EX-99.1 2 a2224748zex-99_1.htm EX-99.1

Use these links to rapidly review the document
TABLE OF CONTENTS
Gabelli Securities Group and Subsidiaries Combined Consolidated Financial Statements Years ended December 31, 2014, 2013 and 2012

Table of Contents


Exhibit 99.1

        GAMCO INVESTORS, INC.
One Corporate Center
Rye, NY 10580

            , 2015

Dear Owner:

        We are pleased to report that the previously announced plan to spin-off our alternative investment management business, our institutional research services business and certain cash and other assets (collectively, the "Gabelli Securities Group") is expected to become effective on                  , 2015. Prior to the spin-off, GAMCO Investors, Inc. ("GAMCO") will transfer the businesses and assets of the Gabelli Securities Group to Gabelli Securities Group, Inc. ("GSG"), a newly formed holding company that will become a public company on                  , 2015. Following the spin-off, GSG will have approximately $1.0 billion in assets under management, and GAMCO will have approximately $46.5 billion in assets under management.

        We believe that separating the Gabelli Securities Group as an independent, publicly owned company is in the best interests of both GSG and GAMCO. The spin-off will permit each company to tailor its strategic plans and growth opportunities, more efficiently raise and allocate resources, including capital raised through debt or equity offerings, allow flexibility for each company to use its own stock as currency for teammate incentive compensation and potential acquisitions and provide investors a more targeted investment opportunity.

        At the time of the spin-off, you will receive:

    one share of GSG class A common stock, par value $0.001 per share ("GSG Class A Stock"), for each share of GAMCO class A common stock, par value $0.001 per share ("GAMCO Class A Stock"), that you hold at 5:00 p.m. New York City time on                  , 2015 (the "record date"); and

    one share of GSG class B common stock, par value $0.001 per share ("GSG Class B Stock"), for each share of GAMCO class B common stock, par value $0.001 per share ("GAMCO Class B Stock"), that you hold on the record date.

        If you sell your shares of GAMCO Class A Stock or GAMCO Class B Stock (collectively, "GAMCO common stock"), prior to            , 2015, the ex-dividend date, you may also be selling your right to receive shares of GSG Class A Stock and/or GSG Class B Stock (collectively, "GSG common stock") in the spin-off. You are encouraged to consult with your financial advisor regarding the specific implications of selling your GAMCO common stock prior to or on the distribution date.

        We intend for the distribution of GSG common stock in the spin-off to be tax-free for our stockholders. It is a condition to completing the spin-off that we receive an opinion of counsel that the distribution of GSG common stock to GAMCO stockholders will qualify as a tax-free distribution for United States federal income tax purposes.

        In due course, you will be provided with information to assist you in computing your tax bases in the GAMCO common stock and the GSG common stock.

        Following the distribution, you will own shares in both GAMCO and GSG. The GAMCO Class A Stock will continue to trade on the New York Stock Exchange under the symbol "GBL." GSG intends to list the GSG Class A Stock on the New York Stock Exchange under the symbol "            ." Consistent with the GAMCO Class B Stock, the GSG Class B Stock will not be listed on any exchange, nor will it be transferable. However, with the approval of GSG's board of directors, the GSG Class B Stock can be converted into GSG Class A Stock, just as the GAMCO Class B Stock may be converted into GAMCO Class A Stock with the approval of the GAMCO board of directors.

        The enclosed information statement, which is being mailed to all holders of GAMCO common stock on the record date, describes the distribution in detail and contains important information about


Table of Contents

GSG, its business, financial condition and results of operations. We urge you to read the information statement carefully.

        We want to thank you for your continued support of GAMCO, and we look forward to your future support of GSG. Please note that no stockholder vote is required for the spin-off to occur, and no stockholder vote is being sought.

        Stockholders of GAMCO with inquiries related to the distribution should contact GAMCO's transfer agent, Computershare Trust Company, N.A., at (877) 282-1168 or (781) 575-2879 (outside the United States, Canada and Puerto Rico).

    Sincerely,

 

 

/s/ KEVIN HANDWERKER

EVP and General Counsel

Table of Contents

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to the GSG Class A Stock has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

PRELIMINARY INFORMATION STATEMENT SUBJECT TO COMPLETION, DATED MAY 12, 2015

INFORMATION STATEMENT
RELATING TO THE DISTRIBUTION OF COMMON STOCK OF

GABELLI SECURITIES GROUP, INC.
by
GAMCO INVESTORS, INC.

        This information statement is being furnished in connection with the distribution by GAMCO Investors, Inc. ("GAMCO") to holders of its common stock of all the outstanding shares of common stock of its wholly owned subsidiary Gabelli Securities Group, Inc., a newly formed Delaware corporation ("GSG"). Prior to the distribution, GAMCO will transfer to GSG its alternative investment management business, its institutional research services business and certain cash and other assets (collectively, the "Gabelli Securities Group").

        As a result of the spin-off, you will receive:

    one share of GSG class A common stock, par value $0.001 per share ("GSG Class A Stock"), for each share of GAMCO class A common stock, par value $0.001 per share ("GAMCO Class A Stock"), that you hold at 5:00 p.m. New York City time on                        , 2015 (the "record date"); and

    one share of GSG class B common stock, par value $0.001 per share ("GSG Class B Stock"), for each share of GAMCO class B common stock, par value $0.001 per share ("GAMCO Class B Stock"), that you hold on the record date.

        In addition, our management team, along with certain of GAMCO's teammates, will receive shares of GSG Class A Stock in the distribution as a result of their ownership of certain equity awards of GAMCO entitling them to the same benefits as holders of GAMCO Class A Stock. The distribution will be effective at 11:59 p.m. New York City time on                        , 2015 (the "distribution date"). For GAMCO stockholders who own GAMCO Class A Stock or GAMCO Class B Stock (collectively, "GAMCO common stock"), in registered form, in most cases the transfer agent will credit their shares of GSG Class A Stock or GSG Class B Stock (collectively, "GSG common stock") to book-entry accounts established to hold their GSG common stock. Our distribution agent will mail these stockholders a statement reflecting their GSG common stock ownership shortly after the distribution date. For stockholders who own GAMCO common stock through a broker, bank or other nominee, their shares of GSG common stock will be credited to their accounts by that broker, bank or other nominee.

        No stockholder approval of the distribution is required. GAMCO stockholders will not be required to pay for the shares of GSG common stock to be received by them in the distribution or to surrender or to exchange shares of GAMCO common stock in order to receive GSG common stock or to take any other action in connection with the distribution.

        There is currently no trading market for the GSG common stock. We will apply to have the GSG Class A Stock listed on the New York Stock Exchange (the "NYSE") under the symbol "        ."

        In reviewing this information statement, you should carefully consider the matters described in "Risk Factors" beginning on page 16.

        Upon completion of the spin-off, Mario J. Gabelli and his affiliates will control approximately 95% of the voting power and approximately 73% of the outstanding shares of GSG common stock. As a result, we will be a "controlled company" within the meaning of the corporate governance standards of the NYSE. See "Management—Corporate Governance—Controlled Company Exception."

        We are an "emerging growth company" as well as a "smaller reporting company," each as defined under the federal securities laws. See "Business—Status as an Emerging Growth Company and a Smaller Reporting Company."

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

        This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

        GAMCO first mailed this information statement to its stockholders on                        , 2015

        The date of this information statement is                        , 2015.


Table of Contents


TABLE OF CONTENTS

 
  Page  

SUMMARY

    1  

RISK FACTORS

   
16
 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

   
30
 

THE SPIN-OFF

   
31
 

DIVIDEND POLICY

   
40
 

REGULATORY APPROVALS

   
40
 

BUSINESS

   
41
 

SELECTED HISTORICAL COMBINED CONSOLIDATED FINANCIAL DATA

   
52
 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   
53
 

ARRANGEMENTS BETWEEN GAMCO AND GSG AFTER THE SPIN-OFF

   
66
 

MANAGEMENT

   
70
 

EXECUTIVE COMPENSATION

   
79
 

DESCRIPTION OF CAPITAL STOCK

   
84
 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

   
87
 

LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

   
90
 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   
91
 

WHERE YOU CAN FIND MORE INFORMATION

   
93
 

COMBINED CONSOLIDATED FINANCIAL STATEMENTS

   
F-1
 

******

i


Table of Contents

 


SUMMARY

        This summary highlights selected information contained elsewhere in this information statement relating to the separation of the Gabelli Securities Group from GAMCO and the distribution of GSG common stock by GAMCO to the holders of GAMCO common stock. This summary may not contain all of the information that is important to you. To better understand the separation and GSG, you should carefully read this entire information statement including the risks described in "Risk Factors" and our financial statements and the notes thereto beginning on page F-1.

        Except as otherwise indicated or unless the context otherwise requires, "GSG," "we," "us," "our" and "the Company" refer to Gabelli Securities Group, Inc., a Delaware corporation, and its subsidiaries, which after giving effect to the spin-off will succeed to the business of the Gabelli Securities Group. References to the "Formation Transactions" mean the transactions to be completed by GAMCO and its affiliates to facilitate or in connection with the spin-off as described in "The Spin-Off—The Formation Transactions." All references to "GAMCO" are: (i) for periods prior to the Formation Transactions, GAMCO Investors, Inc., individually or together with its subsidiaries as the context may require; and (ii) for periods after the Formation Transactions, GAMCO Investors, Inc., excluding the Gabelli Securities Group, after giving effect to the spin-off. Unless the context otherwise requires, all references in this information statement to our certificate incorporation and bylaws refer to our certificate of incorporation and bylaws as amended and restated prior to the spin-off.

        We refer in this information statement to the transaction in which we will be spun-off from GAMCO and become an independent public company as the "separation," the "distribution" or the "spin-off."

        Unless otherwise indicated or the context requires otherwise, we describe in this information statement the Gabelli Securities Group businesses to be contributed to us by GAMCO as if the spin-off has already occurred. However, we are a newly formed entity that will not have conducted any separate operations prior to the spin-off and some of the actions necessary to transfer assets and liabilities of GAMCO to us have not occurred but will occur prior to the distribution date. Following the spin-off, we will be an independent public company. Accordingly, our historical financial results as part of GAMCO contained herein may not reflect our financial results in the future as an independent public company or what our financial results would have been had we been an independent public company during the periods presented.

Our Business

        We are a newly formed Delaware corporation organized to be the holding company for GAMCO's alternative investment management business, institutional research services business and certain cash and other assets in the spin-off. Our principal executive offices are located at One Corporate Center, Rye, NY 10580. Our telephone number is (914) 921-5135. Our website address is www.GabelliSecuritiesGroup.com. Information contained on or connected to our website does not and will not constitute part of this information statement or the Registration Statement filed on Form 10, of which this information statement is a part.

Alternative Investment Management

        We own a 93.9% interest in Gabelli Securities, Inc. ("GSI"), a registered investment advisor. GSI and its wholly owned subsidiary, Gabelli & Partners, LLC ("Gabelli & Partners"), collectively serve as general partners or investment managers to investment funds including limited partnerships and offshore companies (collectively, "Investment Partnerships"), and separate accounts. We primarily manage assets in equity event-driven value strategies, across a range of risk and event arbitrage portfolios. The business earns fees from its advisory assets, and income (loss) from trading and investment portfolio activities. The advisory fees include management and incentive fees. Management fees are largely based on a percentage of the portfolios' levels of assets under management ("AUM"). Incentive fees are based on the percentage of profits derived the from investment performance

 

1


Table of Contents

delivered to clients' invested assets. As of December 31, 2014, we managed a total of $1.0 billion in assets. GSI is registered with the Securities and Exchange Commission (the "SEC") as an investment advisor under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). Certain employees of GAMCO own 1.9% of GSI, and the remaining 4.2% of GSI is owned by individual investors unrelated to GAMCO.

Institutional Research Services

        We operate our institutional research services business through G.research, Inc. ("G.research"), a wholly owned subsidiary of GSI. G.research is a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Through G.research, we provide institutional research services as well as act as an underwriter. G.research is regulated by the Financial Industry Regulatory Authority ("FINRA"). G.research's revenues are derived primarily from institutional research services.

Our Strategy

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

    continuing an active fundamental Investment Approach;

    growing our Investment Partnerships advisory business;

    capitalizing on acquisitions, alliances and lift-outs;

    pursuing partnerships and joint ventures;

    continuing our sponsorship of industry conferences; and

    attracting and retaining experienced professionals.

        For more information, see "Business—Business Strategy."

The Spin-Off

        GAMCO's board of directors (the "GAMCO Board") regularly reviews the various businesses conducted by GAMCO to ensure that resources are deployed and activities are pursued in the best interests of its stockholders. As part of this evaluation of a possible separation, the GAMCO Board considered a number of factors, including the strategic focus and flexibility of the businesses, their ability to operate and compete efficiently and effectively and the probability of the successful execution of the various structural alternatives. Upon careful review and consideration, the GAMCO Board determined that the spin-off of the Gabelli Securities Group is in the best interests of GAMCO. The GAMCO Board's determination was based on a number of factors, including the following:

    Potential Increase in Aggregate Stock Value.  Following a spin-off, a number of corporations have experienced an increase in the aggregate stock value of the two companies' shares. An increase in the aggregate stock value would better enable both GAMCO and GSG to use their respective stock to pursue and achieve their respective strategic objectives, including enhanced equity compensation programs and potential acquisitions with less dilution to existing stockholders.

    Creation of Two Focused Companies.  While there will initially be some overlap between the senior management of GAMCO and the senior management of GSG, primarily the Chief Executive Officer, a senior financial executive and a legal executive, we intend and expect that the amount of such overlap will decline over time. As a result of the spin-off, the employees and

 

2


Table of Contents

      board of directors of each company will be able to more fully focus on their respective priorities with customized operating models and financial targets that best fit each company's business, markets and unique opportunities. This increase in focus is expected to result in an increase in accountability for decisions.

    Tailored Capital Structure and Financing Options.  After the spin-off, we and GAMCO will have increased flexibility to tailor our respective capital structures to our individual needs, and, as separate companies, each may be able to attain more favorable financing terms and lower blended costs of capital. In addition, tailored capital structures may facilitate our and GAMCO's ability to pursue acquisitions and strategic alliances possibly using common stock as currency.

