 2000. Interest
expense rose $2.5 million to $6.2 million in 2001, from $3.7 million in 2000.
The increase in interest expense is attributable to the issuance of a $100
million convertible note in August 2001. The note pays interest at a rate of
6.5% per year through August 2002 and 6% thereafter. The note is convertible, at
the holder's option, into shares of the Company's Class A Common Stock at $53
per share.

The effective tax rate for 2001 was 38.6% down from the 2000 effective tax
rate of 39.6% primarily from lower applicable state and local income taxes.

Minority interest expense was $1.5 million in 2001 down 56% from $3.4
million in 2000. The decrease in expense is primarily attributable to the
Company's increased ownership in Gabelli Securities, Inc. During 2001 the
Company raised its ownership interest to 92% versus 77% at the end of the prior
year.

Shares outstanding on a diluted basis at December 31, 2001 were 30.8
million and included 0.7 million shares from the assumed conversion of the
Company's convertible note for the period outstanding from its issuance in
August 2001. The full number of shares which may be issued upon conversion of
this note and which will be included in the calculation of diluted shares
outstanding in 2002 is approximately 1.9 million.

Operating Results for the Year Ended December 31, 2000 as Compared to the Year
Ended December 31, 1999

Total revenues for the year ended December 31, 2000 were $233.9 million, an
increase of $57.7 million, or 33%, compared to $176.3 million for the year ended
December 31, 1999. Investment advisory and incentive fees, comprising 81% of
total revenues, increased $42.8 million, or 29%, to $190.2 million, as the
Company experienced strong growth in the level of average assets under
management in each of its Mutual Funds, Separate Accounts and Alternative
Investments businesses. Average total assets under management, which is the
basis for investment advisory and incentive fees, were $23.1 billion in 2000, an
increase of $4.6 billion, or 25%, compared to average assets under management of
$18.5 billion in 1999. Total assets under management at December 31, 2000 were
$23.6 billion, an increase of $1.6 billion or 7% from assets under management of
$21.9 billion at December 31, 1999. Assets under management in Mutual Funds were
$12.1 billion at December 31, 2000, an increase of approximately $0.5 billion,
or 4%, from December 31, 1999. This increase represents approximately $1.7
billion in net cash inflows and $0.1 billion in assets acquired, offset by $1.3
billion in market-related depreciation. Assets under management in Separate
Accounts were $11.0 billion at December 31, 2000, an increase of $0.9 billion or
9% from $10.1 billion at December 31, 1999. This increase represents
approximately $1.0 billion in net cash inflows offset by $0.1 billion in
market-related depreciation.

Commission revenues in 2000 were $16.8 million, an increase of $4.9
million, or 42%, from commission revenues of $11.9 million in 1999. The increase
resulted from increased agency trading activity for accounts managed by
affiliated companies. Commission revenues derived from transactions on behalf of
the Mutual Funds and Separate Accounts clients totaled $14.5 million, or
approximately 87% of total commission revenues in 2000.

Distribution fees and other income increased more than 58% to $26.9 million
in 2000 from $17.0 million in 1999. Increased 12b-1 fees, resulting from the 41%
growth in assets under management in our open end equity mutual funds, to $22.9
million, and a $3.1 million investment banking fee were the principal components
for this increase.

Total expenses were $145.0 million in 2000, an increase of $34.1 million,
or 31%, from $110.9 million, excluding a $50.7 million non-recurring charge, in
1999. Operating income as a percentage of total revenues rose to 38% in 2000
from 37% in 1999. Compensation costs, which are largely variable in nature and
increase or decrease as revenues grow or decline, increased approximately $25.2
million, or 35%, to $97.1 million in 2000 from $71.9 million in 1999. Management
fee expense, which is totally variable and increases or decreases as pre-tax
profits grow or decline, was $11.3 million in 2000, an increase of $1.1 million,
or 11%, from $10.2 million for the year ended December 31, 1999. Other operating
expenses, which include marketing, promotion and distribution costs as well as
general operating expenses were $36.7 million in 2000, an increase of
approximately $7.8 million, or 27%, from $28.9 million in 1999. Mutual fund
administration and distribution expenses and brokerage clearing charges
accounted for more than $6.4 million, or 82%, of this increase.

Net gain from investments, which is derived from the Company's proprietary
investment portfolio, was approximately $6.7 million for the year ended December
31, 2000 compared to a net gain of $14.3 million for 1999. Included in the net
gain for 1999 was $2.3 million which was derived from the proprietary portfolio
distributed to GFI as part of the Reorganization. Interest and dividend income
was $9.7 million in 2000 compared to $6.9 million in 1999. Interest expense rose
$0.3 million to $3.7 million in 2000, from $3.4 million in 1999.

Income taxes increased to $40.3 million, an effective tax rate of 39.6%, in
2000 from $10.5 million and an effective tax rate of 32.4% for 1999. This
increase is principally due to the 1999 conversion of the Company from an "S"
Corporation to a "C" Corporation for Federal and state income tax purposes.
Income taxes for 1999 is net of the $19.8 million deferred tax benefit resulting
from the $50.7 million non recurring charge.

Minority interest expense increased to $3.4 million in 2000 from $3.3
million in 1999. This increase is reflective of additional income attributable
to the minority interests of the Company's majority controlled subsidiaries,
GSI, Fixed Income and Advisers.

Liquidity and Capital ResourcesLIQUIDITY AND CAPITAL RESOURCES
The Company's principal assets consist of cash, short-term investments,
securities held for investment purposes and investments in partnerships in which
the Company is either a general or limited partner. Short-term investments are
comprised primarily of United States treasury securities with maturities of less
than one year and money market funds managed by the Company. Although
investments in investment partnerships are for the most part illiquid, the
underlying investments of such partnerships are for the most part liquid and the
valuations of the investment partnerships reflect that underlying liquidity.
29

Summary cash flow data is as follows:
1999
2000 2001 ---- ---- ----2002
-------- -------- --------

(in thousands)
Cash flows provided by (used in):
Operating activities $ (13,454) $ (1,918) $ 139,573$139,573 $(38,347)
Investing activities 4,073 (28,093) (375) 18,539
Financing activities 62,191 (3,750) 96,978 ------------- -------------- -------------25,791
-------- -------- --------
Increase (decrease) in cash and cash equivalents 52,810 (33,761) 236,176 5,983
Cash and cash equivalents at beginning of year 50,222 103,032 69,271 ------------- -------------- -------------305,447
-------- -------- --------
Cash and cash equivalents at end of year $ 103,032 $ 69,271 $ 305,447
============= ============== =============$305,447 $311,430
======== ======== ========

Cash and liquidity requirements have historically been met through
operating activitiesincome and the Company's borrowing capacity. At December 31, 2001,2002, the
Company had cash and cash equivalents of $305.4$311.4 million, an increase of $236.2$6.0
million from the prior year-end.year end. On August 14, 2002 the Company established a
collateral account, consisting of cash and cash equivalents totaling $103.0
million, to secure a letter of credit issued in favor of Cascade Investment
LLC("Cascade"), the holder of the $100.0 million convertible note. The letter of
credit expires on August 14, 2003. Cash provided byand securities held in the collateral
account are restricted from other uses until the letter of credit expires.

Cash used in operating activities of $139.6$38.3 million in 20012002 results
primarily from $70.6$120.0 million provided by the proceeds from net sales ofused to purchase equity securities and U.S.
governmentGovernment obligations which, due to their maturities, are not classified as
cash equivalents, as well asoffset by net income of $53.3 million, the cash savings from
recognizing $18.7 million in deferred tax assets related to the repayment of the
$50 million note payable and the tax benefit related to the exercise of
non-qualified stock options of $4.5 million. Cash provided by operating
activities of $139.6 million in 2001 came primarily from $70.6 million in
proceeds from net sales of investments and reported net income of $61.1 million.

Cash used in operatingprovided by investing activities of $1.9$18.5 million in 2000 results2002 is primarily
due to distributions from $64.7certain partnerships and affiliates of $27.2 million, used for net purchases of equity securities and
U.S. government obligations partially
offset by cash provided by net incomeinvestments in certain partnerships of $58.0$8.1 million. Cash used in
investing activities of $0.4 million in 2001 iswas primarily due to investments in
partnerships and affiliates of $33.6 million, offset by distributions from
partnerships of $26.2 million and proceeds from sales of available for sale
securities of $8.4 million.

Cash used in investingprovided by financing activities of $28.1$25.8 million in 2000 is primarily2002 was largely
due to investmentsthe issuance of $90 million of mandatory convertible securities and $10.8
million received from the exercise of Company stock options by employees
partially offset by the payment of a $50.0 million note in partnershipsJanuary 2002, the
purchase of an additional $17.2 million of our Class A Common Stock and affiliates$5.3
million of $32.5 million.mandatory convertible securities. Cash provided by financing
activities of $97.0 million in 2001 was largely due to the issuance of a $100
million convertible note to Cascade, Investment
LLC, partially offset by the purchase of $3.1
million of additional treasury stock during the year of $3.1 million.year. The note paid interest of
6.5% through August 14, 2002 and pays interest 6.5% during the first year and 6% annually thereafter. The note is
convertible, at the option of the holder, into shares of Class A Common Stock at
$53 per share. Further, at the option of the holder, this note can be put back
to the Company at par on August 13, 2002 or August 13,
2003. Cash used in financing activities of $3.8 million in 2000 was largely due
to the purchase of additional treasury stock during the year.

