Financial Results
Revenues for the initial three months of 2002 were $58.0 million compared to $58.3 million in the prior year quarter. Operating income increased 5% to $28.1 million from the $26.8 million earned in the first quarter of 2001. Net income was $15.4 million, or a record $0.51 per diluted share versus $14.9 million or $0.50 per diluted share in the first quarter of 2001. Record earnings were achieved despite an increase in shares outstanding to 32.2 million fully diluted versus 29.8 million from the comparable prior year period.

Growth Drivers
Assets under management at March 31, 2002 climbed 9.5% to a record $25.9 billion from the $23.7 billion under management at March 31, 2001, and were 4.7% higher than the $24.8 billion reported at December 31, 2001. Average assets under management were $24.6 billion in the 2002 quarter against $24.2 billion in the first quarter of 2001 and $23.8 billion during the fourth quarter of 2001. Assets grew $1.2 billion during the 2002 quarter with the growth about evenly divided between cash inflows and market appreciation. Roughly two-thirds of this increase in assets was generated by GAMCO through our institutional and high net worth business. Since GAMCO’s fees are mostly billed on asset levels at the beginning of the quarter, the full effect of the asset growth will be reflected in the second quarter of 2002. During the first quarter
of 2002 our assets in open-end equity mutual funds rose 3.7% to $8.6 billion.

Revenues were about the same on a year-to-year basis as the increase in investment advisory and incentive fees was offset by lower commissions and lower 12b-1 distribution fees. The growth in investment advisory and incentive fees was generated primarily by higher revenues from GAMCO’s institutional and high net worth business.

Operating margins improved to 48.5% from 45.9% in the initial quarter of 2001 as total expenses declined more than $1.6 million, or 5.2%, to $29.9 million from $31.6 million a year earlier. Compensation costs benefited as we re-engineered our outlays to add to our research capabilities in our sell-side broker dealer operation while reducing administrative staff. Operating expenses were 11% lower in the 2002 quarter reflecting lower mutual fund administration and distribution costs, resulting from lower asset levels in these funds, as well as our continued efforts to better manage and reduce our overall cost structure.

Interest expense increased $1.8 million to $2.7 million from $0.9 million in the first quarter of 2001 due to the issuance of two convertible securities, with proceeds totaling $190 million, in August 2001 and February 2002. This increase was partially offset by the repayment of a $50 million note on January 2, 2002. While investable funds in our proprietary portfolio averaged $435 million in the quarter versus $274 million a year ago, lower interest rates coupled with our conservative investment strategy resulted in investment income being unchanged at $2.1 million.

The effective tax rate in the first quarter of 2002 was 37.6% versus 38.6% in calendar 2001 as we anticipate the full year tax rate to benefit from lower state tax rates and other tax planning opportunities. Minority interest declined as a result of the share exchange program, completed in August 2001, in which we increased our ownership in Gabelli Securities, Inc. to 92% from 77%.

We continue to build a strong and liquid balance sheet. Cash and investments were $482 million at March 31, 2002 versus $428 million at December 31, 2001 and $283 million at March 31, 2001. In addition, we have a $20 million tax credit which will be utilized during 2002. Convertible debt, consisting of a $100 million convertible note and $90 million in mandatory convertible securities, totaled $190 million on March 31, 2002 as compared to $100 million at December 31, 2001. Stockholders’ equity was $295 million at March 31, 2002 versus $216 million a year earlier.

Our cash position reflects the February 6, 2002 sale of $90 million mandatory convertible securities. The 3.6 million shares we sold trade on the NYSE (GBL.I) and consist of both a contract to purchase shares of GBLon February 17, 2005 and 6% senior notes due in February 2007. Under the purchase contract the number of shares of our Class ACommon Stock to be issued will be between 1.9 million and 2.3 million based upon the applicable market value at that date.

Share Repurchase Program
During the quarter the company repurchased 93,000 shares of its common stock for $3.6 million. The total number of shares repurchased since the inception of the stock repurchase program is 666,000, with an average cost of $22.02 per share. As of March 31 an authorization to repurchase an additional $4.2 million of stock remains outstanding.

Investment, Business and Other Highlights

• Assets under management at GAMCO rose 6.3% in the first quarter of 2002 to a record $13.0 billion. Growth drivers included $243 million of business from new clients. Net fund inflows from existing clients of $141 million and positive portfolio performance also added to the overall growth in managed assets.

• Assets in our twenty-eight open-end and four closed-end mutual funds totaled $12.3 billion at March 31, 2002 up from $ 11.7 billion on March 31, 2001 and $12.0 billion at year end 2001. Net fund inflows into Gabelli Mutual Funds were $185 million including $146 million into open-end equity funds.

• Six Gabelli and Gabelli Westwood Funds, representing more than 50% of total rated fund assets, received Morningstar Inc.’s coveted “Five Star” rating. Three of these funds, Gabelli Asset, Gabelli Value, and the Gabelli Westwood Mighty Mites, also were designated “Best in Class” in the March 2002 issue of Mutual Funds Magazine.

• The Gabelli Gold Fund, with a total return of 97.4% for the twelve months ended March 31, 2002, was ranked #1 in its category by Lipper Inc.

• Gabelli Japanese Value Partners, an event-driven offshore equity fund, was started on April 1, 2002 increasing the number of alternative investment products available to institutional and high net worth investors to nine.

• We received an investment grade rating from Moody’s Investors Service, which complements an investment grade rating previously received from Standard & Poor’s. On assigning their rating Moody’s noted our strong brand, financial fundamentals, fund performance and product diversification.

Mario J. Gabelli
Chairman & Chief Executive Officer

Special Note Regarding Forward-Looking Information
Our disclosure and analysis in this report 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 Form 10-K and other public filings. 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.

Assets Under
Management Grid

Unaudited Consolidated
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Unaudited Condensed
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of Financial Condition

Unaudited Condensed
Consolidated Statements
of Income

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