    Increased Transparency.  The spin-off will increase transparency and clarity of the businesses of each of GAMCO and GSG and allow investors to more accurately value the merits, performance and future prospects of each company.

    Reduced Conflicts With Respect to Marketing Various Products.  Internal marketing conflicts at GAMCO and GSG will be decreased, as GAMCO is not expected to offer alternative investment products ("Alternative Investments").

    Potential Reduced Volatility in GAMCO Common Stock and Possible Improved Valuation for GAMCO.  The inherent volatility effects of performance fees received by the Gabelli Securities Group on GAMCO common stock will be reduced, which may result in an improved valuation for GAMCO's far larger mutual fund and institutional and private wealth management businesses.

    Ability to Use Competitors of Each Company.  GSG will be able to partner with competitors of GAMCO to the extent such competitors' products may be useful to GSG. In addition, GAMCO will be able to use the services of GSG's competitors.

    Provide Incentive Compensation that is More Relevant to Teammates of Each Business.  The spin-off will create a new class of publicly traded equity securities and permit the creation of restricted stock units and other forms of equity compensation for GSG, which will enable it to:

    provide incentive compensation arrangements for its key teammates that are directly related to the performance of GSG;

    provide enhanced incentives to teammates of GSG for achieving superior performance; and

    improve GSG's ability to attract, retain and motivate qualified personnel.

        With $1.0 billion in AUM at December 31, 2014, GSG represented 2.1% of GAMCO's AUM, which was $47.5 billion at December 31, 2014. We believe that GSG, following the spin-off, will devote greater attention to implementing a growth strategy as it will no longer be overshadowed by the GAMCO umbrella under which it currently operates. In order to facilitate this spin-off, GSG's board of directors (our "Board") appointed Mario J. Gabelli, the Chairman and Chief Executive of GAMCO, to serve as our Executive Chairman and Chief Executive Officer and Marc Gabelli to serve as our President. Kieran Caterina, GAMCO's Finance Director and Co-Chief Accounting Officer, will also serve as our Chief Financial Officer. We have appointed Salvatore F. Sodano, Daniel R. Lee, Bruce M. Lisman and Richard L. Bready as independent members of our Board, and Mr. Sodano will serve as Vice Chairman of our Board. Messrs. Bready and Marc Gabelli are both current members of the GAMCO Board. It is expected that Mr. Bready will resign from the GAMCO Board on the distribution date. We believe that the spin-off and new independent board representation, along with management hires we make in the future, will enable us to devote greater attention to implementing a growth strategy. That strategy will be focused entirely on benefiting GSG and our stockholders, rather than on functioning as part of the larger GAMCO organization, in which decisions must take into account the interests of the entire entity, not solely those of GSG.

 

3


Table of Contents

Status as an Emerging Growth Company and Smaller Reporting Company

        As a company with less than $1 billion in revenues during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act (the "JOBS Act"). For as long as a company is deemed to be an emerging growth company, it may take advantage of certain reduced reporting and other regulatory requirements that are generally unavailable to other public companies.

        In addition, we qualify as a "smaller reporting company" under the Exchange Act. As a smaller reporting company, we enjoy many of the same exemptions as emerging growth companies, and those exemptions would continue to be available to us even after the emerging growth company status expires if we still are a smaller reporting company at such time. For a discussion of the implications of our status as an "emerging growth company" and as a "smaller reporting company," see "Business—Status as an Emerging Growth Company and Smaller Reporting Company" and "Risk Factors—Risks Related to the GSG Common Stock—The reduced disclosure requirements applicable to us as an 'emerging growth company' and a 'smaller reporting company' may make GSG common stock less attractive to investors."

 

4


Table of Contents

Our Assets Under Management

        The following table sets forth GSG's total AUM for the dates shown.


Assets Under Management
(in thousands)

 
  At December 31,  
Category(a)
  2010   2011   2012   2013   2014  

Event Merger Arbitrage

  $ 400,996   $ 512,661   $ 721,065   $ 690,975   $ 795,894  

Event-Driven Value

    54,994     131,833     123,648     140,091     166,825  

Other(b)

    59,593     65,300     75,469     76,050     76,827  

Total

  $ 515,533   $ 709,794   $ 920,182   $ 907,116   $ 1,039,546  

(a)
Asset levels include various structures, including managed accounts, partnerships and offshore companies.

(b)
Includes investment vehicles focused on private equity, merchant banking, non-investment-grade credit and capital structure arbitrage.

Conflicts of Interest

        See "Certain Relationships and Related Party Transactions."

 

5


Table of Contents

 


Questions and Answers About the Spin-Off

        See "The Spin-Off" for a more detailed description of the matters summarized below.

How will the spin-off work?

  All shares of GSG common stock are currently held by GAMCO. On the distribution date, all of the shares of GSG common stock held by GAMCO will be distributed pro rata to the holders of GAMCO common stock as of the record date.

What is being distributed in the distribution?

 

Approximately            shares of GSG Class A Stock and            shares of GSG Class B Stock will be distributed in the distribution, based upon the number of shares of GAMCO common stock expected to be outstanding on the record date. The shares of GSG common stock to be distributed by GAMCO will constitute all of the issued and outstanding shares of GSG common stock immediately after the distribution. The actual number of shares of GSG common stock to be issued in the distribution will be determined as of the record date. For more information, see "Shares Eligible for Future Sale" and "Description of Capital Stock—Common Stock and Performance Common Stock."

What is the record date for the distribution?

 

5:00 p.m. New York City time on                        , 2015.

When will the distribution occur?

 

We expect that shares of GSG common stock will be distributed by our transfer agent in its capacity as the distribution agent, on behalf of GAMCO, effective at 11:59 p.m. New York City time on the distribution date.

If I am a record holder of GAMCO common stock, when will I receive my GSG common stock? Will I receive a stock certificate for GSG common stock distributed as a result of the spin-off?

 

Registered holders of GAMCO common stock who are entitled to participate in the spin-off will receive their shares in book-entry form on the distribution date. A book-entry account statement reflecting their ownership of GSG common stock will be provided shortly after the distribution date. For additional information, registered stockholders in the United States, Canada or Puerto Rico should contact GAMCO's transfer agent, Computershare Trust Company, N.A., at (877) 282-1168 or through its website at www.computershare.com. Stockholders from outside the United States, Canada and Puerto Rico may call (781) 575-2879. See "The Spin-Off—When and How You Will Receive Shares of GSG Common Stock."

If I hold my GAMCO common stock through a broker, bank or other nominee, when will I receive my GSG common stock?

 

It is expected that persons that hold their GAMCO common stock through a broker, bank or other nominee will have their brokerage account credited with GSG common stock shortly after the distribution date. For additional information, those stockholders should contact their broker or bank directly.

 

6


Table of Contents

What will GSG's relationship with GAMCO be after the spin-off?

 

After the spin-off, the principal elements of our relationship with GAMCO will be governed by a Separation and Distribution Agreement (the "Separation Agreement") and a Transitional Administrative and Management Services Agreement (the "Administrative Agreement"). We cannot assure you that these agreements will be on terms as favorable to GSG as agreements with unaffiliated third parties. Among the principal services GAMCO will provide to us pursuant to the Administrative Agreement are:

 

general corporate management services, as well as supervision of certain tax and other regulatory matters;

 

treasury services, including insurance and risk management services and administration of benefits;

 

operational and general administrative assistance including office space, office equipment, administrative personnel, payroll and procurement services as needed;

 

accounting and related financial services;

 

legal, regulatory and compliance advice; and

 

human resources functions, including sourcing of permanent and temporary employees as needed, recordkeeping, performance reviews and terminations.

 

These services will be provided to GSG in exchange for a payment of $            per quarter, or $            per year. The Administrative Agreement is terminable by either party on 30 days' prior written notice to the other party. The Administrative Agreement has a term of twelve months, and may be extended in whole or in part by agreement of the parties.

 

For more information, see "Arrangements Between GAMCO and GSG After the Spin-Off."

What do I have to do to participate in the spin-off?

 

You are not required to take any action to receive shares of GSG common stock in the spin-off. No vote of GAMCO stockholders is required and none will be obtained for the spin-off. If you own shares of GAMCO common stock on the record date, you will receive a pro rata number of shares of GSG common stock. Please do not mail in GAMCO common stock certificates in connection with the spin-off.

Can I receive fractional shares in the spin-off?

 

No. Any fractional share of GSG common stock otherwise issuable to you will be sold on your behalf, and you will receive a cash payment with respect to that fractional share. Such cash payment generally will constitute taxable income to you.

 

For an explanation of how the cash payments for fractional shares will be determined, see "The Spin-Off—Treatment of Fractional Shares."

 

7


Table of Contents

Will GAMCO incur any debt or issue any stock in connection with the spin-off?

 

On or before the distribution date, GAMCO expects to provide us with additional capital through the sale or transfer of shares of GAMCO Class A Stock, newly issued preferred shares or a note or a combination of any or all three in the amount of $            million to, among other things, provide seed capital for Investment Partnerships that we expect to form. See "The Spin-Off—The Formation Transactions."

Can GAMCO decide to cancel the distribution of GSG common stock if it wishes to do so?

 

Yes. GAMCO has the right to terminate the spin-off and the distribution of GSG common stock at any time in its sole discretion, if any event or development occurs or exists that in the judgment of the GAMCO Board makes the spin-off inadvisable.

What will happen to the listing of GAMCO Class A Stock?

 

Immediately after the spin-off of GSG common stock, GAMCO Class A Stock will continue to be traded on the NYSE under its existing symbol "GBL."

Who will serve as distribution agent, transfer and agent registrar for the GSG common stock?

 

Expected to be Computershare Trust Company, N.A.

Is the distribution taxable for U.S. federal income tax purposes?

 

The distribution is conditioned on the receipt by GAMCO of certain opinions from its tax advisors substantially to the effect that the distribution will be tax-free to GAMCO and its stockholders under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code"). Based on these tax opinions, for U.S. federal income tax purposes, you should not recognize any gain or loss and no amount should be included in your income as a result of the Formation Transactions or upon your receipt of shares of GSG common stock pursuant to the distribution. Notwithstanding the foregoing, if you receive cash in lieu of fractional shares as a result of the spin-off, you will generally be subject to tax on the receipt of such cash. Neither GAMCO nor GSG has applied for a private letter ruling from the Internal Revenue Service (the "IRS") with respect to the tax consequences of the distribution. Accordingly, there can be no assurance that the IRS or another taxing authority will not assert that the distribution is taxable to GAMCO, GSG or GAMCO stockholders. For more information, see "The Spin-Off—Material U.S. Federal Income Tax Consequences on the Spin-Off." Tax matters are very complex and the tax consequences of the distribution to any particular GAMCO stockholder will depend on that stockholder's particular situation. GAMCO stockholders should consult with their own tax advisors to determine the specific tax consequences of the spin-off to them.

 

8


Table of Contents

How will the spin-off affect my tax basis in GAMCO common stock?

 

Your tax basis in the GAMCO common stock held by you immediately prior to the spin-off will be allocated between the GAMCO common stock and GSG common stock held by you immediately after the spin-off in proportion to their respective fair market values. You should consult your tax advisor on this matter. See "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Spin-Off" for more information.

Does GSG intend to pay dividends on GSG common stock?

 

We currently contemplate paying a dividend; however, we cannot assure you that we will pay any dividend. Whether we pay cash dividends in the future will be at the discretion of our Board and will be dependent upon our financial condition, earnings, capital requirements, legal and regulatory considerations and any other factors that our Board decides are relevant. See "Dividend Policy" for further information.

How will GSG common stock trade?

 

There is not currently a public market for the GSG Class A Stock. We will apply to have the GSG Class A Stock listed on the NYSE under the symbol "        ." Beginning shortly before, and continuing up to and including, the distribution date, we expect that there will be a "when-issued" trading market in the GSG Class A Stock. The "when-issued" market will be a trading market for the GSG Class A Stock that will be distributed to holders of shares of GAMCO common stock on the distribution date. If you owned shares of GAMCO common stock on the record date, you will be entitled to GSG Class A Stock distributed pursuant to the distribution. You may trade this entitlement to shares of GSG Class A Stock, without the shares of GAMCO Class A Stock you own, on the "when-issued" market. On the first trading day following the distribution date, "when-issued" trading with respect to the GSG Class A Stock will end and "regular way" trading will begin.

 

There will be no trading market for the GSG Class B Stock.

Will the number of shares of GAMCO common stock I own change as a result of the spin-off?

 

No. The number of shares of GAMCO common stock you own will not change as a result of the spin-off.

Whom can I contact for more information?

 

If you have questions relating to the mechanics of the distribution of GSG common stock, you should contact the distribution agent:

 

Computershare Trust Company, N.A.
250 Royall Street
Canton, Massachusetts 02021-1011
Telephone: (877) 282-1168 or 781-575-2879 (outside the United States, Canada and Puerto Rico)

 

9


Table of Contents

 

Before the spin-off, if you have any questions regarding the spin-off, you should contact:

 

GAMCO Investors, Inc.
One Corporate Center
Rye, NY 10580
Telephone: (914) 921-5000
Attention: Kevin Handwerker

 

After the spin-off, if you have any questions regarding the spin-off or GSG common stock, you should contact:

 

Gabelli Securities Group, Inc.
One Corporate Center
Rye, NY 10580
Telephone: (914) 921-5135
Attention: David Goldman

 

10


Table of Contents

 


Summary Historical Combined Consolidated Financial Data

        Gabelli Securities Group, Inc. was formed on April 15, 2015 and had nominal assets and no liabilities, and conducted no operations prior to the date of this information statement. Therefore, we believe that a presentation of the historical results of GSG would not be meaningful. Accordingly, the following tables set forth our summary historical combined consolidated financial data as of and for each of the fiscal years in the three year period ended December 31, 2014.