The Company continues to maintain its investment grade rating which it has
received investment grade ratings from two well respected ratings agencies, Moody's Investors Services and Standard and
Poor's Ratings Services. In assigning their investment ratings both agencies noted the
Company's strong brand, high operating margins and increasing cash flows in
assets under management. The addition ofWe believe that our ability to maintain our investment
grade ratings from two
respected agencies is expected torating will provide greater access to the capital markets, enhance
liquidity and enhance liquidity.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, 20002001 and 2001,2002,
Gabelli & Company had net capital, as defined, of approximately $16.0$10.4 million
and $10.4$13.5 million, respectively, exceeding the regulatory requirement by
approximately $15.8$10.2 million and $10.2$13.2 million, respectively. Regulatory net
capital requirements increase when Gabelli & Company is involved in underwriting
activities.
Market Risk30

MARKET RISK

EQUITY PRICE RISK

The Company is subject to potential losses from certain market risks as a
result of absolute and relative price movements in financial instruments due to
changes in interest rates, equity prices and other factors. The Company's
exposure to market risk is directly related to its role as financial
intermediary and advisor for assets under management in its mutual funds,
institutional and separate accounts business and its proprietary investment and
trading activities. At December 31, 2001,2002, the Company's primary market risk
exposure was for changes in equity prices and interest rates. At December 31,
20002001 and 2001,2002, the Company had equity investments, including mutual funds
largely invested in equity products, of $57.3$52.8 million and $52.8$69.2 million,
respectively. Investments in mutual funds, $32.2$38.9 million and $38.9$38.5 million at
December 31, 20002001 and 2001,2002, respectively, generally lower market risk through
the diversification of financial instruments within their portfolios. In
addition, the Company may alter its investment holdings from time to time in
response to changes in market risks and other factors considered appropriate by
management. The Company's exposureCompany also holds investments in partnerships and affiliates
which invest primarily in equity securities and which are subject to interest rate risk results, principally, from its
investmentchanges in
equity prices. Investments in partnerships and affiliates totaled $65.8 million
and $47.9 million at December 31, 2001 and 2002, respectively, of excess cashwhich $53.8
million and $35.7 million were invested in government obligations.partnerships and affiliates which
invest in event-driven merger arbitrage strategies. These investmentsstrategies are
primarily short termdependent upon deal closure rather than the overall market
environment.

The following table provides a sensitivity analysis for our investments in
natureequity securities and partnerships which invest primarily in equity securities
excluding arbitrage products, for which the fairprincipal exposure is to deal
closure and not overall market conditions, as of December 31, 2001 and 2002. The
sensitivity analysis assumes a 10% increase or decrease in the value of these
investments generally
approximates market value.investments. (In thousands)

FAIR VALUE ASSUMING FAIR VALUE ASSUMING
10% DECREASE IN 10% INCREASE IN
FAIR VALUE EQUITY PRICES EQUITY PRICES
---------- ---------- ----------

AT DECEMBER 31, 2001:
Equity price sensitive investments,
at fair value........................ $ 63,196.5 $ 56,876.9 $ 69,516.2
---------- ---------- ----------
AT DECEMBER 31, 2002:
Equity price sensitive investments,
at fair value........................ $ 78,905.4 $ 71,014.9 $ 86,795.9
---------- ---------- ----------

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

Recent Accounting DevelopmentsINTEREST RATE RISK

The Company's exposure to interest rate risk results, principally, from its
investment of excess cash in government obligations. These investments are
primarily short term in nature and the fair value of these investments generally
approximates market value. The Company's mandatory convertible securities
include a provision to reset the interest rate in November 2004. The reset rate
will be 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
the reset rate was determined at December 31, 2002 the interest rate would have
been approximately 4.1%.

COMMITMENTS AND CONTINGENCIES

The Company is obligated to make future payments under various contracts
such as debt agreements and capital and operating lease agreements. The
following table sets forth the significant contractual cash obligations of the
Company as of December 31, 2002. (In thousands)

Total 2003 2004 2005 2006 2007 Thereafter
-------- -------- -------- -------- -------- -------- --------

Contractual Obligations:
6% Convertible note ..... $100,000 $ -- $ -- $ -- $ -- $ -- $100,000
6.95%-Mandatory
convertible securities 84,545 -- -- -- -- 84,545 --
Capital lease obligations 7,896 756 765 765 765 765 4,080
Non-cancelable operating
lease obligations ..... 1,191 437 247 216 199 92 --
-------- -------- -------- -------- -------- -------- --------
Total ................... $193,632 $ 1,193 $ 1,012 $ 981 $ 964 $ 85,402 $104,080
======== ======== ======== ======== ======== ======== ========

In 1998,addition, the 6% convertible note provides the holder certain put
rights, at par plus accrued interest, on August 13, 2003. If exercised, the
Company 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 $103.0 million to secure a letter of credit in favor of the
convertible note holder. The letter of credit will expire on August 14, 2003.

CRITICAL ACCOUNTING POLICIES

In the ordinary course of business the Company makes a number of estimates
and assumptions relating to the reporting of results of operations and financial
condition in the preparation of its financial statements in conformity with
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 option accounting and the possible
impact of the recently issued accounting policy Financial Accounting Standards BoardInterpretation No.
("FASB"FIN") issued46 "Consolidation of Variable Interest Entities."

REVENUE RECOGNITION

Advisory fees from Mutual Funds and sub-advisory accounts are computed
daily or weekly, while advisory fees from Separate Accounts and certain
alternative investment products are generally computed quarterly based upon
account values as of the end of the preceding quarter. Revenues from our
alternative investment products generally include an incentive allocation of 20%
of the economic profit, as defined, which is recorded as earned. The incentive
allocation fees may increase or decrease during the year as funds' profits
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 fees are finalized and received when the contract
period is completed.

INVESTMENTS

We hold investments in investment partnerships and affiliates, whose
underlying assets consist 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 many of these investments 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 SFAS 142, goodwill and other long-lived intangible
assets were amortized each year. The adoption of SFAS 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, 2002
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. The extent to which assessments may be proposed, the ultimate impact
on future financial results cannot be determined.

STOCK BASED COMPENSATION

As permitted by SFAS No. 133 ("Accounting123, "Accounting for Derivative Instruments and Hedging Activities"). SFAS No.
133, as amended, establishes standardsStock-Based Compensation." we
currently account for recognizing and fair valuing
derivative financial instruments. SFAS No. 133 is required to be adopted for
fiscal years beginning after January 1, 2001. The implementationstock options by the disclosure-only provision of this
statement didStatement, and therefore use the intrinsic value method as prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," for accounting for stock-based compensation. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of our stock at the date of the option grant over the
exercise price. We have not incurred any such compensation expense during the
last three fiscal years. If we had elected to account for our stock based
compensation awards previously issued using the fair value method, the estimated
fair value of awards would have any significantbeen charged against income over the vesting
period. For the year ended December 31, 2002 net income and diluted net income
per share would have been lowered by an estimated $698,000 and $0.03 per share,
respectively under the fair value method. 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 estimate 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
Company's reported
financial positionvalue of the options as well. The effects of changing any of the assumptions or
results of operations.factors employed by the Black Scholes model may result in a significantly
different valuation, net income and net income per share.

RECENT ACCOUNTING DEVELOPMENTS

In JulyJune 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS 141 requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method. Under SFAS 142, intangible assets with indefinite lives and goodwill
will no longer be required to be amortized. Instead, these assets will be
evaluated annually for impairment. The Company will adoptadopted the provisions of SFAS
142 at the beginning of 2002. Based on managements review and evaluation there
was no impairment in the carrying value of its intangible assets including
goodwill and it did not have a material impact on the Company's consolidated
financial statements in 2002.

In April 2002, the 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 the Company's mandatory convertible in 2002 of $613,000 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 doesis not expect the adoptionexpected 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 Interpretations initial recognition and initial
measurement provisions are applicable on a prospective basis to guarantees
issued or modified after December 31, 2002. The Company indemnifies its clearing
broker for losses it may sustain from the customer accounts introduced by the
Company's 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, the Company further limits
margin balances to a maximum of 25% versus 50% permitted under exchange
regulations. At December 31, 2002 the total amount of customer balances subject
to indemnification (i.e. margin debits) was immaterial.

