Original GBL Prospectus - Gabelli

Other operating expenses include product distribution and promotion costs, clearing charges and fees for
GFI's brokerage operation, rental of oÇce space and electronic data equipment and services, insurance,
charitable contributions and other general and administrative operating costs.
Interest and dividend income net, as well as net gain from investments (which includes both realized and
unrealized gains) is derived from proprietary investments of GFI's capital in various public and private
investments.
Net gain from investments is derived primarily from the assets to be distributed to GFI and also includes
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
Ñnancial instruments represent future commitments to sell an underlying index for speciÑed amounts at
speciÑed future dates. In connection with the Formation Transactions, GFI will retain most of the proprietary
investment portfolio (which includes GFI's hedging activities).
In connection with the completion of the OÅering, the Company will become taxable as a
""C'' corporation for federal and state income tax purposes and will pay taxes at an eÅective rate considerably
higher than when GFI 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 GFI's consolidated majority-owned subsidiaries.
Impact of $50 Million Non-Recurring Charge ($1.10 per share) to be Recorded in First Quarter of 1999
On an historical basis, the Company has paid to Mr. Gabelli a management fee equal to 20% of the pretax
proÑts of each of the Company's operating divisions, before consideration of the management fee. Prior to
the OÅering, the Company and Mr. Gabelli entered into an Employment Agreement (the ""Employment
Agreement''). Pursuant to the Employment Agreement, Mr. Gabelli will receive, in addition to his portfolio
management compensation and account executive fees, an incentive-based management fee of 10% of the
aggregate pre-tax proÑts of the Company as computed for Ñnancial reporting purposes in accordance with
generally accepted accounting principles (before consideration of this fee or the $50 million deferred payment
described below or any employment taxes thereon) so long as he is an executive of the Company and devoting
the substantial majority of his working time to its business. Pursuant to the Employment Agreement, Mr.
Gabelli will also receive a deferred payment of $50 million on January 2, 2002, plus interest payable quarterly
at an annual rate of 6%. See ""Management Ì Employment Agreements.'' The Company will incur a nonrecurring
charge of $50 million, before a tax beneÑt of approximately $20 million, upon the eÅective date of
the Employment Agreement, which occurred in the Ñrst quarter of 1999. This payment, net of tax beneÑt, will
reduce earnings by $1.10 per share (based on the expected weighted average number of shares outstanding in
the Ñrst quarter of 1999 of 27.3 million).
Operating Results for Nine Months Ended September 30, 1998 as Compared to Nine Months Ended
September 30, 1997
Total revenues for the nine months ended September 30, 1998 were $102.3 million, an increase of $27.5
million, or 37%, compared to $74.8 million for the nine months ended September 30, 1997. Investment
advisory and incentive fees, comprising 84% of total revenues, increased $22.2 million, or 35%, to $86.3
million, as GFI experienced strong growth in the level of average assets under management in both its Mutual
Funds and Separate Accounts businesses. Total average assets under management, which is the basis for
investment advisory and incentive fees, were $14.8 billion for the nine months ended September 30, 1998, an
increase of $3.7 billion, or 33%, compared to average assets under management of $11.1 billion in the same
period a year earlier. Total assets under management at September 30, 1998 were $13.9 billion, an increase of
$1.1 billion from assets under management of $12.8 billion at September 30, 1997. Assets under management
in Mutual Funds were $7.0 billion at September 30, 1998, an increase of approximately $1.1 billion, or 19%,
from September 30, 1997. This increase represents approximately $1.2 billion in net cash inÖows oÅset by $56
million from market-related depreciation. Assets under management in Separate Accounts were $6.7 billion at
September 30, 1998 and $6.8 billion at September 30, 1997. Growth in revenues was greater than growth in
assets due to a greater weighting of assets to higher fee equity portfolios.
28