        Our historical combined consolidated financial statements included in this information statement have been presented on a "carve-out" basis from GAMCO's consolidated financial statements using the historical results of operations, cash flows, assets and liabilities attributable to the Gabelli Securities Group and include allocation of expenses from GAMCO for certain functions, including general corporate expenses related to information technology, operations, financial reporting, legal, regulatory and compliance and human resource activities, which may not be representative of the future costs we will incur as an independent public company. In addition, our historical financial statements do not reflect changes that we expect to experience in the future as a result of our spin-off from GAMCO. Our historical combined consolidated financial statements also do not reflect the allocation of certain transactions between GAMCO and us as reflected under "—Summary Unaudited Pro Forma Combined Consolidated Financial Statements." Consequently, the financial information included here may not necessarily reflect our financial position, results of operations and cash flows in the future or what our financial position, results of operations and cash flows would have been had we been an independent publicly traded company during the periods presented.

        The summary historical combined consolidated financial data presented below should be read in conjunction with our audited historical combined consolidated financial statements and accompanying notes, "—Summary Unaudited Pro Forma Combined Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 
  Year Ended December 31,  
Income Statement Data (in thousands)
  2014   2013   2012  

Revenues

  $ 21,029   $ 20,422   $ 21,549  

Total expenses

    31,382     35,454     34,447  

Operating loss

    (10,353 )   (15,032 )   (12,898 )

Total other income, net

    13,824     60,027     25,277  

Income before income taxes

    3,471     44,995     12,379  

Income tax provision

    2,127     14,774     3,666  

Net income before noncontrolling interests

    1,344     30,221     8,713  

Net income (loss) attributable to noncontrolling

                   

interests

    (4,157 )   463     170  

Net income

  $ 5,501   $ 29,758   $ 8,543  

 

 
  December 31,  
Balance Sheet Data (in thousands)
  2014   2013   2012  

Total assets

  $ 754,694   $ 588,720   $ 589,715  

Long-term obligations

             

Other liabilities and noncontrolling interest

    172,195     94,227     79,948  

Total liabilities and noncontrolling interest

    172,195     94,227     79,948  

Total equity

  $ 582,499   $ 494,493   $ 509,767  

 

 
  December 31,  
Assets Under Management (unaudited)
(at year end, in thousands):
  2014   2013   2012  

Total

  $ 1,039,546   $ 907,116   $ 920,182  

 

11


Table of Contents


Summary Unaudited Pro Forma Combined Consolidated Financial Statements

[To come]

 

12


Table of Contents


Gabelli Securities Group (Carve-Out Basis)

Unaudited Pro Forma Combined Consolidated Statements of Income

For the Year Ended December 31, 2014

(in thousands)

[To come]

        See Notes to Unaudited Pro Forma Combined Consolidated Financial Statements.

 

13


Table of Contents


Gabelli Securities Group (Carve-Out Basis)

Unaudited Pro Forma Combined Consolidated Balance Sheet

As of December 31, 2014

(in thousands)

[To come]

        See Notes to Unaudited Pro Forma Combined Consolidated Financial Statements.

 

14


Table of Contents


Notes to Unaudited Pro Forma Combined Consolidated Financial Statements

[To come]

15


Table of Contents


RISK FACTORS

        You should carefully consider the risks described below and all of the other information in this information statement in evaluating GSG. Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition.

        See also "Special Note Regarding Forward-Looking Statements."


Risks Related to the Spin-Off

We may not achieve the benefits expected from our spin-off from GAMCO and may be more susceptible to adverse events.

        We expect that, as a company independent from GAMCO, we will be able to grow organically and through acquisitions. Nonetheless, we may not be able to achieve any of these benefits. Furthermore, by separating from GAMCO, there is a risk that we may be more susceptible to adverse events than we would have otherwise experienced as a subsidiary of GAMCO. As a subsidiary of GAMCO, we enjoyed certain benefits, including economies of scope and scale in costs, employees and business relationships. These benefits may not be as readily achievable as a smaller, stand-alone company.

After the separation, certain of our directors and officers may have actual or potential conflicts of interest because of their positions or relationships with GAMCO.

        After the separation, Mario J. Gabelli will serve as our Chairman and Chief Executive Officer and will also continue to serve as Chairman and Chief Executive Officer of GAMCO. Our President, Marc Gabelli, is a son of Mario J. Gabelli and also serves on the GAMCO Board. Marc Gabelli will continue to have responsibilities relating to GAMCO after the distribution date, including continuing to serve on the GAMCO Board and participating on GAMCO's portfolio management team. Kieran Caterina, GAMCO's Finance Director and Co-Chief Accounting Officer, will also serve as our Chief Financial Officer. In addition, some of our portfolio managers and employees will initially be provided pursuant to the Administrative Agreement with GAMCO and will be officers or employees of GAMCO. Such dual assignments could create, or appear to create, potential conflicts of interest when our and GAMCO's management and directors face decisions that could have different implications for the two companies.

        Also, some of our directors, executive officers, portfolio managers and teammates own shares of GAMCO common stock and GAMCO restricted stock awards ("RSAs") or other GAMCO equity awards. At the time of the spin-off, these equity awards will be supplemented by the awarding of GSG equity awards such that each GAMCO award's pre-spin-off value will equate to the post-spin-off combined value of the GAMCO and associated GSG equity awards. Specifically, outstanding RSAs relating to GAMCO will remain unchanged, with each RSA holder also receiving an equal number of RSAs relating to GSG. The terms of the new GSG RSAs will remain substantially the same as the terms of the pre-spin-off GAMCO RSAs. The ownership of these RSAs may create, or may create the appearance of, conflicts of interest.

        Mario J. Gabelli is deemed to control GSI by his control of GAMCO Investors, Inc. through GGCP Holdings, LLC ("Holdings"), an intermediate subsidiary of GGCP, Inc. ("GGCP"), a private company controlled by Mario J. Gabelli. It is anticipated that after the distribution, Mario J. Gabelli will control GSG and will continue to control GSI through his ownership and control of Holdings. Marc Gabelli is President of GGCP.

        In addition, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between GAMCO and GSG regarding the terms of the agreements governing the separation and the relationship thereafter between the companies. The executive officers and other

16


Table of Contents

personnel of GAMCO who serve as directors or executive management of GSG may interpret these agreements in their capacity as GAMCO employees in a manner that would adversely affect the business of GSG.

        Also, certain subsidiaries of GAMCO and GSI, which will be GSG's 93.9% owned subsidiary after the spin-off, are investment advisers. The executive officers and other personnel of GAMCO who also serve as directors or executive management of GSG may be confronted with the possibility of making decisions in their GAMCO capacity that would adversely affect the business of GSG.

        Both GSG and GAMCO expect to be vigilant in attempting to identify and resolve any potential conflicts of interest, including but not limited to the types described above, at the earliest possible time. However, there can be no guarantee that the interests of GSG may not be adversely affected at some point by such a conflict.

The separation from GAMCO may adversely affect the level of our AUM.

        Our revenues are dependent on the amount of our AUM as well as the performance of our products. Many investors may have invested money in the Alternative Investments in part because GSI was a subsidiary of GAMCO. There can be no assurance that we will be able to attract investors to the Alternative Investments at the same rate as in prior years. In addition, we can make no assurance that current investors will not redeem their investments from the Alternative Investments as a result of our changed relationship with GAMCO. The occurrence of either of these events could adversely affect our business, results of operations and financial condition.

Concerns about our prospects as a stand-alone company could affect our ability to attract and retain employees or individuals whom we are attempting to recruit as employees.

        Our employees or individuals whom we are attempting to recruit as employees may have concerns about our prospects as a stand-alone company, including our ability to maintain our independence and our inability to continue our current reliance on GAMCO's resources after the spin-off. If we are not successful in assuring our employees or individuals whom we are attempting to recruit as employees of our prospects as an independent company, our employees or recruits may seek or accept other employment, which could adversely affect our business and our results of operations.

We may have been able to receive better terms from unaffiliated third parties than the terms provided in our agreements with GAMCO.

        The agreements related to our separation from GAMCO, including, but not limited to, the Separation Agreement, the Administrative Agreement and the Service Mark and Name License Agreement, were negotiated in the context of our separation from GAMCO while GSG was still majority-owned by GAMCO. Accordingly, they may not reflect terms that would have been reached between unaffiliated parties. The terms of the agreements we negotiated in the context of our separation related to, among other things, indemnities and other obligations between GAMCO and us. Had these agreements been negotiated with unaffiliated third parties, they might have been more favorable to us. For more information, see "Arrangements Between GAMCO and GSG After the Spin-Off."

In connection with the spin-off, GAMCO will indemnify us for certain liabilities. There can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that GAMCO's ability to satisfy its indemnification obligations will not be impaired in the future.

        Pursuant to the Separation Agreement, GAMCO will agree to indemnify us from certain liabilities, as discussed further in the section entitled "Arrangements Between GAMCO and GSG After the Spin-Off." Third parties could seek to hold us responsible for any of the liabilities that GAMCO has

17


Table of Contents

agreed to retain, and there can be no assurance that the indemnity from GAMCO will be sufficient to protect us against the full amount of such liabilities or that GAMCO will be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from GAMCO any amounts for which we are held liable, we may be temporarily required to bear those losses until such recovery. Each of these risks could adversely affect our business, results of operations and financial condition.

At this time, there has been no authoritative determination as to whether the distribution will qualify for tax-free treatment for GAMCO, GSG or GAMCO stockholders under U.S. tax laws. It could be determined in the future that the distribution should have been considered a taxable event with respect to U.S. federal income tax purposes for GSG, GAMCO or GAMCO stockholders.

        As noted above, the distribution is conditioned on the receipt by GAMCO of certain opinions from its tax advisors substantially to the effect that the distribution will be tax-free to GAMCO and its stockholders under Sections 355 and 368(a)(1)(D) of the Code. However, neither GAMCO nor GSG has applied for a private letter ruling from the IRS with respect to the tax consequences of the distribution. Accordingly, there can be no assurance that the IRS or another taxing authority will not assert that the distribution is taxable to GAMCO, GSG or GAMCO stockholders. If that were to happen, among other things, each GAMCO stockholder who receives shares of GSG common stock in the spin-off may be treated as receiving a taxable distribution and GAMCO would realize taxable income to the extent the distribution consists of appreciated property distributed by GAMCO.

        For more information, see "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Spin-Off." Tax matters are very complex and the tax consequences of the spin-off to any particular GAMCO stockholder will depend on that stockholder's particular situation. GAMCO stockholders should consult with their own tax advisors to determine the specific tax consequences of the spin-off to them.

The aggregate post-distribution value of the GSG Class A Stock and the GAMCO Class A Stock may not equal or exceed the pre-spin-off value of the GAMCO Class A Stock.

        After the spin-off, the GAMCO Class A Stock will continue to be listed and traded on the NYSE under the symbol "GBL." The GSG Class A Stock is expected to be listed on the NYSE under the symbol "        ." We cannot assure you that the combined value of the GAMCO Class A Stock and the GSG Class A Stock after the spin-off, as adjusted for any changes in the combined capitalization of these companies, will be equal to or greater than the value of GAMCO Class A Stock prior to the spin-off. Until the market has fully evaluated the business of GAMCO without the business of GSG, the value of GAMCO may fluctuate significantly. Similarly, until the market has fully evaluated the business of GSG, the value of GSG may fluctuate significantly.


Risks Related to Our Industry

Changes in laws or regulations or in governmental policies and compliance with existing laws or regulations could limit the sources and amounts of our revenues, increase our costs of doing business, decrease our profitability and materially and adversely affect our business.

        Our business is subject to extensive regulation in the United States, primarily at the federal level, including regulation by the SEC under the Advisers Act as well as other securities laws, by the Department of Labor under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and regulation by FINRA and state regulators. The Advisers Act imposes numerous obligations on investment advisors, including record-keeping, advertising and operating requirements, fiduciary and disclosure obligations, custodial requirements and prohibitions on fraudulent activities. In addition, our businesses are also subject to regulation by the Financial Conduct Authority ("FCA") in

18


Table of Contents

the United Kingdom, and we are also subject to the laws of other non-U.S. jurisdictions and non-U.S. regulatory agencies or bodies.

        Our failure to comply with applicable laws or regulations could result in fines, censure, suspensions of personnel or other sanctions, including revocation of our subsidiaries' registrations as an investment advisor or broker-dealer. Industry regulations are designed to protect our clients and investors in our funds and other third parties who deal with us and to ensure the integrity of the financial markets. Our industry is frequently altered by new laws or regulations and by revisions to, and evolving interpretations of, existing laws and regulations, both in the United States and in other nations. Changes in laws or regulations or in governmental policies could limit the sources and amounts of our revenues, increase our costs of doing business, decrease our profitability and materially and adversely affect our business.

We are subject to extensive and pervasive regulation around the world.

        Our business is subject to extensive regulation around the world. These regulations subject our business activities to a pervasive array of increasingly detailed operational requirements, compliance with which is costly, time-consuming and complex. We may be adversely affected by our failure to comply with current laws and regulations or by changes in the interpretation or enforcement of existing laws and regulations. Challenges associated with interpreting regulations issued in numerous countries in a globally consistent manner may add to such risks if regulators in different jurisdictions have inconsistent views or provide only limited regulatory guidance. In particular, violation of applicable laws or regulations could result in fines, temporary or permanent prohibition of certain activities, reputational harm and related client terminations, suspensions of employees or revocation of their licenses, suspension or termination of investment adviser, broker-dealer or other registrations or other sanctions, which could have a material adverse effect on our reputation or business and may cause our AUM, revenue and earnings to decline. For a more extensive discussion of the laws, regulations and regulators to which GSG is subject, see "Business—Regulation."

New tax legislation or changes in U.S. and foreign tax laws and regulations or challenges to GSG's historical taxation practices may adversely affect GSG's effective tax rate, business and overall financial condition.