In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" which provides alternative methods of
transition to SFAS 123, "Accounting for Stock-Based Compensation" and also
amends its disclosure provisions. In addition to the Company'sProspective method
originally provided under Statement 123, Statement 148 provides for a modified
prospective and a retroactive restatement method. SFAS 148 further expands the
disclosure requirements to require disclosure in condensed consolidated interim
financial positionstatements for any period in which stock-based awards are outstanding
and accounted for using the intrinsic value method of APB Opinion No. 25. The
Company will begin expensing options using the fair value recognition provisions
of SFAS 123 effective January 1, 2003. We are in the process of determining
which of the three transition methods provided under SFAS 148 will be applied.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities", which provides new criteria for determining whether
or itsnot consolidation accounting is required. This interpretation focuses on
financial interests that indicate control despite the absence of clear control
through voting interests. It concludes that a company's exposure (variable
interest) to the economic risks and rewards from the variable interest entity's
assets and activities are the best evidence of control. If the company holds the
largest variable interest it could be considered the primary beneficiary. As the
primary beneficiary it would be required to include the variable interest
entity's assets, liabilities and results of operations.

Seasonalityoperations in its own financial
statements. This interpretation may require the Company to consolidate or
provide additional disclosures of the financial information for certain
investment partnerships for which it is a general partner. This interpretation
is effective for variable interest entities created after January 31, 2003;
otherwise, it is applicable for the first interim or annual reporting period
after June 15, 2003. If applicable, the Interpretation would require
consolidation of an investment partnership's assets and Inflationliabilities and results
of operation with minority interest recorded for the ownership share applicable
to other investors. The difference between consolidation and the equity method
would 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 maybe required. Refer
to Note C to the consolidated financial statements.

SEASONALITY AND INFLATION

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

ItemITEM 7A: Quantitative and Qualitative Disclosures About Market RiskQUANTITATIVE 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."

ItemITEM 8: Financial Statements and Supplementary DataFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

2834

ItemITEM 8: Financial Statements and Supplementary DataFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

PagePAGE

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

Consolidated Financial Statements:CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Statements of Operations for the years
ended December 31, 1999, 2000, 2001 and 2001...............2002............................ F-3

Consolidated Statements of Financial Condition at
December 31, 20002001 and 2001......................................2002....................................... F-4

Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1999,
2000, 2001 and 2001......................................................2002................. F-5

Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 2000, 2001 and 2001.......................2002........................... F-6

Notes to Consolidated Financial Statements..........................Statements......................... F-7

Supplementary Data:SUPPLEMENTARY DATA:
Unaudited Pro Forma Consolidated Statement of
Income for the year ended December 31, 1999.....................1999...................... F-18

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

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
29

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,
20002001 and 20012002 and the related consolidated statements of income,operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2001.2002. 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, 20002001 and 2001,2002, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001,2002, in conformity with accounting
principles generally accepted in the United States.

ERNST & YOUNG LLP

New York, New York
March 18, 200211, 2003

F-2
30

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended December
YEAR ENDED DECEMBER 31,
------------------------------------------------
1999------------------------------------------
2000 2001 2002
---------- ---------- ----------
(In thousands, except per share data)
Revenues

(IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUES
Investment advisory and incentive fees............................. $ 147,414fees $ 190,200 $ 186,124 $ 177,077
Commission revenue................................................. 11,856revenue ................... 16,805 15,939 13,883
Distribution fees and other income................................. 16,992income ... 26,913 22,351 18,999
---------- ---------- ----------
Total revenues................................................ 176,262revenues .................. 233,918 224,414 209,959
---------- ---------- ----------
ExpensesEXPENSES
Compensation costs................................................. 71,860costs ................... 97,055 85,754 80,387
Management fee..................................................... 10,153fee ....................... 11,296 11,325 9,533
Other operating expenses........................................... 28,917expenses ............. 36,653 33,887 Non recurring charge............................................... 50,725 - -30,377
---------- --------------------- ----------
Total expenses................................................ 161,655expenses .................. 145,004 130,966 120,297
---------- ---------- ----------
Operating income................................................... 14,607income ..................... 88,914 93,448 89,662
---------- ---------- ----------
Other Income (Expense)OTHER INCOME (EXPENSE)
Net gain from investments.......................................... 14,253investments ............ 6,716 5,187 1,353
Interest and dividend income....................................... 6,850income ......... 9,745 9,461 6,757
Interest expense................................................... (3,438)expense ..................... (3,714) (6,174) (11,977)
---------- ---------- ----------
Total other income net....................................... 17,665(expense), net 12,747 8,474 (3,867)
---------- ---------- ----------

Income before income taxes and
minority interest................................................ 32,272interest .................. 101,661 101,922 85,795
Income taxes....................................................... 10,467taxes ......................... 40,257 39,342 32,259
Minority interest.................................................. 3,270interest .................... 3,409 1,482 224
---------- ---------- ----------
Net Income......................................................... $ 18,535income ........................... $ 57,995 $ 61,098 $ 53,312
========== ========== ==========

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

Weighed average shares outstanding:
Basic............................................................ 29,117 29,575 29,666
========== ========== ==========

Diluted.......................................................... 29,117 29,914 30,783
========== ========== ==========

Pro forma data (unaudited):
Income before income taxes and minority interest
as reported................................................. $ 32,272

Pro forma interest expense on $50 million note payable.......... (338)

Pro forma management fee adjustment from 20%
to 10% of pre tax profits................................... 1,096

Pro forma reallocation of expenses to the new
parent company.............................................. 23

Pro forma effect on income and expenses of
Distribution of assets and liabilities...................... (2,256)

Pro forma provision for income taxes............................ (12,728)

Pro forma minority interest..................................... (3,270)
-----------

Pro forma net income............................................ $ 14,799
===========

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

Pro forma weightedWeighted average shares outstanding:
Basic and diluted........................................... 29,890
===========................................ 29,575 29,666 30,092
========== ========== ==========
Diluted .............................. 29,914 30,783 30,302
========== ========== ==========

See accompanying notes.

F-3
31

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

December
DECEMBER 31,
--------------------------
2000 2001 2002
---------- ----------
(In thousands, except share data)

ASSETS

(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS

Cash and cash equivalents...................................................... $ 69,271equivalents, including restricted cash of $103,000 in 2002 $ 305,447 $ 311,430
Investments in securities...................................................... 134,520securities ............................................... 56,293 Investment175,466
Investments in partnerships and affiliates...................................... 56,546affiliates .............................. 65,838 47,932
Receivable from broker......................................................... 3,853brokers ................................................. 36 4,919
Investment advisory fees receivable............................................ 15,307receivable ..................................... 14,651 15,603
Notes and other receivables from affiliates.................................... 11,584affiliates ............................. 11,860 10,440
Capital lease.................................................................. 2,939lease ........................................................... 2,693 2,446
Deferred income taxes.......................................................... 19,382taxes ................................................... 18,661 --
Intangible assets.............................................................. 1,340assets ....................................................... 4,653 4,650
Other assets................................................................... 3,062assets ............................................................ 6,262 9,845
---------- ----------
Total assets..............................................................assets ....................................................... $ 317,804486,394 $ 486,394582,731
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Note payable...................................................................payable ............................................................ $ 50,000 $ 50,000--
Payable to broker.............................................................. -brokers ...................................................... 8,554 17,138
Income taxes payable........................................................... 7,468payable .................................................... 4,733 9,196
Capital lease obligation....................................................... 3,541obligation ................................................ 3,492 3,433
Compensation payable........................................................... 25,670payable .................................................... 21,183 18,459
Securities sold, not yet purchased ...................................... -- 5,022
Accrued expenses and other liabilities......................................... 11,077liabilities .................................. 15,524 15,583
---------- ----------
Total liabilities......................................................... 97,756liabilities .................................................. 103,486 68,831
---------- ----------

6% Convertible note............................................................... -note ..................................................... 100,000 100,000

6.95% Mandatory convertible securities .................................. -- 84,545

Minority interest.............................................................. 17,851interest ....................................................... 7,611 7,562

Stockholders' equity:
Class A Common Stock, $.001 par value; 100,000,000 shares authorized;
6,000,0006,550,000 and 6,550,0007,450,844 shares issued, respectively............................................................... 6respectively ................. 7 8
Class B Common Stock, $.001 par value; 100,000,000 shares authorized;
24,000,00023,450,000 and 23,450,00023,150,000 shares issued and outstanding, respectively.................................................. 24respectively 23 23
Additional paid-in capital................................................... 117,046capital ............................................ 126,001 136,835
Retained earnings............................................................ 93,151earnings ..................................................... 154,249 207,561
Accumulated comprehensive loss............................................... -loss ........................................ (168) (638)
Treasury stock, at cost (480,700(172,096 and 172,096719,622 shares, respectively) (8,030).... (4,815) (21,996)
---------- ----------
Total stockholders' equity................................................ 202,197equity .................................. 275,297 321,793
---------- ----------
Total liabilities and stockholders' equity................................ $ 317,804equity .................. $ 486,394 $ 582,731
========== ==========

See accompanying notes.

F-4
32

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
(DOLLARS IN THOUSANDS)

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1999, 2000 and 2001
(Dollars in thousands)

Accumulated
Other
Additional Compre-
Common Paid-in Retained hensive Treasury Notes
Stock Capital Earnings Loss Stock Receivable TotalACCUMULATED
OTHER
ADDITIONAL COMPRE-
COMMON PAID-IN RETAINED HENSIVE TREASURY
STOCK CAPITAL EARNINGS LOSS STOCK TOTAL
---------- ---------- ---------- ---------- ---------- ----------

Balance at December 31, 1998............1999 ......... $ 230 $ 21,471117,046 $ 184,14135,156 $ --- $ -(4,656) $ (10,714) $ 194,900147,576
---------- ---------- ---------- ---------- ---------- ----------

Net income............................ - - 18,535 - - - 18,535
Issuance of 6,000,000 shares,
Class A Common Stock............... 6 95,575 - - - - 95,581
Issuance of 24,000,000 shares,
Class B Common Stock............... 24 - - - - - 24
Distribution to GFI................... (2) - (165,271) - - 10,714 (154,559)
Distribution to stockholders.......... - - (2,249) - - - (2,249)income ......................... -- -- 57,995 -- -- 57,995
Purchase of treasury stock............ - - - - (4,656) - (4,656)stock ......... -- -- -- -- (3,374) (3,374)
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1999............ 30 117,046 35,156 - (4,656) - 147,576

Net income............................ - - 57,995 - - - 57,995
Purchase of treasury stock............ - - - - (3,374) - (3,374)

Balance at December 31, 2000............2000 ......... 30 117,046 93,151 --- (8,030) - 202,197
---------- ---------- ---------- ---------- ---------- ----------
Comprehensive income:
Net income.......................... - -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...... - - -$136 ... -- -- -- (168) - --- (168)
---------------
Total comprehensive income..........income ...... 60,930
IssuanceExchange of treasury stock for
minority interests in GSI exchange........................ -a
subsidiary ...................... -- 8,955 - --- -- 6,268 - 15,223
Purchase of treasury stock............ - - - -stock ......... -- -- -- -- (3,053) - (3,053)
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2001............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 ......... $ 3031 $ 126,001136,835 $ 154,249207,561 $ (168)(638) $ (4,815)(21,996) $ - $ 275,297321,793
========== ========== ========== ========== ========== ==========

See accompanying notes.

F-5
33

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December
YEAR ENDED DECEMBER 31
---------------------------------------------------
1999------------------------------------------
2000 2001 ------------- ------------ ------------
(In thousands)
Operating activities2002
---------- ---------- ----------

(IN THOUSANDS)
OPERATING ACTIVITIES
Net income.............................................................. $ 18,535income ............................................... $ 57,995 $ 61,098 $ 53,312
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in earnings of partnerships and affiliates..................... (6,793)affiliates ...... (7,435) (1,949) (1,135)
Depreciation and amortization......................................... 740amortization .......................... 706 769 897
Deferred income taxes................................................. (16,887)taxes .................................. (2,495) 721 19,882
Tax benefit from stock options exercised ............... -- -- 4,488
Minority interest in income of subsidiaries........................... 3,270subsidiaries ............ 3,409 1,482 224
Realized losses on available for sale securities...................... - -securities ....... -- 320 Non-recurring charge.................................................. 50,725 - -20
Market value of donated securities ..................... -- -- 412
(Increase) decrease in operating assets:
Investments in securities.......................................... (63,446)securities ........................... (64,729) 70,635 (119,935)
Investment advisory fees receivable................................ (5,418)receivable ................. (1,038) 656 (953)
Notes and other receivables from affiliates........................ (8,483)affiliates ......... 5 (276) 1,419
Other receivables.................................................. -receivables ................................... (798) (650) 417
Receivable from broker............................................. 529broker .............................. (3,853) 3,817 (4,883)
Other assets....................................................... 1,826assets ........................................ (773) (2,919) (4,647)
Increase (decrease) in operating liabilities:
Payable to broker.................................................. 5,637broker ................................... (5,637) 8,554 8,584
Income taxes payable............................................... 1,592payable ................................ 2,876 (2,629) 3,521
Compensation payable............................................... 4,417payable ................................ 15,410 (4,457) (2,641)
Securities sold, but not yet purchased............................. (338)purchased .............. (2) --- 5,022
Accrued expenses and other liabilities............................. 640liabilities .............. 4,441 4,401 ------------- ------------ ------------(2,351)
---------- ---------- ----------
Total adjustments....................................................... (31,989)adjustments ........................................ (59,913) 78,475 ------------ ------------ ------------(91,659)
---------- ---------- ----------
Net cash provided by (used in) operating activities..................... (13,454)activities ...... (1,918) 139,573 ------------ ------------ ------------

Investing activities(38,347)
---------- ---------- ----------
INVESTING ACTIVITIES
Purchases of available for sale securities............................. - -securities ............... -- (1,394) (1,237)
Proceeds from sales of available for sale securities.................... - -securities ..... -- 8,362 735
Distributions from partnerships and affiliates.......................... 5,554affiliates ........... 4,447 26,241 27,154
Investments in partnerships and affiliates.............................. (1,481)affiliates ............... (32,540) (33,584) ------------ ------------ ------------(8,113)
---------- ---------- ----------
Net cash provided by (used in) investing activities..................... 4,073activities ...... (28,093) (375) ------------ ------------ ------------

Financing activities
Distributions to shareholders........................................... (10,023) - -
Cash included in deemed distribution.................................... (18,170) - -18,539
---------- ---------- ----------
FINANCING ACTIVITIES
Purchase of minority stockholders' interest............................. (579)interest .............. (376) 31 Proceeds from issuance of common stock.................................. 95,619 - -(273)
Proceeds from issuance of convertible note.............................. - -note ............... -- 100,000 --
Proceeds from issuance of mandatory convertible securities -- -- 87,738
Repayment of note payable ................................ -- -- (50,000)
Proceeds from exercise of stock options .................. -- -- 10,819
Purchase of mandatory convertible securities ............. -- -- (5,312)
Purchase of treasury stock.............................................. (4,656)stock ............................... (3,374) (3,053) ------------ ----------- ------------(17,181)
---------- ---------- ----------
Net cash provided by (used in) financing activities..................... 62,191activities ...... (3,750) 96,978 ------------ ----------- ------------25,791
---------- ---------- ----------

Net increase (decrease) in cash and cash equivalents.................... 52,810equivalents ..... (33,761) 236,176 5,983
Cash and cash equivalents at beginning of year.......................... 50,222year ........... 103,032 69,271 ------------ ------------ ------------305,447
---------- ---------- ----------
Cash and cash equivalents at end of year................................ $ 103,032year ................. $ 69,271 $ 305,447 ============ ============ ============

Supplemental disclosures of cash flow information$ 311,430
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest.................................................. $ 3,438interest ................................... $ 3,714 $ 6,174 ------------ ------------ ------------$ 11,977
---------- ---------- ----------
Cash paid for income taxes.............................................. $ 25,762taxes ............................... $ 39,884 $ 41,421 ------------ ------------ ------------
Supplemental disclosures of non-cash financing activities$ 4,464
---------- ---------- ----------
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES
Treasury stock exchanged for subsidiary stock held
by minority stockholders.............................................stockholders ............................... $ - $ --- $ 15,223 ------------ ------------ ------------$ --
---------- ---------- ----------
Securities reclassified to available for sale...........................sale ............ $ - $ --- $ 14,278 ------------ ------------ ------------$ --
---------- ---------- ----------

See accompanying notes

F-6
34

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

A. Significant Accounting Policies

Basis of PresentationSIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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

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

The accompanying consolidated financial statements for periods prior to the
date of the Reorganization include the assets,
liabilities and earnings of GFI,GBL its wholly-owned subsidiary GAMCO Investors,
Inc. ("GAMCO"), and GFI'sGBL's majority-owned subsidiaries consisting of Gabelli
Securities, Inc. ("GSI"), Gabelli Fixed Income L.L.C. ("Fixed Income") and
Gabelli Advisers Inc. ("Advisers").

After the Reorganization these financial statements include the
accounts of Gabelli Funds, L.L.C., GAMCO and former GFI majority-owned
subsidiaries GSI, Fixed Income and Advisers.

At December 31, 1999, 2000, 2001 and 2001,2002, the Company owned approximately 77%,
77%92% and 92%, respectively, of GSI, and 41% of Advisers, which, combined with the
voting interests of affiliated parties, represented voting control, and 80% of Fixed Income which commenced operations on April 15, 1997.and a 51% voting interest
in Advisers (41% economic interest.) All significant intercompany transactions
and balances have been eliminated.

Use of EstimatesUSE 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 OperationsNATURE OF OPERATIONS

GAMCO, Gabelli Funds, L.L.C., Fixed Income and Advisers are registered
investment advisers under the Investment Advisers Act of 1940. Gabelli &
Company, Inc. ("Gabelli & Company") and Gabelli Direct Inc. ("Gabelli Direct")
are both wholly owned subsidiaries of GSI, 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 and Gabelli
Direct both act as an introducing broker and all transactions for their
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. Both of these
broker dealers are exposed to credit losses on these open positions in the event
of nonperformance by their customers. This exposure is reduced by the clearing
brokers' policy of obtaining and maintaining adequate collateral until the open
transaction is completed.