        Our businesses may be affected by new tax legislation or regulations, or the modification of existing tax laws and regulations, by U.S. or non-U.S. authorities. In particular, the Foreign Account Tax Compliance Act ("FATCA") has introduced expansive new investor onboarding, withholding and reporting rules aimed at ensuring U.S. persons with financial assets outside of the United States pay appropriate taxes. The FATCA rules will impact both U.S. and non-U.S. funds and subject GSG to extensive additional administrative burdens. Certain of our FATCA compliance is done by third parties, and we cannot be certain that they will always comply with applicable FATCA rules. Similarly, there has been renewed momentum by several European Union ("EU") Member States to introduce national financial transaction taxes ("FTTs"), which would impose taxation on a broad range of financial instrument and derivatives transactions. If introduced as proposed, FTTs could have an adverse effect on GSG's financial results and on clients' performance results. In addition, the Organization for Economic Co-operation and Development recently launched a base erosion and profit shifting proposal ("BEPS") that aims to rationalize tax treatment across jurisdictions. If the BEPS proposal becomes the subject of legislative action in the format proposed, it could have unintended taxation consequences for collective investment vehicles and our tax position, which could adversely affect our financial condition.

        We also manage significant assets in products and accounts that have specific tax and after-tax related objectives, which could be adversely impacted by changes in tax policy. Additionally, any new legislation, modification or interpretation of tax laws could impact GSG's corporate tax position. The application of complex tax regulations involves numerous uncertainties and in the normal course of business, U.S. and non-U.S. tax authorities may review and challenge GSG's historical tax positions.

19


Table of Contents

These challenges may result in adjustments to GSG's tax position, or impact the timing or amount of, taxable income, deductions or other tax allocations, which may adversely affect GSG's effective tax rate and overall financial condition.

To the extent we are forced to compete on the basis of price, we may not be able to maintain our current fee structure.

        The investment management business is highly competitive and has relatively low barriers to entry. To the extent we are forced to compete on the basis of price, we may not be able to maintain our current fee structure. Although our investment management fees vary from product to product, historically we have competed primarily on the performance of our products and not on the level of our investment management fees relative to those of our competitors. In recent years, however, there has been a trend toward lower fees in the investment management industry. In order to maintain our fee structure in a competitive environment, we must be able to continue to provide clients with investment returns and service that make investors willing to pay our fees. We cannot be assured that we will succeed in providing investment returns and service that will allow us to maintain our current fee structure. Fee reductions on existing or new business could have an adverse effect on our profit margins and results of operations.

Catastrophic and unpredictable events could have a material adverse effect on our business.

        A terrorist attack, political unrest, war (whether or not directly involving the United States), power failure, cyber-attack, technology failure, natural disaster or many other possible catastrophic or unpredictable events could adversely affect our future revenues, expenses and earnings by, among other things: causing disruptions in United States, regional or global economic conditions; interrupting our normal business operations; inflicting employee casualties, including loss of our key executives; requiring substantial expenditures and expenses to repair, replace and restore normal business operations; and reducing investor confidence.

        Pursuant to the Administrative Agreement with GAMCO, we have a disaster recovery plan to address certain contingencies, but it cannot be assured that this plan will be effective or sufficient in responding to, eliminating or ameliorating the effects of all disaster scenarios. If our employees or vendors we rely upon for support in a catastrophic event are unable to respond adequately or in a timely manner, we may lose clients resulting in a decrease in AUM which may have a material adverse effect on revenues and net income.

The soundness of other financial institutions could adversely affect our business.

        Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We and the investments we manage may have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including: brokers and dealers, commercial banks, investment banks, clearing organizations, mutual and hedge funds and other institutions. Many of these transactions expose us and the accounts we manage to credit risk in the event of the counterparty's default. There is no assurance that any such losses would not materially and adversely impact GSG's revenues and earnings.


Risks Related to Our Business

Control by Mario J. Gabelli of a majority of the combined voting power of GSG common stock may give rise to conflicts of interests.

        Mario J. Gabelli, through his control and majority ownership of GGCP and his individual ownership of GSG common stock, will beneficially own a majority of our outstanding GSG Class B Stock, representing approximately 95% voting control. As long as Mario J. Gabelli indirectly

20


Table of Contents

beneficially owns a majority of the combined voting power of GSG common stock, he will have the ability to elect all of the members of our Board and thereby control our management and affairs, including determinations with respect to acquisitions, dispositions, borrowings, issuances of common stock or other securities, and the declaration and payment of dividends on the GSG common stock. In addition, Mario J. Gabelli will be able to determine the outcome of all matters submitted to a vote of our stockholders for approval and will be able to cause or prevent a change in control of GSG. As a result of Mario J. Gabelli's control, none of our agreements with Mario J. Gabelli and other companies controlled by him can be assumed to have been arrived at through "arm's-length" negotiations, although the parties endeavor to implement market-based terms. There can be no assurance that we would not have received more favorable terms, or offered less favorable terms to, an unaffiliated party.

        In addition, Mario J. Gabelli, through his control and majority ownership of GGCP, controls GAMCO, and he could take actions that favor GAMCO over GSG.

We may compete with GAMCO for clients and investment opportunities.

        Although our business is expected to focus primarily on alternative investment management and institutional services, while GAMCO is expected to focus primarily on its mutual fund and institutional and private wealth management businesses, situations may arise where we find ourselves directly competing with GAMCO for investment clients and opportunities. For example, it is possible that a potential investor might consider investing in GSG and GAMCO investment products and that such potential investor will have to choose between our investment products and those offered by GAMCO. In addition, GSG and GAMCO could pursue the same investment opportunities in the future.

Investors in our products have the right to redeem their investments in our products on a regular basis and could redeem a significant amount of AUM during any given quarterly period, which would result in significantly decreased revenues.

        Subject to any specific redemption provisions applicable to a product, investors may generally redeem their investments in our products on an annual or quarterly basis following the expiration of a specified period of time. In a declining market, the pace of redemptions and consequent reduction in our AUM potentially could accelerate. Furthermore, investors in our products may also invest in products managed by other alternative asset managers that have restricted or suspended redemptions or may in the future do so. Such investors may redeem capital from our products, even if our performance is superior to such other alternative asset managers' performance, if they are restricted or prevented from redeeming capital from those other managers.

        The decrease in revenues that would result from significant redemptions in our products could have a material adverse effect on our results of operations, cash flows and business. In 2009, due to factors related to the financial crisis, investors redeemed approximately $62 million invested in GSG's products which represented approximately 20% of GSG's AUM at that time. If economic and market conditions remain uncertain or worsen, we may once again experience significant redemptions.

Our business and financial condition may be materially adversely impacted by the highly variable nature of our revenues, results of operations and cash flows. In a typical year, a substantial portion of our incentive allocation income is determined and recorded in the fourth quarter of each year, which means that our interim results are not expected to be indicative of our results for a full year.

        Our revenues are influenced by the combination of the amount of AUM and the investment performance of our products. Asset flows, whether inflows or outflows, can be highly variable from month to month and quarter to quarter. Furthermore, our products' investment performance, which affects the amount of AUM, can be volatile due to, among other things, general market and economic conditions. Accordingly, our revenues, results of operations and cash flows may be highly variable. This

21


Table of Contents

variability is exacerbated during the fourth quarter of each fiscal year, primarily due to the fact that a substantial portion of our revenues historically has been, and we expect will continue to be, derived from incentive allocation income from our products. Incentive allocation income is contingent on the investment performance of the products as of the relevant measurement period, which generally is as of the end of each calendar year. We may also experience fluctuations in our results from quarter to quarter due to a number of other factors, including changes in management fees resulting from changes in the values of our products' investments, other changes in the amount of AUM, changes in our operating expenses, unexpected business developments and initiatives and, as discussed above, general economic and market conditions. Such variability and unpredictability may lead to volatility or declines in the price of the GSG Class A Stock, once it starts trading, and cause our results for a particular period not to be indicative of our performance in a future period or meaningful as a basis of comparison against results for a prior period.

        The amount of incentive allocation income that may be generated by our products is uncertain until it is determined and realized at a particular point in time. We generally do not record incentive allocation income in our interim financial statements other than incentive allocation income earned as a result of investor redemptions during the period. As a result of these and other factors, our interim results may not be indicative of historical performance or the results that may be expected for a full year.

        In addition, a substantial portion of our products' AUM have "high-water marks." This means that if an investor experiences losses in a given year, we will not be able to earn incentive allocation income with respect to such investor's investment unless and until our investment performance surpasses the high-water mark. The incentive allocation income we earn is therefore dependent on the net asset value of each investor's investment in our products. Investors in our products for the year ended December 31, 2014 generally experienced gains, resulting in no high-water marks for such investors. However, we can make no assurances that our investors will not experience losses in future years and, as a result, we may not earn incentive allocation income in those years.

A decline in the prices of securities generally could lead to a decline in our AUM, revenues and earnings.

        Substantially all of our revenues are directly related to both the amount of our AUM and the performance of our investment products. Under our investment advisory contracts, the investment advisory fees we receive are typically based on the market value of AUM. Accordingly, a decline in the prices of securities generally may cause our revenues and net income to decline by either causing the value of our AUM to decrease, which would result in lower investment advisory fees, or causing our clients to withdraw funds in favor of investments they perceive to offer greater opportunity or lower risk, which would also result in lower fees. The securities markets are highly volatile, and securities prices may increase or decrease for many reasons beyond our control, including but not limited to economic and political events, war (whether or not directly involving the United States), acts of terrorism, unanticipated changes in currency exchange rates, interest rates, inflation rates, the yield curve, defaults by derivative counterparties, bond default risks, the sovereign debt crisis in Europe and other factors that are difficult or impossible to predict or even to identify. If a decline in securities prices caused our revenues to decline, it could have a material adverse effect on our earnings.

The loss of the services of Mario J. Gabelli and other key personnel could have a material adverse effect on our business.

        We are dependent on the efforts of Mario J. Gabelli, our Executive Chairman and Chief Executive Officer. The loss of the services of Mario J. Gabelli could have a material adverse effect on our business.

        Our future success depends to a substantial degree on our ability to retain and attract other qualified personnel to conduct our investment management business. The market for qualified portfolio

22


Table of Contents

managers is extremely competitive and has grown more so in recent periods as the investment management industry has experienced growth. We anticipate that it will be necessary for us to add portfolio managers and investment analysts as we further diversify our investment products and strategies. There can be no assurance, however, that we will be successful in our efforts to recruit and retain the required personnel. In addition, our investment professionals and senior marketing personnel have direct contact with our clients, which can lead to strong client relationships. The loss of these personnel could jeopardize our relationships with certain clients, and result in the loss of such accounts. The loss of key management professionals or the inability to recruit and retain sufficient portfolio managers and marketing personnel could have a material adverse effect on our business.

We have experienced and may again experience periods of rapid growth and significant declines in AUM, which place significant demands on our legal, compliance, accounting, risk management, administrative and operational resources.

        Our AUM grew from approximately $230 million as of December 31, 1999 to $814 million as of December 31, 2004. Between December 31, 2004 and December 31, 2008, our AUM had declined to $295 million due to investment losses and redemptions experienced by our funds over that period. As of December 31, 2014, our AUM had grown to approximately $1.0 billion.

        Rapid changes in our AUM impose significant demands on our legal, compliance, accounting, risk management, administrative and operational infrastructure. The complexity of these demands and the time and expense required to address them, is a function not simply of the amount by which our AUM have changed, but also of significant differences in the investing strategies employed within our funds and the time periods during which these changes occur. Furthermore, our future growth will depend on, among other things, our ability to develop and maintain highly reliable operating platforms, management systems and financial reporting and compliance infrastructures that are also sufficiently flexible to promptly and appropriately address our business needs, applicable legal and regulatory requirements and relevant market and other operating conditions, all of which can change rapidly.

There may be adverse effects on our business from a decline in the performance of the securities markets.

        Our results of operations are affected by many economic factors, including the performance of the securities markets. During the 1990s, unusually favorable and sustained performance of the U.S. securities markets, and the U.S. equity market in particular, attracted substantial inflows of new investments in these markets. That contributed to significant market appreciation which, in turn, led to an increase in our AUM and revenues. More recently, the securities markets in general have experienced significant volatility, and such volatility may continue or increase in the future. At December 31, 2014, our AUM are primarily invested in equity securities. Any decline in the securities markets, in general, and the equity markets, in particular, could reduce our AUM and consequently reduce our revenues. In addition, any such decline in the equity markets, failure of these markets to sustain their prior levels of growth, or continued short-term volatility in these markets could result in investors withdrawing from the equity markets or decreasing their rate of investment, either of which would be likely to adversely affect us. Also, from time to time, a relatively high proportion of the assets we manage may be concentrated in particular economic or industry sectors. A general decline in the performance of securities in those industry sectors could have an adverse effect on our AUM and revenues.

There is a possibility of losses associated with proprietary investment activities.

        Currently, we maintain large proprietary investment positions in securities. Market fluctuations and other factors may result in substantial losses in our proprietary accounts, which could have an adverse effect on our balance sheet, reduce our ability or willingness to make new investments or impair our credit ratings.

23


Table of Contents

Future investment performance could reduce revenues and other income.

        Success in the investment management business is dependent on investment performance as well as distribution and client servicing. Good performance generally stimulates sales of our investment products and tends to keep withdrawals and redemptions low, which generates higher management fees (which are based on the amount of AUM). Conversely, poor performance, both in absolute terms and/or relative to peers and industry benchmarks, tends to result in decreased sales, increased withdrawals and redemptions and in the loss of clients, with corresponding decreases in revenues to us. Failure of our investment products to perform well could, therefore, have a material adverse effect on us.

        In addition, when our investment products experience strong results relative to the market or other asset classes, clients' investments in our products may increase beyond their target levels, and we could, therefore, suffer withdrawals as our clients rebalance their investments to fit their asset allocation preferences.

There is a possibility of losses associated with underwriting, trading and market-making activities.

        Our underwriting and trading activities are primarily conducted through our subsidiary, G.research, primarily as agent. Such activities subject our capital to significant risks of loss. The risks of loss include those resulting from ownership of securities, extension of credit, leverage, liquidity, counterparty failure to meet commitments, client fraud, employee errors, misconduct and fraud (including unauthorized transactions by traders), failures in connection with the processing of securities transactions and litigation. We have procedures and internal controls to address such risks, but there can be no assurance that these procedures and controls will prevent losses from occurring.

We may have liability as a general partner or otherwise with respect to our Alternative Investments.

        We act as general partner for Investment Partnerships, including arbitrage, event-driven long/short, sector focused and merchant banking limited partnerships. As a general partner of these partnerships, we may be held liable for the partnerships' liabilities in excess of their ability to pay such liabilities. In addition, in certain circumstances, we may be liable as a control person for the acts of our Investment Partnerships. As of December 31, 2014, our AUM included approximately $905 million in Investment Partnerships. A substantial adverse judgment or other liability with respect to our Investment Partnerships could have a material adverse effect on us.

Operational risks may disrupt our businesses, result in regulatory action against us or limit our growth.

        We face operational risk arising from errors made in the execution, confirmation or settlement of transactions or from transactions not being properly recorded, evaluated or accounted for. Our business is highly dependent on our ability to process, on a daily basis, transactions across markets in an efficient and accurate manner. Consequently, we rely heavily on our financial, accounting and other data processing systems. Despite the reliability of these systems and the training and skill of our teammates and third parties we rely on, it remains likely that errors may occasionally occur due to the extremely large number of transactions we process. In addition, if systems we use are unable to accommodate an increasing volume of transactions, our ability to expand our businesses could be constrained. If any of these systems do not operate properly or are disabled, we could suffer financial loss, a disruption of our businesses, liability to clients, regulatory intervention or reputational damage.

Failure to maintain adequate infrastructure could impede our productivity and growth. Additionally, failure to maintain effective information and cyber security policies, procedures and capabilities could disrupt operations and cause financial losses that could result in a decrease in our earnings or stock price.

        Our infrastructure, including information systems, hardware, software, networks and other technology, is vital to the competitiveness of our business. Our information systems and technology is

24


Table of Contents

currently provided by GAMCO pursuant to the Administrative Agreement. The failure of GAMCO to maintain an adequate infrastructure commensurate with the size and scope of our business could impede our productivity and growth, which could cause our earnings or stock price to decline. GAMCO outsources a significant portion of our information systems operations to third parties, who are responsible for providing the management, maintenance and updating of such systems. Technology is subject to rapid change, and we cannot guarantee that our competitors may not implement more advanced technology platforms for their products than we do for ours. In addition, there can be no assurance that the cost of maintaining such outsourcing arrangements will not increase from its current level, which could have a material adverse effect on us.

        In addition, any inaccuracies, delays, system failures or security breaches in these and other systems could subject us to client dissatisfaction and losses. Our technology systems may be subject to unauthorized access, computer viruses or other malicious code or other events that could have a security impact. There can be no assurance that breach of our technology systems could result in material losses (such material losses including the loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by the breach, additional security costs to mitigate against future incidents and litigation costs resulting from the incident) relating to such security breach of our technology systems.

        If a successful cyber attack or other security breach were to occur, our confidential or proprietary information, or the confidential or proprietary information of our clients or their counterparties, that is stored in, or transmitted through, such technology systems could be compromised or misappropriated. Moreover, loss of confidential customer identification information could harm our reputation and subject us to liability under laws that protect confidential personal data, resulting in increased costs or loss of revenues. Further, although we take precautions to password protect and encrypt our laptops and other mobile electronic hardware, there can be no assurance that these measures will always provide sufficient protection. If such hardware is stolen, misplaced or left unattended, it may become vulnerable to hacking or other unauthorized use, creating a possible security risk and resulting in potentially costly actions by us.

The failure of one of our vendors to fulfill its obligations to us could have a material adverse effect on us and our clients.

        We and GAMCO depend on a number of key vendors for various fund administration, accounting, custody and transfer agent roles and other operational needs. Our or GAMCO's failure or inability to diversify sources for key services or the failure of any key vendors to fulfill their obligations could lead to operational issues for us and, with respect to certain products, could result in financial losses for us and our clients.

We face exposure to legal actions, including litigation and arbitration claims and regulatory and governmental examinations and/or investigations. Insurance coverage for these matters may be inadequate.

        The volume of litigation and arbitration claims against financial services firms and the amount of damages claimed has increased over the past several years. The types of claims that we may face are varied. For example, we may face claims against us for purchasing securities that are inconsistent with a client's investment objectives or guidelines or arising from an employment dispute. The risk of litigation is difficult to predict, assess or quantify, and may occur years after the activities or events at issue. In addition, from time to time we may become the subject of governmental or regulatory investigations and/or examinations. Even if we prevail in a legal or regulatory action, the costs alone of defending against the action or the harm to our reputation could have a material adverse effect on us. The insurance coverage that we maintain with respect to legal and regulatory actions may be inadequate or may not cover certain proceedings.

25


Table of Contents

Compliance failures could adversely affect us.

        Our investment management activities are subject to client guidelines. A failure to comply with these guidelines could result in damage to our reputation or in our clients seeking to recover losses, withdrawing their investments or terminating their contracts, any of which could cause our revenues and earnings to decline. There can be no assurance that the precautions and procedures that we have instituted and installed or the insurance we maintain to protect ourselves in case of client losses will protect us from potential liabilities.

Our reputation is critical to our success.

        Our reputation is critical to acquiring, maintaining and developing relationships with our clients and third-party intermediaries. In recent years, there have been a number of well-publicized cases involving fraud, conflicts of interest or other misconduct by individuals in the financial services industry. Misconduct by our staff, or even unsubstantiated allegations, could result not only in direct financial harm but also in harm to our reputation, causing injury to the value of our brands and our ability to retain or attract AUM. In addition, in certain circumstances, misconduct on the part of our clients or other parties could damage our reputation. Moreover, reputational harm may cause us to lose current employees and we may be unable to attract new employees with similar qualification or skills. Damage to our reputation could substantially reduce our AUM and impair our ability to maintain or grow our business, which could have a material adverse effect on us.

We face strong competition from numerous and sometimes larger companies.

        We compete with numerous investment management companies, stock brokerage and investment banking firms, insurance companies, banks, savings and loan associations and other financial institutions. The periodic establishment of new investment management companies and other competitors increases the competition that we face. At the same time, consolidation in the financial services industry has created stronger competitors with greater financial resources and broader distribution channels than our own. Competition is based on various factors, including, among others, business reputation, investment performance, product mix and offerings, service quality and innovation, distribution relationships and fees charged. Our competitive success in all of these areas cannot be assured. Additionally, competing securities dealers whom we rely upon to distribute our products also sell their own proprietary investment products, which could limit the distribution of our investment products. To the extent that existing or potential customers, including securities dealers, decide to invest in or distribute the products of our competitors, the sales of our products as well as our market share, revenues and net income could decline. Both GAMCO and GSG have asset management as their principal business and derive most of their revenues through that business and, as such, may compete with each other.

If third-party investors in our funds exercise their right to remove us as investment manager or general partner of our products, we would lose the AUM in such funds, which would eliminate our management fees and incentive allocation income derived from such products.

        The governing agreements of most of our investment partnerships and offshore funds provide that, subject to certain conditions, third-party investors in those funds have the right, without cause, to vote to remove us as investment manager or general partner of the investment partnerships or offshore fund by a simple majority vote, resulting in the elimination of the AUM by those products and the management fees and incentive allocation income derived from those products. In addition to having a significant negative impact on our revenues, results of operations and cash flows, the occurrence of such an event would likely result in significant reputational damage to us.

26


Table of Contents

If we were deemed an investment company under the Advisers Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.

        We do not believe that we are an "investment company" under the Advisers Act because the nature of our assets and the sources of our income exclude us from the definition of an investment company pursuant to Rule 3a-1 under the Advisers Act. In addition, we believe we are not an investment company under Section 3(b)(1) of the Advisers Act because we are primarily engaged in a non-investment company business. We intend to conduct our operations so that we will not be deemed an investment company. However, if we were to be deemed an investment company, restrictions imposed by the Advisers Act, including limitations on our capital structure and our ability to transact business with affiliates, could make it impractical for us to continue our business as contemplated and would have a material adverse effect on our business.


Risks Related to the GSG Common Stock

The disparity in the voting rights among the classes of shares may have a potential adverse effect on the price of the GSG Class A Stock.

        The holders of GSG Class A Stock and GSG Class B Stock have identical rights except that (i) holders of GSG Class A Stock are entitled to one vote per share, while holders of GSG Class B Stock are entitled to ten votes per share on all matters to be voted on by stockholders in general, and (ii) holders of GSG Class A Stock are not eligible to vote on matters relating exclusively to GSG Class B Stock and vice versa. Upon completion of our spin-off, Mario J. Gabelli, through his control and majority ownership of GGCP and his individual ownership of GSG common stock, will beneficially own a majority of the outstanding GSG Class B Stock, representing approximately 95% voting control. As long as Mario J. Gabelli indirectly beneficially owns a majority of the combined voting power of the GSG common stock, he will have the ability to elect all of the members of our Board and thereby control our management and affairs, including, among other things, any determinations with respect to acquisitions, dispositions, borrowings, issuances of common stock or other securities, and the declaration and payment of dividends on the GSG common stock. The differential in voting rights and the ability of GSG to issue additional GSG Class B Stock could adversely affect the value of the GSG Class A Stock to the extent the investors, or any potential future purchaser of GSG, view the superior voting rights of the GSG Class B Stock to have value. While there is no current intention to issue additional GSG Class B Stock, there is no prohibition on GSG issuing additional shares of GSG Class B Stock in the future.

An active public trading market for the GSG Class A Stock may not develop.

        Prior to the time "when-issued" trading begins in the GSG Class A Stock (see "The Spin-Off—Trading Markets for the GSG Common Stock"), there will be no public market for the GSG Class A Stock. We expect that the NYSE will approve the listing of the GSG Class A Stock under the symbol "          ." However, a liquid public market for the GSG Class A Stock may not develop, especially because a large percentage of the GSG common stock will be held by a limited number of stockholders. If an active trading market for the GSG Class A Stock does not develop, the market price and liquidity of the GSG Class A Stock may be materially and adversely affected.

We cannot predict the prices at which the GSG Class A Stock may trade after the spin-off.

        The market price of the GSG Class A Stock may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:

    our quarterly or annual earnings, or those of other companies in our industry;

27


Table of Contents

    actual or anticipated reductions in our revenue, net earnings and cash flow resulting from actual or anticipated decline in AUM;

    changes in accounting standards, policies, guidance, interpretations or principles;

    the failure of securities analysts to cover GSG after the spin-off or changes in financial estimates by analysts;

    changes in earnings estimates by securities analysts or our ability to meet those estimates;

    the operating and stock price performance of other comparable companies;

    overall market fluctuations; and

    general economic conditions.

        In particular, the realization of any of the risks described in these "Risk Factors" could have a significant and adverse impact on the market price of the GSG Class B Stock. In addition, the stock market in general has experienced extreme price and volume volatility that has often been unrelated to the operating performance of particular companies. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry. The price of the GSG Class A Stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce our stock price.

Future sales of GSG Class A Stock in the public market or sales or distributions of GSG Class B Stock could lower our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute our stockholders' ownership in us.

        We may sell additional shares of GSG Class A Stock in public or private offerings. We also may issue additional shares of GSG Class A Stock or convertible debt securities. In addition, sales by our current stockholders could be perceived negatively.

        No prediction can be made as to the effect, if any, that future sales or distributions of GSG Class B Stock owned by Holdings will have on the market price of the GSG Class A Stock from time to time. Sales or distributions of substantial amounts of GSG Class A Stock or GSG Class B Stock, or the perception that such sales or distributions are likely to occur, could adversely affect the prevailing market price for the GSG Class A Stock.

The reduced disclosure requirements applicable to us as an "emerging growth company" and a "smaller reporting company" may make GSG common stock less attractive to investors.

        We are an "emerging growth company" as defined in the the JOBS Act, and we may avail ourselves of certain exemptions from various reporting requirements of public companies that are not "emerging growth companies," including, but not limited to, an exemption from complying with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act") and, like smaller reporting companies, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirement of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may remain an emerging growth company for up to five full fiscal years following the spin-off. We would cease to be an emerging growth company, and, therefore, become ineligible to rely on the above exemptions, if we (a) have more than $1 billion in annual revenue in a fiscal year, (b) issue more than $1 billion of non-convertible debt over a three-year period or (c) become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur after: (i) we have filed at least one annual report; (ii) we have been an SEC-reporting company for at least 12 months; and (iii) the market value of GSG Class A Stock that is held by non-affiliates exceeds $700 million as of the last business day of

28


Table of Contents

our most recently completed second fiscal quarter. We cannot predict if investors will find GSG common stock less attractive because we may rely on these exemptions.

        We also qualify as a "smaller reporting company" under the Exchange Act. As a smaller reporting company, we enjoy many of the same exemptions and reduced disclosure requirements as emerging growth companies, and those exemptions would continue to be available to us even after the emerging growth company status expires if we still are a smaller reporting company at such time.

        If some investors find GSG Class A Stock less attractive as a result of the exemptions available to us as an emerging growth company and a smaller reporting company, there may be a less active trading market for GSG Class A Stock (assuming a market develops) and our value may be more volatile than that of an otherwise comparable company that does not avail itself of the same or similar exemptions.

Upon the listing of shares of the GSG Class A Stock on the NYSE, we will be a "controlled company" within the meaning of NYSE rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

        After completion of the spin-off, Mario J. Gabelli and his affiliates will control a majority of the voting power of the GSG common stock. As a result, we will be a "controlled company" within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain corporate governance requirements, including the requirements that, within one year of the date of the listing of the GSG Class A Stock:

    we have a board that is composed of a majority of "independent directors," as defined under the rules of the NYSE;

    we have a compensation committee that is composed entirely of independent directors; and

    we have a corporate governance and nominating committee that is composed entirely of independent directors.

        Following the spin-off, we intend to utilize these exemptions. As a result, we do not expect that any of the committees of our Board, other than our Audit Committee, will consist entirely of independent directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.


Risks Related to Our Regulatory Environment

Changes in laws or regulations or in governmental policies could limit the sources and amounts of our revenues, increase our costs of doing business, decrease our profitability and materially and adversely affect our business.