Cash EquivalentsCASH AND CASH EQUIVALENTS

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

Securities TransactionsAt December 31, 2002 approximately $103 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, 2003.

F-7
35

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001SECURITIES 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 the Company's management. The resulting unrealized gains and
losses for trading securities are included in net gain (loss) 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.

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

Investments in Partnerships and AffiliatesINVESTMENTS IN PARTNERSHIPS AND AFFILIATES

Investments in partnerships, whose underlying assets consist of marketable
securities, and investments in affiliates are accounted for using the equity
method, under which the Company's share of net earnings or losses of these
partnerships and affiliated entities is reflected in income as earned and
distributions received are reductions of the investments. Investments in
partnerships for which market values are not readily available are stated at
their estimated fair values as determined by the Company's management.

Receivables from and Payables to BrokersRECEIVABLES FROM AND PAYABLES TO BROKERS

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

Revenue RecognitionREVENUE 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 AmortizationDEPRECIATION 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

Theassets consist primarily of the cost in excess of net assets
acquired is recorded as(i.e. goodwill). In July 2001, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 142,
"Goodwill and Other Intangible Assets," which established new accounting and
reporting standards for goodwill and through December 31, 2001, was amortized on a straight-line basis over periods
of tenother intangible assets. Under the new
rules, goodwill and other intangible assets deemed to fifteen years. Subsequent to December 31, 2001, goodwill ishave indefinite lives are
no longer amortized, but are instead will be reviewed at least annually for impairment
in accordance with Statementthe provisions of Financial Accounting Standards ("SFAS")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 "Goodwill and Other Intangible Assets." The new rules require that an assessment
for impairment is made whenever events or changes in circumstances indicate that
goodwill maydid not be recoverable based upon expectations of operating income and
non-discounted cash flows over its remaining life. Accumulated amortization at
December 31, 2000 and 2001 was approximately $791,000 and $1,008,000,
respectively.

Income Taxeshave a material impact
on the Company's consolidated financial statements.

F-8

INCOME TAXES

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

F-8
36

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

Minority InterestMINORITY 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 the Company.

Fair Values of Financial InstrumentsFAIR 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 ShareEARNINGS 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 the Company's convertible
note for the period outstanding since its issuance in August 2001. An average of
339,000, 398,000 and 398,000210,000 incremental shares were included as the dilutive
effect of stock options in 2000, 2001 and 2001,2002, respectively. In 1999 the average of the Company's stock price for the
period during which the stock options were outstanding was lower than the
exercise price of the stock options and therefore was antidilutive and not
included in the calculation of diluted earnings per share. 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. Business SegmentsIn 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.

STOCK BASED COMPENSATION

The Company currently sponsors stock option plans previously adopted and
approved by its shareholders as a means to attract, retain and motivate
employees. The Company has elected to account for stock options under 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 is recognized where the exercise price
equals or exceeds the market price of the underlying stock on the date of grant.
In July 2002 the Company announced it would begin expensing the cost of stock
options effective January 1, 2003 using the fair value recognition provisions of
SFAS No. 123, "Accounting for Stock Based Compensation." Refer also to Notes F
and O.

BUSINESS SEGMENTS

The Company operates predominantly in one business segment, the investment
advisory and asset management industry.

Distribution CostsDISTRIBUTION COSTS

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

F-9
37
RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2002, the 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 extinguishment. Since the issuance of SFAS No. 4 the use of debt
extinguishment has become a part of the risk management strategy of many
companies, particularly those which participate in the secondary lending market.
Debt extinguishments no longer meet the criteria for classification as
extraordinary items in APB Opinion No. 30. Accordingly, gains from the
repurchase of the Company's mandatory convertible securities in 2002 of $613,000
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.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities", which provides new criteria for determining whether
or not consolidation accounting is required. This interpretation focuses on
financial interests that indicate control despite the absence of clear control
through voting interests. It concludes that a company's exposure (variable
interest) to the economic risks and rewards from the variable interest entity's
assets and activities are the best evidence of control. If the company holds the
largest variable interest it could be considered the primary beneficiary. As the
primary beneficiary it would be required to include the variable interest
entity's assets, liabilities and results of operations in its own financial
statements. This interpretation may require the Company to consolidate or
provide additional disclosures of the financial information for certain
investment partnerships for which it is a general partner. This Interpretation
is effective for variable interest entities created after January 31, 2003;
otherwise, it is applicable for the first interim or annual reporting period
beginning after June 15, 2003. If applicable, the Interpretation would require
consolidation of an investment partnership's 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
would 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.

F-10

B. Investments in SecuritiesINVESTMENTS IN SECURITIES

Investments in securities at December 31, 20002001 and 20012002 consisted of the
following:

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 2000 2001
----------------------- ----------------------
Market Market
Cost Value Cost Value2002
--------------------- ---------------------
MARKET MARKET
COST VALUE COST VALUE
-------- -------- -------- --------
(In thousands)
Trading securities:

(IN THOUSANDS)
Trading securities:
U.S. Government Obligations................ $ 76,772 $ 77,204obligations ......... $ 3,476 $ 3,490 $104,323 $104,706
Common stocks.............................. 22,058 22,919stocks ....................... 12,052 12,275 28,859 28,231
Mutual funds............................... 32,602 32,163funds ........................ 32,217 32,195 Preferred stocks........................... 491 542 - -32,726 32,582
Corporate bonds ..................... -- -- 1,598 1,599
Other investments.......................... 1,713 1,692investments ................... 1,648 1,647 2,425 2,425
-------- -------- -------- --------
Total trading securities................... 133,636 134,520securities ............ 49,393 49,607 169,931 169,543
-------- -------- -------- --------

Available for sale securities:
Mutual funds............................... - -funds ........................ 6,990 6,686 7,059 5,923
-------- -------- -------- --------
Total available for sale securities........ - -securities.. 6,990 6,686 7,059 5,923
-------- -------- -------- --------
Total investments in securities............ $133,636 $134,520securities ..... $ 56,383 $ 56,293 $176,990 $175,466
======== ======== ======== ========

At December 31, 2001 and 2002 the market value of investments available for
sale was $6.7 million.million and $5.9 million, respectively. An unrealized holding
loss, net of management fees and taxes, of $0.2 million and $0.6 million in 2001
and 2002, respectively, has been included in stockholders' equity. Proceeds from
sales of investments available for sale were approximately $8.4 million and $0.7
million for the periodperiods ended December 31, 2001.2001 and 2002, respectively. Realized
gains on the sale of investments available for sale amounted to $0.2 million and
$0.1 million and realized losses were $0.5 million and $0.1 million during 2001.2001
and 2002, respectively.

C. Investments in Partnerships and AffiliatesINVESTMENTS IN PARTNERSHIPS AND AFFILIATES

The Company is a co-General Partner of various limited partnerships whose
underlying assets consist primarily of marketable securities. As co-General
Partner, the Company is contingently liable for all of the partnerships'
liabilities. Summary financial information, including the Company's carrying
value and income from these partnerships at December 31, 20002001 and 20012002 and for
the years then ended, is as follows (in thousands):

2000 2001
---- ----

Total assets....................... $ 257,498 $ 268,768
Total liabilities.................. 15,488 25,197
Equity............................. 242,010 243,571
Net earnings....................... 28,150 1,991
Company's carrying value........... 29,739 34,396
Company's income................... 6,5712001 2002
-------- --------
Total assets...................... $268,768 $271,764
Total liabilities................. 25,197 44,577
Equity............................ 243,571 227,187
Net earnings...................... 1,991 774
Company's carrying value.......... 34,396 28,300
Company's income.................. 94
25

Income from the above partnerships for the year ended December 31, 19992000 was
approximately $8,612,000.$6,571,000.

The Company's income from these partnerships consists of its pro rata
capital allocation and its share of a 20% incentive allocation from the limited
partners. The general partners also receive an annual administrative fee based
on a percentage of each partnership's net assets. For the years ended December
31, 1999, 2000, 2001 and 2001,2002, the Company earned administrative fees of approximately
$1,328,000, $1,745,000, $2,193,000, and $2,193,000,$2,041,000, respectively.

At December 31, 20002001 and 2001,2002, the Company had various limited partner
interests in unaffiliated limited partnerships aggregating approximately
$1,077,000$1,161,000 and $1,161,000,$1,596,000, respectively. For the years ended December 31, 1999,
2000,
2001 and 2001,2002, the net gains (losses) recorded by the Company in these investments
approximated ($8,000), $137,000, $100,000, and $100,000,$423,000, respectively.

F-11

At December 31, 2001 and 2002, the Company had investments in various
affiliated offshore funds aggregating $28,694,000 and $18,036,000, respectively.
As the investment advisor, the Company earns an annual administrative fee based
on a percentage of net assets and is entitled to a performance fee based on the
absolute gain in the portfolio. For the years ended December 31, 2001 and 2002,
the Company earned administrative and performance fees of $4,311,000 and
$3,613,000, respectively.