        Our business is subject to extensive regulation in the United States, primarily at the federal level, including regulation by the SEC under the Advisers Act. We are registered with the SEC as an investment adviser. The Advisers Act imposes numerous obligations on investment advisers, including record-keeping, advertising and operating requirements, disclosure obligations and a broad range of other highly-detailed and complex regulatory requirements. Our failure to comply with applicable laws or regulations could result in fines, censure, suspensions of personnel or other sanctions, including revocation of GSI's registration as an investment adviser. Changes in laws or regulations or in governmental policies could limit the sources and amounts of our revenues, increase our costs of doing business, decrease our profitability and have a material adverse effect on our business.

29


Table of Contents


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        Our disclosure and analysis in this information statement 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. In some cases, these forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. 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. The factors described under "Risk Factors" and the following factors could cause our actual results to differ from our expectations or beliefs:

    the adverse effect from a decline in the securities markets;

    a decline in the performance of our products;

    the impact of our separation from GAMCO;

    our inability to realize the benefits of our separation from GAMCO;

    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.

        Other factors not described above, may also cause our actual results to differ from our expectations and belief. Except as required by law, 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.

30


Table of Contents


THE SPIN-OFF

General

        The GAMCO Board regularly reviews the various businesses conducted by GAMCO to ensure that resources are deployed and activities are pursued in the best interests of its stockholders. On April 10, 2015, GAMCO announced that the GAMCO Board had authorized its management to take various actions in contemplation of the spin-off of the Gabelli Securities Group to GAMCO's stockholders in a spin-off transaction. This authorization is subject to, among other things, the conditions described below under "—Spin-Off Conditions and Termination."

        The Gabelli Securities Group consists of GAMCO's interests in GSI and its subsidiaries, GAMCO's interest in certain cash accounts, investments accounts, investment partnerships and offshore funds that GAMCO will contribute to GSG as part of the spin-off. GAMCO will also contribute its interests in investment management contracts for the GAMCO International SICAV ("SICAV") and the GAMA Select Energy Plus Master Fund ("Select Energy Fund") at the effective time of the spin-off. GSI is currently 93.9% owned by GAMCO, 1.9% owned by certain GAMCO employees and 4.2% owned by investors unrelated to GAMCO. On the distribution date, GAMCO's 93.9% interest in GSI will be contributed to GSG. The other interests in GSI will remain unchanged.

The Formation Transactions

        GAMCO plans to provide us with substantial additional capital to enable us to pursue a number of growth initiatives, including providing seed capital for Investment Partnerships that we expect to form. After the record date and before the distribution date, GAMCO expects to either sell or transfer to us shares of GAMCO Class A Stock that are currently held in treasury, newly issued preferred shares or a note of GAMCO or another party, or a combination of any or all three, in the amount of $             million. On or before the distribution date, GAMCO expects to contribute to GSG its 93.9% interest in GSI, as well as approximately $             million in cash and other assets.

Reasons for the Spin-Off

        The GAMCO Board has determined upon careful review and consideration that the spin-off of the Gabelli Securities Group from the rest of GAMCO and the establishment of GSG as a separate, publicly traded company is in the best interests of GAMCO. The GAMCO Board's determination was based on a number of factors, including the following:

    Potential Increase in Aggregate Stock Value.  Following a spin-off, a number of corporations have experienced an increase in the aggregate stock value of the two companies' shares. An increase in the aggregate stock value would better enable both GAMCO and GSG to use their respective stock to pursue and achieve their respective strategic objectives, including enhanced equity compensation programs and potential acquisitions with less dilution to existing stockholders.

    Creation of Two Focused Companies.  While there will initially be some overlap between the senior management of GAMCO and the senior management of GSG, primarily the Chief Executive Officer, a senior financial executive and a legal executive, we intend and expect that the amount of such overlap will decline over time. As a result of the spin-off, the employees and board of directors of each company will be able to more fully focus on their respective priorities with customized operating models and financial targets that best fit each company's business, markets and unique opportunities. This increase in focus is expected to result in an increase in accountability for decisions.

    Tailored Capital Structure and Financing Options.  After the spin-off, we and GAMCO will have increased flexibility to tailor our respective capital structures to our individual needs, and, as separate companies, each may be able to attain more favorable financing terms and lower

31


Table of Contents

      blended costs of capital. In addition, tailored capital structures may facilitate our and GAMCO's ability to pursue acquisitions and strategic alliances possibly using common stock as currency.

    Increased Transparency.  The spin-off will increase transparency and clarity of the businesses of each of GAMCO and GSG and allow investors to more accurately value the merits, performance and future prospects of each company.

    Reduced Conflicts With Respect to Marketing Various Products.  Internal marketing conflicts at GAMCO and GSG will be decreased, as GAMCO is not expected to offer Alternative Investments.

    Potential Reduced Volatility in GAMCO Common Stock and Possible Improved Valuation for GAMCO.  The inherent volatility effects of performance fees received by GSG on GAMCO common stock will be reduced, which may result in an improved valuation for GAMCO's far larger mutual fund and institutional and private wealth management businesses.

    Ability to Use Competitors of Each Company.  GSG will be able to partner with competitors of GAMCO to the extent such competitors' products may be useful to GSG. In addition, GAMCO will be able to use the services of competitors of GSG.

    Provide Incentive Compensation that is More Relevant to Teammates of Each Business.  The spin-off will create a new class of publicly traded equity securities, and permit the creation of restricted stock units and other forms of equity compensation for GSG, which will enable it to:

    provide incentive compensation arrangements for its key teammates that are directly related to the performance of GSG;

    provide enhanced incentives to teammates of GSG for achieving superior performance; and

    improve GSG's ability to attract, retain and motivate qualified personnel.

        With $1.0 billion in AUM at December 31, 2014, GSG represented 2.1% of GAMCO's AUM, which was $47.5 billion at December 31, 2014. We believe that GSG, following the spin-off, will devote greater attention to implementing a growth strategy as it will no longer be overshadowed by the GAMCO umbrella under which it currently operates. In order to facilitate this distribution, our Board appointed Mario J. Gabelli, the Chairman and Chief Executive of GAMCO, to serve as our Executive Chairman and Chief Executive Officer and Marc Gabelli to serve as our President. Kieran Caterina, GAMCO's Finance Director and Co-Chief Accounting Officer, will also serve as our Chief Financial Officer. We have appointed Messrs. Salvatore F. Sodano, Daniel R. Lee, Bruce M. Lisman and Richard L. Bready as independent members of our Board, and Mr. Sodano will serve as Vice Chairman of our Board. Messrs. Bready and Marc Gabelli are both current members of the GAMCO Board. It is expected that Mr. Bready will resign from the GAMCO Board on the distribution date. We believe that the spin-off and new independent board representation, along with management hires we make in the future as our revenues warrant, will enable us to devote greater attention to implementing a growth strategy. That strategy will be focused entirely on benefiting GSG and our stockholders, rather than on functioning as part of the larger GAMCO organization, in which decisions must take into account the interests of the entire entity, not solely those of GSG.

        The GAMCO Board also considered a number of potentially negative factors in evaluating the separation, including the potential loss of synergies from operating as a subsidiary and potential increased costs, potential disruptions to GSG's businesses as a result of the separation and the risks of being unable to achieve the benefits expected to be achieved by the spin-off. The GAMCO Board concluded that the potential benefits of the spin-off greatly outweighed these factors.

32


Table of Contents

Interests of Certain Persons

        Mario J. Gabelli controls GGCP, a private company of which he is the Chief Executive Officer. GGCP, through Holdings, is the beneficial owner of approximately 94% of the combined voting power of the outstanding GAMCO common stock and approximately 72% of the equity interest of GAMCO. By virtue of his ownership of GGCP, Mario J. Gabelli may be deemed to control GAMCO. In addition, upon completion of the spin-off, Mario J. Gabelli is expected to have the same relative ownership in GSG as he does in GAMCO and may be deemed to control GSG.

        See "Certain Relationships and Related Party Transactions" for a description of the registration rights agreement that we expect to enter into with Mario Gabelli and GGCP prior to the spin-off.

        Marc Gabelli, who will serve as our President, has served as President and Managing Director of GGCP since GAMCO's initial public offering in February 1999. In addition, he will receive 10,000 GSG RSAs in the spin-off with respect to the 10,000 GAMCO RSAs he currently owns.

        Kieran Caterina, who will serve as our Chief Financial Officer, will receive 8,000 GSG RSAs in the spin-off with respect to the 8,000 GAMCO RSAs he currently owns.

        See "Certain Relationships and Related Party Transactions" for additional information about the interests of GAMCO's officers and directors in GSG and the spin-off.

Manner of Effecting the Spin-Off

        Our Board and the GAMCO Board have approved the spin-off of GSG to the holders GAMCO common stock. No stockholder vote is necessary to effectuate the spin-off and none will be obtained.

        The general terms and conditions relating to the spin-off will be set forth in Separation Agreement between GAMCO and us. Under the Separation Agreement, the spin-off will be effective on the distribution date. As a result of the spin-off, you will receive:

    one share of GSG Class A Stock for each share of GAMCO Class A Stock that you on the record date; and

    one share of GSG Class B Stock for each share of GAMCO Class B Stock that you hold on the record date.

        As discussed under "—Trading of GAMCO Class A Stock After the Record Date and Prior to the Distribution," if a stockholder of record of GAMCO Class A Stock sells those shares in the "regular way" market after the record date and prior to the distribution, that stockholder also will be selling the right to receive shares of GSG common stock in the distribution. The distribution will be made in book-entry form. For registered GAMCO stockholders, our transfer agent will credit their shares of GSG common stock to book-entry accounts established to hold their shares of GSG common stock. Book-entry refers to a method of recording stock ownership in our records in which no physical certificates are issued. For stockholders who own GAMCO common stock through a bank or brokerage firm, their shares of GSG common stock will be credited to their accounts by the bank or broker. See "—When and How You Will Receive Shares of GSG Common Stock." Each share of GSG common stock that is distributed will be validly issued, fully paid and nonassessable. Holders of shares of GSG common stock will not be entitled to preemptive rights. See "Description of Capital Stock." Following the spin-off, stockholders whose shares are held in book-entry form may request the transfer of their shares of GSG Class A Stock to a brokerage or other account at any time, without charge.

        You will not be required to make any payment for the shares of GSG common stock that you receive nor will you be required to surrender or exchange your shares of GAMCO common stock or take any other action to receive GSG common stock.

33


Table of Contents

Treatment of Fractional Shares

        The transfer agent will aggregate all fractional shares of GSG Class A Stock and sell them on behalf of those holders who otherwise would be entitled to receive a fractional share. We anticipate that these sales will occur as soon as practicable after the distribution date. Those holders will then receive a cash payment in the form of a check in an amount equal to their pro rata share of the total net proceeds of those sales. Your check for any cash that you may be entitled to receive instead of fractional shares of GSG common stock will be mailed to you.

        It is expected that all fractional shares held in street name will be aggregated and sold by brokers or other nominees according to their standard procedures. You should contact your broker or other nominee for additional details.

        None of GAMCO, GSG or the transfer agent will guarantee any minimum sale price for the fractional shares of GSG Class A Stock. Neither we nor GAMCO will pay any interest on the proceeds from the sale of fractional shares. The receipt of cash in lieu of fractional shares will generally be taxable to the recipient stockholders. See "—Material U.S. Federal Income Tax Consequences of the Spin-Off."

Results of the Spin-Off

        After the spin-off, we will be a publicly traded company. Immediately following the spin-off, we expect that there will be approximately            shares of GSG Class A Stock and approximately             shares of GSG Class B Stock issued and outstanding, based on the anticipated number of shares of GAMCO common stock outstanding as of the record date. The actual number of shares of GSG common stock to be distributed will be determined based on the number of shares GAMCO common stock outstanding as of the record date.

        You will not be required to make any payment for the shares of GSG common stock you receive, nor will you be required to surrender or exchange your shares of GAMCO common stock or take any other action in order to receive the shares of GSG common stock to which you are entitled. The spin-off will not affect the number of outstanding shares of GAMCO common stock or any rights of GAMCO stockholders, although it may affect the market value of the outstanding GAMCO common stock. Immediately following the spin-off, we expect to have approximately            registered holders of shares of GSG Class A Stock and            holders of GSG Class B Stock.

        As noted above, Mario J. Gabelli owns approximately        % of the shares of GGCP, the indirect holder of approximately 94% of the combined voting power of the outstanding GAMCO common stock and approximately 72% of the equity interest of GAMCO as of December 31, 2014. By virtue of his ownership of GGCP, Mario J. Gabelli may be deemed to control GAMCO. Accordingly, immediately following the spin-off, Mario J. Gabelli may be deemed to control GSG.

        Mario J. Gabelli has served in two capacities with regard to GSI. The first capacity is as Chief Executive Officer of GAMCO and the second is as a member of the portfolio management team for Gabelli Associates Fund, Gabelli Associates Limited, Gabelli Associates Fund II and Gabelli Associates Limited II E, which are arbitrage partnerships managed by GSI that we collectively refer to as the Arbitrage Partnerships, and as a portfolio manager for certain event-driven value partnerships. In his role as CEO of GAMCO, Mario J. Gabelli has made and, until the distribution date, will make, decisions relating to GSI as a subsidiary of GAMCO. After the spin-off, Mario J. Gabelli will continue in his role as CEO of GAMCO. However, as GSI will no longer be a subsidiary of GAMCO, Mario J. Gabelli's role as CEO of GAMCO will have no bearing on GSG. However, Mario J. Gabelli will continue to exert influence and control over GSI by providing advice and expertise to GSI through his role as Chairman and CEO of GSG and his position as the controlling stockholder of GSG through his ownership and control of the majority of the shares of GGCP.

34


Table of Contents

        We and GAMCO will be parties to agreements that govern the spin-off and our future relationship. For a more detailed description of these agreements, see "Arrangements Between GAMCO and GSG After the Spin-Off."

When and How You Will Receive Shares of GSG Common Stock

        On the distribution date, GAMCO will release its shares of GSG common stock for distribution by Computershare Trust Company, N.A., as the distribution agent. The distribution agent will cause the shares of GSG common stock to which you are entitled to be registered in your name or in the "street name" of your bank or brokerage firm.