D. Income TaxesINCOME TAXES

The Company accounts 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.

The Company and its greater than 80% owned subsidiaries file a consolidated
federal income tax return. Advisers, the Company's 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.

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

F-10
38

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

The provision (benefit) for income taxes for the years ended December 31,
1999, 2000, 2001 and 20012002 consisted of the following:

1999 2000 2001
---- ---- ----
(In thousands)
Federal:

Current......................... $ 23,895 $ 36,945 $ 33,089
Deferred........................ (15,350) (2,329) 842
State and local:
Current......................... 5,119 5,807 5,426
Deferred........................ (3,197) (166) (15)
------------ ----------- ----------
$ 10,467 $ 40,257 $ 39,342
============ =========== ==========
2000 2001 2002
-------- -------- --------
(IN THOUSANDS)
Federal:
Current ........................ $ 36,945 $ 33,089 $ 10,284
Deferred ....................... (2,329) 842 17,027

State and local:
Current ........................ 5,807 5,426 2,093
Deferred ....................... (166) (15) 2,855
-------- -------- --------
$ 40,257 $ 39,342 $ 32,259
======== ======== ========

The Company's effective tax rate for each of the years ended December 31,
1999, 2000, 2001 and 20012002 was 32.4%39.6%, 39.6%38.6% and 38.6%37.6%, respectively. A reconciliation
of the Federal statutory income tax rate to the effective tax rate is set forth
below:

1999 2000 2001
---- ---- ----

Statutory Federal income tax rate................................ 35.0% 35.0% 35.0%
State income tax, net of Federal benefit......................... 3.9 3.6 3.4
GFI's pre-Offering earnings not subject to tax................... (7.7) - -
Other............................................................ 1.2 1.0 0.2
------ ------ ------
Effective income tax rate........................................ 32.4% 39.6% 38.6%
====== ====== ======
2000 2001 2002
-------- -------- --------
Statutory Federal income tax rate 35.0% 35.0% 35.0%
State income tax, net of Federal
benefit ......................... 3.6 3.4 3.7
Other ............................. 1.0 0.2 (1.1)
-------- -------- --------
Effective income tax rate ......... 39.6% 38.6% 37.6%
======== ======== ========

Significant components of the Company's deferred tax assets and liabilities
were as follows:

2000 2001
---- ----
(in thousands)
Deferred tax assets:

Deferred compensation......................................... $19,830 $ 19,830
Available for sale............................................ - 16
Other deferred................................................ 1,385 1,419
-------- --------
21,215 21,265
-------- --------
Deferred tax liabilities:
Investments in securities and partnerships.................... (1,468) (2,565)
Other......................................................... (365) (39)
-------- --------
Total deferred tax liabilities................................ (1,833) (2,604)
-------- --------

Net deferred tax assets.......................................... $19,382 $ 18,661
=======2001 2002
-------- --------
Deferred tax assets: (in thousands)
Deferred compensation ........................ $ 19,830 $ --
Investments in securities available for sale.. 16 400
Other ........................................ 1,419 523
-------- --------
21,265 923
-------- --------
Deferred tax liabilities:
Investments in securities and partnerships.... (2,565) (1,290)
Other ........................................ (39) (470)
-------- --------
Total deferred tax liabilities ............... (2,604) (1,760)
-------- --------
Net deferred tax assets (liabilities)............ $ 18,661 $ (837)
========
========

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

F-12
E. DebtDEBT

Debt consists of the following:

2000 2001
---- ----

Note payable..................................................... $ 50,000 $ 50,000
Convertible note................................................. - 100,000
--------- ----------
Total............................................................ $ 50,000 $ 150,000
========= ==========

2001 2002
-------- --------
Note payable..................................... $ 50,000 $ --

Convertible note................................. 100,000 100,000
Mandatory convertible securities................. -- 84,545
-------- --------
Total............................................ $150,000 $184,545
======== ========

NOTE PAYABLE

In conjunction with the Reorganization, the Company entered into an
Employment Agreement with its Chairman and Chief Executive Officer ("Chairman")
which, in part, provides that the Chairman will 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. Interest expense recorded on this note was $3,000,000 for both of
the years ended December 31, 2000 and 2001. The note was paid in full on January 2, 2002. F-11
39

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBERInterest expense
recorded on this note was $3,000,000 for each of the years ended December 31,
2000 and 2001, respectively.

CONVERTIBLE NOTE

On August 13, 2001, the Company issued a 10-year, $100 million convertible
note to Cascade Investment LLC ("Cascade"). The convertible note, due August 14,
2011, pays interest semi-annually at 6.5% for the first year and 6% thereafter
and is convertible into the Company's Class A Common Stock at $53 per share. The
note provides the holder with certain put rights, at par plus accrued interest,
on August 13, 2002 and 2003. As a result of the purchase, and upon conversion, Cascade
will own approximately 6% of the Company's aggregate outstanding common stock.

On August 9, 2002, the Board of Directors authorized the Company to
establish a collateral account consisting of cash or securities totaling $103
million to secure a letter of credit in favor of Cascade. The Company will pay
fees of approximately $206,000 for the letter of credit which will expire August
14, 2003. 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 the Company completed its 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 the
Company's 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 the Company's 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 the Company 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 approximately $81,000 has been amortized to interest expense.

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. Through December 31, 2002
the Company repurchased 218,200 shares at an average price of $22.06 per share
and an aggregate cost of $4.8 million. In 2002 a gain of approximately $613,000
attributable to the extinguishment of the debt component of each mandatory
convertible security repurchased has been included in net gain from investments.

F-13
F. Stockholders' EquitySTOCKHOLDERS' EQUITY

STOCK AWARD AND INCENTIVE PLAN

The Company maintains two Stock Award and Incentive Plan

On February 5, 1999,Plans (the "Plans"),
approved by the Board of Directors adopted the 1999 Gabelli Asset
Management Inc. Stock Award and Incentive Plan (the "Plan"),shareholders, which are designed to provide incentives which
will attract and retain individuals key to the success of the Company through
direct or indirect ownership of the Company's common stock. Benefits under the
PlanPlans 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 charged withresponsible for
administering the Plan.Plans. Under the Plan,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 PlanPlans vest 75% after three years and 100% after four
years from the date of grant and expire after ten years.

A summary of the stock option activity for the years ended December 31,
20002001 and 20012002 is as follows:

Weighted Average
Shares Exercise Price
-------------------- --------------------

Outstanding, December 31, 1999.................... 1,093,500 $ 16.28
Granted........................................... 171,000 $ 17.49
Forfeited......................................... (119,500) $ 17.39
---------
Outstanding, December 31, 2000.................... 1,145,000 $ 16.34
Granted........................................... 172,500 $ 31.62
Forfeited......................................... (71,500) $ 18.33
---------
Outstanding, December 31, 2001.................... 1,246,000 $ 18.34
=========

Shares available for future issuance
at December 31, 2001............................ 254,000
=========

None of theWEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- --------------
Outstanding, December 31, 2000........... 1,145,000 $ 16.34
Granted.................................. 172,500 $ 31.62
Forfeited................................ (71,500) $ 18.33
---------
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
=========
Shares available for future issuance
at December 31, 2002................... 1,783,750
=========

At December 31, 2002 there were 104,344 exercisable outstanding stock
options with a weighted average exercise price of $16.28 per share. There were
no stock options granted were exercisable at December 31, 2000 or December 31, 2001.

The Company has elected to account for stock options under the intrinsic
value method. Under the intrinsic value method, compensation expense is
recognized only if the exercise price of the employee stock option is less than
the market price of the underlying stock on the date of grant.

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

F-12
40

1999 2000 2001
---- ---- ----

Weighted average fair value of options granted: $ 9.38 $ 9.13 $ 18.29

Assumptions made:
Expected volatility................. 36% 32% 45%
Risk free interest rate............. 5.14% 6.66% 5.00%
Expected life....................... 8 years 8 years 8 years
Dividend yield......................2000 2001 2002
------- ------- -------
Weighted average fair value of
options granted: $ 9.13 $ 18.29 $ 15.19

Assumptions made:
Expected volatility............ 32% 45% 39%
Risk free interest rate........ 6.66% 5.00% 3.54%
Expected life.................. 8 years 8 years 8 years
Dividend yield................. 0% 0% 0%

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

The dividend yield reflects the assumption that no payout will be made in
the foreseeable future. The expected life is an estimate established at the date
of grant and is not necessarily indicative of exercise patterns which may, in
fact, occur. The weighted average remaining contractual life of the outstanding
options at December 31, 20012002 was 7.56.8 years.

The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its stock option plan. Accordingly, no compensation expense is recognized where
the exercise price equals or exceeds the market price of the underlying stock on
the date of the grant.