        "Street Name" Holders.    Many GAMCO stockholders have GAMCO common stock held in an account with a bank or brokerage firm. If this applies to you, that bank or brokerage firm is the registered holder that holds the shares of GAMCO common stock on your behalf. For stockholders who hold their GAMCO common stock in an account with a bank or brokerage firm, the GSG common stock being distributed will be registered in the "street name" of your bank or broker, who in turn will electronically credit your account with the shares that you are entitled to receive in the distribution. We anticipate that banks and brokers will generally credit their customers' accounts with GSG common stock on or shortly after the distribution date. We encourage you to contact your bank or broker if you have any questions regarding the mechanics of having your shares credited to your account.

        Registered Holders.    If you are the registered holder of GAMCO common stock and hold your GAMCO common stock either in physical form or in book-entry form, the shares of GSG common stock distributed to you will be registered in your name and you will become the holder of record of the number of shares of GSG common stock that you are entitled to receive in the distribution. Our distribution agent will send you a statement reflecting your ownership of GSG common stock.

        Direct Registration System.    As part of the spin-off, we will be adopting a direct registration system for book-entry share registration and transfer of the GSG common stock. The shares of GSG common stock to be distributed in the spin-off will be distributed as uncertificated shares registered in book-entry form through the direct registration system. No certificates representing your shares will be mailed to you in connection with the spin-off. Under the direct registration system, instead of receiving stock certificates, you will receive a statement reflecting your ownership interest in our shares. The distribution agent will begin mailing book-entry account statements reflecting your ownership of shares promptly after the distribution date. You can obtain more information regarding the direct registration system by contacting our transfer agent and registrar, Computershare Trust Company, N.A., at (877) 282-1168 or through its website at www.computershare.com.

Transferability of Shares You Receive

GSG Class A Stock

        The shares of the GSG Class A Stock distributed to stockholders will be freely transferable, except for shares received by persons who may be deemed to be our "affiliates" under the Securities Act of 1933, as amended (the "Securities Act"). Persons who may be deemed to be our affiliates after the spin-off generally include individuals or entities that control, are controlled by, or are under common control with us, and include our directors and certain of our officers. Our affiliates will be permitted to sell their shares of GSG Class A Stock only pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the Securities Act ("Rule 144").

35


Table of Contents

        Under Rule 144, an affiliate may not sell within any three-month period shares of GSG Class A Stock in excess of the greater of:

    1% of the then outstanding number of shares of GSG Class A Stock; and

    the average weekly trading volume of GSG Class A Stock on the NYSE during the four calendar weeks preceding the filing of a notice with the SEC on Form 144 with respect to such sale.

        Sales under Rule 144 are also subject to certain provisions regarding the manner of sale, notice requirements and availability of current public information about us. Among other restrictions, sales will not be able to be made using Rule 144 until GSG has been subject to the reporting requirements of Section 13 of the Exchange Act for a period of at least 90 days, which will occur on                , 2015.

GSG Class B Stock

        The GSG Class B Stock may not be transferred. With the approval of our Board, the GSG Class B Stock can be converted into GSG Class A Stock and then sold. The GSG Class A Stock received by our affiliates upon the conversion of the GSG Class B Stock will be subject to the same restrictions applicable to our affiliates described under "—Transferability of Shares You Receive—GSG Class A Stock."

Employee Stock-Based Plans

        Pursuant to GAMCO's 2002 Stock Award and Incentive Plan, the holders of GAMCO RSAs are generally entitled to an equitable adjustment in their awards, in order to prevent their dilution due to a spin-off. Therefore, in the spin-off, the holders of GAMCO RSAs will receive GSG RSAs. The new GSG RSAs will have essentially the same terms as the GAMCO RSAs, such that the holders GAMCO RSAs will have awards of the same financial value and other terms immediately before and after the spin-off.

Material U.S. Federal Income Tax Consequences of the Spin-Off

        The following discussion summarizes the material U.S. federal income tax consequences of the spin-off to us, GAMCO, and GAMCO stockholders. This discussion is based upon the U.S. federal income tax laws and regulations now in effect and as currently interpreted, and does not take into account possible changes in such tax laws or interpretations, any of which may be applied retroactively. It is not intended to and does not constitute tax advice for any individual or legal entity, nor may or should it be so interpreted.

        Each stockholder is urged to consult his or her tax advisor as to the specific tax consequences of the spin-off to that stockholder, including the effect of any state, local or foreign tax laws or U.S. tax laws other than those relating to income taxes and of changes in applicable tax laws.

        The following summary is for general information only and may not be applicable to stockholders who received their shares of GSG common stock pursuant to an employee benefit plan (or otherwise as compensation) or who are not citizens or residents of the United States (or are not otherwise United States persons) within the meaning of the Code or who are otherwise subject to special treatment under the Code, such as tax-exempt entities, partnerships (including arrangements treated as partnerships for U.S. federal income tax purposes), financial institutions, insurance companies, dealers or traders in public securities, and persons who hold their shares of GAMCO common stock as part of a straddle, hedge, conversion, constructive sale, synthetic security, integrated investment or other risk-reduction transaction for U.S. federal income tax purposes. Each stockholder's individual circumstances may affect the tax consequences of the spin-off to such stockholder. In addition, no information is provided with respect to tax consequences under any applicable foreign, state or local

36


Table of Contents

laws. Consequently, stockholders are advised to consult their own tax advisor as to the specific tax consequences of the spin-off and the effect of possible changes in tax laws.

        If a partnership (including any arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of GAMCO common stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding shares of GAMCO common stock should consult its tax advisor regarding the tax consequences of the spin-off.

        We have not sought and have not received, and do not plan on seeking or obtaining, a ruling from the IRS regarding the tax consequences of the spin-off. Accordingly, there can be no assurance that the IRS or another taxing authority will not assert that the distribution is taxable to GAMCO, GSG or GAMCO stockholders. However, as discussed previously, we expect that the distribution of GSG shares will not be taxable to GAMCO, GSG or GAMCO stockholders. The distribution is expected to meet the requirements for a tax-free spin-off under Section 355 of the Code. Therefore, we believe that the spin-off will produce the following consequences:

    GAMCO will not recognize any gain or loss upon the spin-off of the stock of GSG to the GAMCO stockholders;

    no gain or loss will be recognized by, or be includible in the income of, a holder of GAMCO common stock solely as the result of the receipt of GSG common stock in the spin-off;

    the aggregate basis of GAMCO common stock and GSG common stock in the hands of GAMCO stockholders immediately after the spin-off will be the same as the basis of GAMCO common stock held by the stockholders immediately before the spin-off, allocated between the common stock of GAMCO and GSG in proportion to the relative fair market values of each on the distribution date;

    the holding period of GSG common stock received by GAMCO stockholders will include the holding period of their GAMCO common stock with respect to which the spin-off was made, provided that such GAMCO common stock is held as a capital asset on the date of the spin-off; and

    the receipt of cash in lieu of a fractional share of GSG common stock generally will be treated as a sale of GSG common stock, and a GAMCO stockholder will recognize gain or loss equal to the difference between the amount of cash received and the stockholder's basis in the fractional share of GSG common stock, as determined above. The gain or loss will be long-term capital gain or loss if the holding period for the fractional share of GSG common stock, as determined above, is more than one year.

        Although we expect the spin-off to be tax-free under Section 355(e) of the Code, the spin-off could nevertheless become taxable to GAMCO (but not GAMCO's stockholders) if GSG or GAMCO were to undergo a change in control pursuant to a plan or a series of related transactions that include the spin-off. Any transaction that occurs within the four-year period beginning two years prior to the spin-off is presumed to be part of a plan or a series of related transactions, which include the spin-off unless GAMCO establishes otherwise. In this context, a change in control generally means a shift in 50% or more of the ownership of either GAMCO or GSG.

        Certain transactions related to the spin-off could result in the recognition of income or gain by GAMCO.

        The foregoing is a summary of the material U.S. federal income tax consequences of the spin-off under current law. The foregoing does not purport to address all U.S. federal income tax consequences or tax consequences that may arise under the tax laws of various states or other jurisdictions or that may apply to particular categories of stockholders. Each GAMCO stockholder should consult his, her or its tax advisor as

37


Table of Contents

to the particular tax consequences of the distribution to such stockholder, including the application of U.S. federal, state, local and foreign tax laws, and the effect of possible changes in tax laws that may affect the tax consequences described above.

Information Reporting

        Treasury Regulations require certain "significant" GAMCO stockholders who receive GSG common stock pursuant to the spin-off to attach to his or her U.S. federal income tax return for the taxable year in which the spin-off occurs a detailed statement setting forth certain information with respect to the spin-off. GSG will provide adequate information to such stockholders for this purpose.

Trading Markets for the GSG Common Stock

        There is currently no public market for the GSG common stock. We will apply to have the GSG Class A Stock listed on the NYSE under the symbol "        ." We anticipate that trading of the GSG Class A Stock will commence on a "when-issued" basis shortly before the record date. When-issued trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. On the first trading day following the distribution date, when-issued trading with respect to the GSG Class A Stock will end and "regular way" trading will begin. Regular way trading refers to trading after a security has been issued and typically involves a transaction that settles on the third full business day following the date of the transaction. We cannot predict what the trading prices for the GSG Class A Stock will be before or after the distribution date. See "Risk Factors—Risks Related to the GSG Common Stock." In addition, we cannot predict any change that may occur in the trading price of GAMCO Class A Stock as a result of the spin-off.

        We do not intend to list the GSG Class B Stock on any exchange, and we do not expect that a trading market for the GSG Class B Stock will develop.

Trading of GAMCO Class A Stock After the Record Date and Prior to the Distribution

        Beginning on or shortly before the record date and through the distribution date, there will be two concurrent markets in which to trade GAMCO Class A Stock: a regular way market and an ex-distribution market. Shares of GAMCO Class A Stock that trade in the regular way market will trade with an entitlement to shares of GSG Class A Stock distributed in connection with the spin-off. Shares of GAMCO Class A Stock that trade in the ex-distribution market will trade without an entitlement to shares of GSG Class A Stock distributed in connection with the spin-off. Therefore, if you owned shares of GAMCO Class A Stock on the record date and sell those shares in the regular way market on or prior to the distribution date, you also will be selling your right to receive the shares of GSG Class A Stock that would have been distributed to you in connection with the spin-off. If you sell those shares of GAMCO Class A Stock in the ex-distribution market prior to or on the distribution date, you will still receive the shares of GSG Class A Stock that were to be distributed to you in connection with the spin-off as a result of your ownership of the shares of GAMCO common stock.

Sale of GAMCO Stock and/or Note to GSG

        After the record date and before the distribution date, GAMCO expects to either sell or transfer to us shares of GAMCO Class A Stock that are currently held in treasury, newly issued preferred shares or a note of GAMCO or another party, or a combination of any or all three, in the amount of $             million. On or before the distribution date, GAMCO expects to contribute to GSG its 93.9% interest in GSI, as well as approximately $             million in cash and other assets.

        Any shares of GAMCO Class A Stock sold or transferred subsequent to the record date will not receive any distribution with respect to in the spin-off. After the distribution, any such shares will be

38


Table of Contents

treated as issued and outstanding shares of GAMCO and, for accounting purposes, as available for sale ("AFS") securities at GSG.

Spin-Off Conditions and Termination

        We expect that the spin-off's distribution date will be on or about                , 2015, provided that, among other things:

    the SEC has declared effective our registration statement on Form 10, of which this information statement is a part, under the Exchange Act, with no stop order in effect with respect to the Form 10;

    this information statement shall have been mailed to the holders of GAMCO common stock;

    the actions and filings, if any, necessary under securities and blue sky laws of the states of the United States and any comparable laws under any foreign jurisdictions must have been taken and become effective;

    no order, injunction, decree or regulation issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the spin-off will be in effect and no other event outside GAMCO's control will have occurred or failed to occur that prevents the consummation of the spin-off;

    the approval for listing of the GSG Class A Stock on the NYSE, subject to official notice of issuance, shall have been obtained;

    GAMCO shall have received an opinion from its tax counsel regarding the tax-free status of the spin-off as of the distribution date (see "—Material U.S. Federal Income Tax Consequences of the Spin-Off"); and

    no event or development has occurred or exists that, in the judgment of the GAMCO Board, in its sole discretion, makes the spin-off inadvisable.

Reasons for Furnishing and Content of this Information Statement

        This information statement is being furnished solely to provide information to holders of GAMCO common stock who will receive shares of GSG common stock in connection with the spin-off. It is not provided as an inducement or encouragement to buy or sell any securities. You should not assume that the information contained in this information statement is accurate as of any date other than the date set forth on the cover. Changes to the information contained in this information statement may occur after the date, and neither GAMCO's nor GSG's management has an obligation or intention to update the information.

Accounting Treatment

        The spin-off will be accounted for by GAMCO as a dividend at historical cost, and no gain or loss will be recorded.

39


Table of Contents


DIVIDEND POLICY

        We currently contemplate paying a dividend; however, we cannot assure you that we will pay any dividend. Whether we pay cash dividends in the future will be at the discretion of our Board and will be dependent upon our financial condition, results of operations, capital requirements, and any other factors that our Board determines are relevant.


REGULATORY APPROVALS

        We do not believe that any regulatory approvals are required in connection with the spin-off, other than possible approval by FINRA of certain of the Formation Transactions.

40


Table of Contents


BUSINESS

Overview

        GSG was incorporated under the laws of the State of Delaware on April 15, 2015 to be the holding company for the Gabelli Securities Group in the spin-off.

Alternative Investment Management

        We own a 93.9% interest in GSI, a registered investment advisor. GSI and its wholly owned subsidiary, Gabelli & Partners, collectively serve as general partners or investment managers to Investment Partnerships, and separate accounts. We primarily manage assets in equity event-driven value strategies, across a range of risk and event arbitrage portfolios. The business earns fees from its advisory assets, and income (loss) from trading and investment portfolio activities. The advisory fees include management and incentive fees. Management fees are largely based on a percentage of the portfolios' levels of AUM. Incentive fees are based on the percentage of profits derived the from investment performance delivered to clients' invested assets. As of December 31, 2014, we managed a total of $1.0 billion in assets. GSI is registered with the SEC as an investment advisor under Advisers Act. Certain employees of GAMCO own 1.9% of GSI, and the remaining 4.2% of GSI is owned by individual investors unrelated to GAMCO. Stockholders of GSI who are employees of GSI or its affiliates may only sell their GSI shares to GSI at the book value per share of the previous fiscal year end. Upon completion of the spin-off, stockholders who are employees of GSI or its affiliates will only be permitted to sell their GSI shares to GSI at the book value per share of the previous fiscal year end.