F-14

If the Company had elected to account for its stock options under the fair
value method of SFAS No. 123 "Accounting for Stock Based Compensation," the
Company's net income and net income per share would have been reduced to the pro
forma amounts indicated below:

1999 2000 2001
---- ---- ----

Net income (in thousands):

As reported....................... $ 18,535 $ 57,995 $ 61,098
Pro forma......................... $ 17,419 $ 56,679 $ 59,318

Net income per share - Basic
As reported....................... $ 0.64 $ 1.96 $ 2.06
Pro forma......................... $ 0.60 $ 1.92 $ 2.00

Net income per share - Diluted
As reported....................... $ 0.64 $ 1.94 $ 2.03
Pro forma......................... $ 0.602000 2001 2002
-------- -------- --------
Net income (in thousands):
As reported ................... $ 57,995 $ 61,098 $ 53,312
Pro forma ..................... $ 56,679 $ 59,318 $ 52,614

Net income per share - Basic
As reported ................... $ 1.96 $ 2.06 $ 1.77
Pro forma ..................... $ 1.92 $ 2.00 $ 1.74

Net income per share - Diluted
As reported ................... $ 1.94 $ 2.03 $ 1.76
Pro forma ..................... $ 1.90 $ 1.97

Because options vest over several years and$ 1.73

Effective January 1, 2003 the Company anticipates making
further grants,will adopt the effectsfair value recognition
provisions of applying SFAS No. 123 onin accordance with the pro forma disclosures
are not likely to be representative oftransition and disclosure
provisions under the effects on pro forma disclosuresrecently issued SFAS 148, "Accounting for future years.

Stock Repurchase ProgramBased
Compensation - Transition and Disclosure".

STOCK REPURCHASE PROGRAM

In 1999 the Board of Directors established the Stock Repurchase Program
through which the Company had been authorized to purchase up to $9 million of
the Company's Class A Common Stock. The Company 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 its 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. There remains $14.1 million available under this program at
December 31, 2002. Under the program the Company has repurchased 572,900820,426 shares
at an average price of $19.35$24.12 per share and an aggregate cost of $11.1$19.8 million
through December 31, 2001.

Shelf Registration2002. The Company also repurchased 300,000 shares of its
Class B Common Stock held by GGCP, its 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.

SHELF REGISTRATION

On December 28, 2001, the Company 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 of the shelf
registration leaving $220 million for future use. Such securities may be issued
as debt securities, trust preferred securities or Class A Common Stock (see Note O).

Exchange of Common Stock for Minority Stockholders' Interests in SubsidiaryStock.

EXCHANGE OF COMMON STOCK FOR MINORITY STOCKHOLDERS' INTERESTS IN SUBSIDIARY

In May, 2001 the Board of Directors, in an effort to simplify its capital
structure, authorized an offer to exchange four shares of the Company's Class A
Common Stock for each share of Common Stock of its majority owned subsidiary GSI
it did not already own. Under the terms of the exchange offer, which ended on
August 31, 2001, all shares of the Company issued will be restricted from sale
for two years from the date of issuance. In connection with this offer the
Company issued 400,504 shares of its common stock held in treasury and increased
its 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.

F-13
41

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001million and has been included in intangible
assets.

Certain shareholders of GSI are required to sell, upon disassociation with
the Company, their shares to GSI at book value (approximately $1.8$1.9 million at
December 31, 2001)2002).

F-15
G. Capital LeaseCAPITAL LEASE

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

Future minimum lease payments for this capitalized lease at December 31,
20012002 are as follows:

(In thousands)

2002........................................... $ 720
2003........................................... 756
2004........................................... 765
2005........................................... 765
2006........................................... 765
Thereafter..................................... 4,845
-------
Total minimum obligations...................... 8,616
Interest....................................... 2,693
-------
Present value of net obligations............... $ 5,923
=======
(IN THOUSANDS)
2003........................................ $ 756
2004........................................ 765
2005........................................ 765
2006........................................ 765
2007........................................ 765
Thereafter.................................. 4,080
--------
Total minimum obligations................... 7,896
Interest.................................... 2,289
--------
Present value of net obligations............ $ 5,607
========

Lease payments under this agreement amounted to approximately $720,000 for
each of the years ended December 31, 20002001 and 2001, respectively.2002. Future minimum lease
payments have not been reduced by related minimum future sublease rentals of
approximately $227,000,$260,000, of which approximately $70,000$103,000 is due from an
affiliated entity. Total minimum obligations exclude the operating expenses to
be borne by the Company, which are estimated to be approximately $550,000$600,000 per
year.

H. CommitmentsCOMMITMENTS

The Company rents office space under leases which expire at various dates
through January 2006.November 2007. Future minimum lease commitments under these operating
leases as of December 31, 20012002 are as follows:

(In thousands)

2002........... $ 427
2003........... 293
2004........... 151
2005........... 24
2006........... 2
Thereafter..... -

$ 897
(IN THOUSANDS)
2003........................................ $ 437
2004........................................ 247
2005........................................ 216
2006........................................ 199
2007........................................ 92
Thereafter.................................. --
--------
$ 1,191
========

Equipment rentals and occupancy expense amounted to approximately
$1,724,000, $2,156,000, $1,656,000 and $1,656,000,$1,165,000, respectively, for the years ended
December 31, 1999, 2000, 2001 and 2001.2002.

I. Related Party Transactions

F-14
42

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001RELATED PARTY TRANSACTIONS

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

The Company had an aggregate investment in the Funds of approximately
$101,108,000$341,812,000 and $341,812,000$342,153,000 at December 31, 20002001 and 2001,2002, respectively, of
which approximately $68,828,000$304,200,000 and $304,200,000$305,339,000 is invested in a money market
mutual fund at December 31, 20002001 and 2001,2002, respectively.

F-16

Prior to the Reorganization, the Company was required to pay the Chairman a
management fee, which was equal to 20% of the pretax profits of each of the
Company's operating divisions before consideration of this management fee.
Immediately preceding the Offering and in conjunction with the Reorganization,
the Company and its Chairman entered into an Employment Agreement. The Company
has an Employment Agreement with its Chairman, which provides that the Company
will pay the Chairman 10% of the Company's aggregate pre-tax profits while he is
an executive of the Company and devoting the substantial majority of his working
time to the business of the Company. The Employment Agreement further providesprovided
that the Company will pay the Chairman $50 million on January 2, 2002, which amount has been included in note
payable (see Note E).2002. The management
fee was approximately $10,153,000,
$11,296,000, $11,325,000, and $11,325,000$9,533,000 for the years
ended December 31, 1999, 2000, 2001 and 2001,2002, respectively. The Chairman also received
portfolio management compensation and account executive fees of approximately
$31,645,000, $34,203,000, $35,790,000, and $35,790,000,$28,195,000, respectively, for the years ended
December 31, 1999, 2000, 2001 and 2001,2002, which have been included in compensation
costs.

The Company had approximately $2,855,000 and $1,216,000 in various notes receivable
(including accrued interest) outstanding at December 31, 2000 and
2001 respectively, from certain
executive officers and employees in connection with the acquisition of ownership
interests in various subsidiaries and affiliates of the Company. Interest rates
on these notes rangeranged from 5% to 10%. All employee notes receivable (including
accrued interest) were repaid in full during 2002.

J. Financial RequirementsFINANCIAL REQUIREMENTS

The Company is required to maintain minimum capital levels with affiliated
partnerships. At December 31, 2001,2002, the minimum capital requirements
approximated $2,383,000.$2,220,000. In connection with the registration of our London
office with the Financial Services Authority we are required to maintain a
minimum Liquid Capital Requirement of (pound)267,000, ($430,000 at December 31,
2002) and an Own Funds Requirement of (euro)50,000 ($52,500 at December 31,
2002).

As a registered broker-dealer, Gabelli & Company is subject to Uniform Net
Capital Rule 15c3-1 (the "Rule") of the Securities and Exchange Commission.
Gabelli & Company computes its net capital under the alternative method
permitted by the Rule which requires minimum net capital of $250,000. At
December 31, 2001,2002, Gabelli & Company had net capital in excess of the minimum
requirement of approximately $10,183,000.$13,241,000.

K. Administration FeesADMINISTRATION FEES

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

L. Profit Sharing Plan and Incentive Savings PlanPROFIT SHARING PLAN AND INCENTIVE SAVINGS PLAN

The Company has a qualified contributory employee profit sharing plan and
incentive savings plan covering substantially all employees. Company
contributions to the plans are determined annually by the Board of Directors but
may not exceed the amount permitted as a deductible expense under the Internal
Revenue Code. The Company accrued contributions of approximately $80,000,
$60,000 $80,000 and $60,000,$50,000, to the plans for the years ended December 31, 1999, 2000, 2001
and 2001,2002, respectively.

M. Derivative Financial Instruments

Prior to the Reorganization,DERIVATIVE FINANCIAL INSTRUMENTS

In 2002 the Company's 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 the Company as the future satisfaction of
these contracts may be for amounts in excess of the amounts recognized in the
consolidated statements of financial condition.

F-15
43

GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

In connection with this futures activity,these activities, the Company incurred gains of
approximately $542,000,$122,000, during the year ended December 31, 1999.2002. There were no
gains or losses for the years ended December 31, 2000 and 2001. Such gains and
losses were reflected as part of net gain (loss) from investments in the consolidated
statements of income.

F-17
N. Quarterly Financial Information (Unaudited)QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Quarterly financial information for the years ended December 31, 20012002 and
20002001 is presented below.

2001 Quarter
-------------------------------------------------------------------------------------------2002 QUARTER
---------------------------------------------------
(in thousands, except per share data) 1st 2nd 3rd 4th Full Year
--- --- --- --- ---------1ST 2ND 3RD 4TH FULL YEAR
------- ------- ------- ------- -------

Revenues..............................$ 58,344 $ 57,017 $ 56,121 $ 52,932 $ 224,414Revenues ............................ $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 1.76

2001 QUARTER
---------------------------------------------------
Revenues............................. $58,344 $57,017 $56,121 $52,932 $224,414
Operating income (a)................. 26,794 24,915 25,322 27,742 104,773
Net income............................income........................... 14,896 15,841 14,946 15,415 61,098
Net income per share:
Basic..............................Basic............................. 0.50 0.54 0.50 0.52 2.06
Diluted............................Diluted........................... 0.50 0.53 0.49 0.51 2.03

2000 Quarter
-------------------------------------------------------------------------------------------

Revenues..............................$ 57,773 $ 57,120 $ 59,164 $ 59,861 $ 233,918
Operating income (a).................. 25,382 24,925 24,455 25,448 100,210
Net income............................ 13,996 14,254 14,490 15,255 57,995
Net income per share:
Basic.............................. 0.47 0.48 0.49 0.52 1.96
Diluted............................ 0.47 0.48 0.48 0.51 1.94

(a) Excludes management fee expense which is based on pre tax income.2.03

(a) Excludes management fee expense which is based on income before income
taxes and minority interest.

O. Subsequent Events

Company Obligations under Mandatorily Convertible Securities ("FELINE PRIDES")SUBSEQUENT EVENTS

On February 6, 200218, 2003 the Board of Directors approved the sixth option grant
under the Company's Stock Award and Compensation Plans for 633,000 shares at an
exercise price, equal to the closing market price on that date, of $28.95 per
share. These options will vest 75% after three years and 100% after four years
from the date of grant and expire after ten years. Under SFAS No. 123, adopted
by the Company completed its public offeringas of 3.6
million FELINE PRIDES. The FELINE PRIDES initially consist of units referred to
as Income PRIDES that include (i) a purchase contract under whichJanuary 1, 2003, the holdertotal compensation cost for this
option grant based on the Black-Scholes pricing model will purchase shares ofbe approximately $5.9
million. Based on the Company's Class A Common Stock on February 17, 2005option vesting schedule and (ii) senior notes due February 17, 2007. The notes pay interest quarterly at
a rate of 6% per year, which rate isthe 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 the Company's Class A Common Stock. The total number of shares to be issuedoptions
which will be between 1.9vest the impact on net income and net income per diluted share in
2003 is estimated at $1.0 million and 2.3 million,
subject to adjustment in certain circumstances, and depends upon the applicable
market value at that date. In connection with the offering the Company 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 will be recorded as a reduction to
additional paid in capital. Costs incurred in connection with the issuance of
the senior notes will be capitalized as deferred financing costs and amortized
as an adjustment to interest expense over the term of the notes.

F-16
44$0.03, respectively.

F-18

GABELLI ASSET MANAGEMENT INC.ITEM 9: CHANGES IN AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
December 31, 1999

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

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

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999

Pro Forma
As Reported Adjustments Pro Forma
----------- ----------------- ---------
(in thousands except per share data)
Revenues

Investment advisory and incentive fees............ $ 147,414 $ 147,414
Commission revenue................................ 11,856 11,856
Distribution fees and other income................ 16,992 16,992
--------------- ----------------
Total revenues.......................... 176,262 176,262
--------------- ----------------
Expenses
Compensation costs................................ 71,860 71,860
Management fee.................................... 10,153 (1,096) (a) 9,057
Other operating expenses.......................... 28,917 (23) (b) 28,894
Non-recurring charge................................ 50,725 - 50,725
--------------- ------------- ----------------
Total expenses.......................... 161,655 (1,119) 160,536
--------------- ------------- ----------------
Operating income.................................. 14,607 1,119 15,726
--------------- -------------- ---------------
Other Income (Expense)
Net gain from investments......................... 14,253 (1,903) (c) 12,350
Interest and dividend income...................... 6,850 (476) (c) 6,374
Interest expense.................................. (3,438) 123 (c)
(338) (d) (3,653)
--------------- ------------- ---------------
Total other income, net................. 17,665 (2,594) 15,071
--------------- --------------- ---------------
Income before income taxes and minority interest.. 32,272 (1,475) 30,797
Income taxes...................................... 10,467 2,261 (e) 12,728
Minority interest................................. 3,270 - 3,270
--------------- ------------------ ---------------
Net income........................................ $ 18,535 $ (3,736) $ 14,799
=============== ============= ===============
Net income per share:
Basic and diluted............................ $ 0.50
===============
Weighted average shares outstanding:
Basic and diluted............................ 29,890
===============

- ----------

(a) To adjust the management fee to reflect the Employment Agreement, which
provides for a reduction in the fee from 20% to 10% of pre-tax profits.

(b) To reflect the reallocation of expenses to the new parent company.

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

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

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

F-18
45

Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial DisclosureDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ItemITEM 10: Directors and Executive Officers of the RegistrantDIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding the Directors and Executive Officers of the Company
and compliance with Section 16(a) of the Securities Exchange Act of 1934 is
incorporated herein by reference from the sections captioned "Election of
Directors"Directors," "Information Regarding Executive Officers" and "Security Ownership
of Certain Beneficial Owners and Management - Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's definitive proxy statement for its 20022003
Annual Meeting of Shareholders (the "Proxy Statement").

ItemITEM 11: Executive CompensationEXECUTIVE 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.

ItemITEM 12: Security Ownership of Certain Beneficial Owners and ManagementSECURITY 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.

ItemITEM 13: Certain Relationships and Related TransactionsCERTAIN 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: 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 the
Company's management, including our Chief Executive Officer and Chief Financial
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 Financial 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.

II-1
46

PART IV

Item 14: Exhibits, Financial Statement Schedules, and Reports on FormITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) List of documents filed as part of this Report:(A) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT:

(1) Consolidated Financial Statements and Independent Auditors'
Report included herein: See Index on page F-1
(2) Financial Statement Schedules:
Financial statement schedules are omitted as not required or
not applicable or because the information is included in the
Financial Statements or notes thereto.
(3) List of Exhibits:

Exhibit
Number Description of ExhibitEXHIBIT
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 -- Promissory Note, dated August 14, 2001, of the Company (Incorporated
by reference to Exhibit 1.2 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.

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).

II-2
47

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).

10.5 -- 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).

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).

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

23.1 -- Consent of Ernst & Young LLP

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

99.1 -- Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.2 -- Certification of CFO 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(B) REPORTS ON FORM 8-K:

Gabelli Asset Management Inc. filed no reports on Form 8-K during
the fiscal yearCompany's fourth quarter ended December 31, 2001.2002.

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 29, 2002.28, 2003.

GABELLI ASSET MANAGEMENT INC.

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

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
Robert S. Zuccaro 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 DateSIGNATURE TITLE DATE
--------- ----- ----

/s/ Mario J. Gabelli Chairman of the Board, March 29, 200228, 2003
- -----------------------
Mario J. Gabelli-------------------------- Chief Executive Officer and
Mario J. Gabelli Chief Investment Officer
(Principal Executive Officer)

/s/ Robert S. Zuccaro Vice President and Chief March 29, 200228, 2003
- -------------------------------------------------- Financial Officer (Principal
Robert S. Zuccaro Financial Officer (Principal Financial Officer and
Principal Accounting Officer)

/s/ Raymond C. Avansino Director March 29, 200228, 2003
- --------------------------
Raymond C. Avansino

/s/ John C. Ferrara Director March 29, 200228, 2003
- -----------------------------------------------------
John C. Ferrara

/s/ Paul B. Guenther Director March 29, 200228, 2003
- -------------------------------------------------
Paul B. Guenther

/s/ Eamon M. Kelly Director March 29, 200228, 2003
- -----------------------------------------------
Eamon M. Kelly

/s/ Karl Otto Pohl Director March 29, 200228, 2003
- -----------------------------------------------
Karl Otto Pohl

II-4

CERTIFICATIONS

I, Mario J. Gabelli, certify that:

1. I have reviewed this annual report on Form 10-K of Gabelli Asset Management
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

By: /s/ Mario J. Gabelli
-----------------------------
Mario J. Gabelli
Chief Executive Officer

Date: March 28, 2003

I, Robert S. Zuccaro, certify that:

1. I have reviewed this annual report on Form 10-K of Gabelli Asset Management
Inc.;

a.) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

c) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

By: /s/ Robert S. Zuccaro
------------------------------
Robert S. Zuccaro
Chief Financial Officer

Date: March 28, 2003