        We generally manage assets on a discretionary basis and invest in a variety of U.S. and international securities utilizing a bottom up value investment style. Our managed funds primarily employ absolute return strategies such that we strive to generate positive returns with low volatility regardless of market cycles or performance.

        We introduced our first alternative fund, a merger arbitrage partnership, Gabelli Arbitrage (renamed Gabelli Associates), in February 1985. We then launched the Gabelli Rosenthal partnership in July 1985 to focus on leveraged buyout opportunities. An offshore version of the event merger arbitrage strategy was added in 1989. Building on our strengths in global event-driven value investing, several new Investment Partnerships have been added to balance investors' geographic, strategy and sector needs. Today, we offer 20 Investment Partnerships in multiple categories, including event merger arbitrage, event-driven value and other across a broad range of absolute return products. Within our event merger arbitrage strategy, as of December 31, 2014, we managed approximately $796 million of assets for investors who seek positive returns not correlated to fluctuations of the general market. These funds seek to drive returns by investing in announced merger and acquisition transactions that are primarily dependent on deal closure and less on the overall market environment. In event-driven value, as of December 31, 2014, we managed approximately $167 million of assets focused on the U.S. and non-U.S. markets. We also manage $77 million of assets in a variety of other series of Investment Partnerships designed to offer investors a mechanism to diversify their portfolios by global economic and sectoral opportunities. These include sector, high yield, capital structure and venture capital or merchant banking portfolios. Since our inception, we have been closely identified with, and have enhanced, the "value" style of investing consistent with our fundamental objective of providing an absolute return for our clients. Our investment objective is to earn a superior risk-adjusted return over the long-term through our proprietary fundamental research. We serve a wide variety of investors including private wealth management accounts, corporations, corporate pension and profit-sharing plans, foundations, endowments, jointly-trusteed plans and municipalities as well as serving as sub-advisor to certain third-party investment funds.

41


Table of Contents

Assets Under Management

        The following table sets forth GSG's total AUM for the dates shown.


Assets Under Management
(in thousands)

 
  At December 31,  
Category(a)
  2010   2011   2012   2013   2014  

Event Merger Arbitrage

  $ 400,996   $ 512,661   $ 721,065   $ 690,975   $ 795,894  

Event-Driven Value

    54,994     131,833     123,648     140,091     166,825  

Other(b)

    59,593     65,300     75,469     76,050     76,827  

Total

  $ 515,533   $ 709,794   $ 920,182   $ 907,116   $ 1,039,546  

(a)
Asset levels include various structures, including managed accounts, partnerships and offshore companies.

(b)
Includes investment vehicles focused on private equity, merchant banking, non-investment-grade credit and capital structure arbitrage.

Institutional Research Services

        We operate our institutional research services business through G.research, a wholly owned subsidiary of GSI. G.research is a broker-dealer registered under the Exchange Act. Through G.research, we act as an underwriter and provide institutional research services. G.research is regulated by FINRA. G.research's revenues are derived primarily from institutional research services, underwriting fees and selling concessions.

Institutional Research Services

        G.research provides institutional investors with investment ideas in numerous industries and special situations, with a particular emphasis on small-cap and mid-cap companies. Our research analysts are industry-focused, following sectors that are based on our core competencies. They research companies of all market capitalizations on a global basis. The primary function of the research team is to gather data, array the data, and then project and interpret data from which investment decisions can be made. Analysts publish their insights in the form of research reports and daily notes. In addition, G.research hosts numerous conferences each year which bring together industry leaders and institutional investors. The objective of the institutional research services is to provide superior investment ideas to investment decision makers.

        Analysts are generally assigned to research platforms, coordinated by a senior analyst, in order to ensure a consistent process, enhance idea cross-fertilization and knowledge-sharing. Our platforms include Digital, which includes cable, telecommunications, broadcasting, publishing, advertising, entertainment and technology; utilities and renewable energy; Consumer, Health and Wellness, Autos, Aerospace and Capital Goods; Natural Resources; and Financial Services.

        G.research generates institutional research services revenues through brokerage activities from securities transactions executed on an agency basis on behalf of institutional and private wealth management clients as well as from retail customers and mutual funds. Institutional research services revenues totaled $9.2 million, $8.9 million, and $11.0 million for the years ended December 31, 2014, 2013 and 2012, respectively. G.research earned $4.7 million, $4.8 million and $4.8 million, or approximately 54%, 58% and 61%, of its commission revenue from transactions executed on behalf of funds advised by Gabelli Funds, LLC, and private wealth management clients advised by GAMCO

42


Table of Contents

Asset Management Inc. for the years ended December 31, 2014, 2013 and 2012, respectively. Additionally, for the year ended December 31, 2014, Gabelli Funds, LLC and GAMCO Asset Management Inc. paid $0.8 million and $0.7 million, respectively, to G.research pursuant to research services agreements. Gabelli Funds, LLC and GAMCO Asset Management Inc. are both wholly owned subsidiaries of GAMCO. G.research continues to pursue expansion of such activities.

Underwriting

        During 2014, G.research participated as Sales Manager in the at the market offerings of The GAMCO Global Gold, Natural Resources & Income Trust and acted as Dealer Manager for The Gabelli Equity Trust Rights Offering, the Gabelli Multimedia Trust Rights Offering, the Gabelli Healthcare & Wellness Trust Rights Offering, and acted as co-manager in The Gabelli Health & Wellness Trust 5.875% Series B Cumulative Preferred Stock Offering. For the year ended December 31, 2014, G.research earned $0.6 million for these roles. During 2013, G.research participated as Sales Manager in the at the market offerings of The GAMCO Global Gold, Natural Resources & Income Trust and acted as Dealer Manager for The Gabelli Global Utility and Income Trust's Series A Preferred Share Rights Offering, and acted as co-manager in The GAMCO Global Gold, Natural Resources & Income Trust 5% Series B Cumulative Preferred Stock Offering. For the year ended December 31, 2013, G.research earned $0.8 million for these roles. During 2012, G.research participated as Sales Manager in the at the market offerings of The GAMCO Global Gold, Natural Resources & Income Trust and acted as Dealer Manager for The Gabelli Equity Trust's Series F Cumulative Preferred Rights Offering, and acted as co-underwriter for The Gabelli Equity Trust's Series H Cumulative Preferred Stock Offering. For the year ended December 31, 2012, G.research earned $3.2 million for these roles. There can be no assurances that GAMCO will continue such relationships with GSG.

Proprietary Trading

        We received a substantial portion of the cash and investments previously held by GAMCO prior to the spin-off. We expect to use this proprietary investment portfolio to provide seed capital in introducing new products, expand our geographic presence, develop new markets and pursue strategic acquisitions, alliances and lift-outs. Our proprietary portfolios are largely invested in products we manage or that are managed by GAMCO.

Business Strategy

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

Continuing an active fundamental Investment Approach

        After the spin-off, our legacy of Gabelli "Private Market Value (PMV) with a Catalyst™" (value investing) approach will remain the core investment philosophy of our business. This method is based on and has evolved from the value investing principles articulated by Graham & Dodd in 1934, and has been further augmented by our founder Mario J Gabelli. This approach, however, will not necessarily be utilized in connection with all of our products.

43


Table of Contents

Growing our Investment Partnerships Advisory Business

        We intend to grow our Investment Partnerships advisory business by gaining share in existing products and introducing new products within our core competencies, such as event and merger arbitrage. In addition, we intend to grow internationally.

Capitalizing on Acquisitions, Alliances and Lift-outs

        We intend to leverage our research and investment capabilities to selectively and opportunistically pursue acquisitions, alliances and lift-outs that will broaden our product offerings and add new sources of distribution.

Pursuing Partnerships and Joint Ventures

        We expect to pursue partnerships and joint ventures with partners that we believe have a strong fit with GSG with respect to product quality and that would provide Asian/European distribution capabilities that would complement our U.S. equity product expertise.

Continuing Our Sponsorship of Industry Conferences

        G.research, our institutional research services business, sponsors industry conferences and management events throughout the year. At these conferences and events, senior management from leading companies share their thoughts on the industry, competition, regulation and the challenges and opportunities in their businesses with portfolio managers and securities analysts. These meetings are an important component of the research services provided to institutional clients. Specifically, in 2014, we hosted 5 such meetings: our 38th Annual Automotive Aftermarket Symposium, 24th Annual Pump Valve & Energy Infrastructure Conference, 20th Annual Aircraft Supplier Conference, 6th Annual Movie & Entertainment Conference and 5th Annual Specialty Chemicals Conference.

Attracting and Retaining Experienced Professionals

        We offer significant variable compensation that provides opportunities to our staff. We expect to increase the scope of our investment management capabilities by adding portfolio managers and other investment personnel in order to expand our products. Our ability to attract and retain highly-experienced investment and other professionals with a long-term commitment to us and our clients has been, and will continue to be, a significant factor in our long-term growth.

Competition

        The alternative asset management industry is intensively competitive and is expected to remain so. We face competition in all aspects of our business and in each of our investment strategies from other managers both in the United States and globally. We compete with other alternative investment management firms, insurance companies, banks, brokerage firms and other financial institutions that offer products that have similar features and investment objectives. Many of these investment management firms are subsidiaries of large diversified financial companies and may have access to greater resources, including liquidity sources, not available to us. Many others are much larger in terms of AUM and revenues and, accordingly, have much larger sales organizations and marketing budgets. Historically, we have competed primarily on the basis of the long-term investment performance of many of our investment products. However, we have taken steps to increase our distribution channels, brand name awareness and marketing efforts.

        The market for providing investment management services to institutional and private wealth management clients is also highly competitive. Approximately 27% of our investment advisory fee revenue for the year ended December 31, 2014 was derived from our institutional and private wealth

44


Table of Contents

management. Selection of investment advisors by U.S. institutional investors is often subject to a screening process and to favorable recommendations by investment industry consultants. Many of these investors require their investment advisors to have a successful and sustained performance record, often five years or longer with focus also on one-year and three-year performance records. We have significantly increased our AUM on behalf of U.S. institutional investors since our entry into the institutional asset management business. At the current time, we believe that our investment performance record would be attractive to potential new institutional and private wealth management clients. However, no assurance can be given that our efforts to obtain new business will be successful.

Intellectual Property

        Service marks and brand name recognition are important to our business. We have rights to the service marks under which our products are offered. We have registered certain service marks in the United States and will continue to do so as new trademarks and service marks are developed or acquired. We have rights to use the "Gabelli" name, the "GAMCO" name, and other names pursuant to a Service Mark and Name License Agreement, a royalty-free perpetual license agreement we entered into with GAMCO. Pursuant to assignment agreements, Mario J. Gabelli has assigned to us and GBL all of his rights, title and interests in and to the "Gabelli" name for use in connection with investment management services and brokerage services. However, under the assignment agreements, Mario J. Gabelli will retain any and all rights, title and interests he has or may have in the "Gabelli" name for use in connection with (i) charitable foundations controlled by Mario J. Gabelli or members of his family and (ii) entities engaged in private investment activities for Mario J. Gabelli or members of his family. In addition, the funds managed by Mario J. Gabelli outside GAMCO and GSG have entered into a license agreement with GAMCO and us permitting them to continue limited use of the "Gabelli" name under specified circumstances. We have taken, and will continue to take, action to protect our interests in these service marks.

Regulation

        Virtually all aspects of our businesses are subject to various federal, state and foreign laws and regulations. These laws and regulations are primarily intended to protect investment advisory clients and investors, the markets and customers of broker-dealers. Under such laws and regulations, agencies that regulate investment advisors and broker-dealers have broad powers, including the power to limit, restrict or prohibit such an advisor or broker-dealer from carrying on its business in the event that it fails to comply with such laws and regulations. In such an event, the possible sanctions that may be imposed include civil and criminal liability, the suspension of individual employees, injunctions, limitations on engaging in certain lines of business for specified periods of time, revocation of the investment advisor and other registrations, censures and fines.

Global Regulatory Reform

        We are subject to numerous regulatory reform initiatives in each country in which we do business. Any such initiative, or any new laws or regulations or changes in enforcement of existing laws or regulations, could materially and adversely impact the scope or profitability of GSG's business activities, lead to business disruptions, require GSG to change certain business practices and expose GSG to additional costs (including compliance and legal costs), as well as reputational harm. GSG's profitability also could be materially and adversely affected by modification of the rules and regulations that impact the business and financial communities in general, including changes to the laws governing taxation, antitrust regulation and electronic commerce.

        Dodd-Frank Wall Street Reform and Consumer Protection Act.    In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "DFA") was signed into law in the United States. The DFA is expansive in scope and requires the adoption of extensive regulations and numerous

45


Table of Contents

regulatory decisions, many of which have been adopted. As the impact of these rules will become evident over time, it is not yet possible to predict the ultimate effects that the DFA, or subsequent implementing regulations and decisions, will have upon GSG's business, financial condition and results of operations.

        Securities and Exchange Commission Review of Asset Managers.    Our business may also be impacted by the SEC regulatory initiatives. For example, on December 11, 2014 the Chair of the SEC announced that she is recommending that the SEC enhance its oversight of asset managers by (i) expanding and updating data requirements with which asset managers must comply, (ii) improving fund level controls, including those related to liquidity levels and the nature of specific instruments and (iii) ensuring that asset management firms have appropriate transition plans in place to deal with market stress events or situations where an investment adviser is no longer able to serve its clients. Although these recommendations have not yet resulted in any proposed rules, any additional SEC oversight or the introduction of any new reporting, disclosure or control requirements could expose us to additional compliance costs and may require us to change how we operate our business.

        Taxation.    Our global business may be impacted by the FATCA, which was enacted in 2010 and introduced expansive new investor onboarding, withholding and reporting rules aimed at ensuring U.S. persons with financial assets outside of the United States pay appropriate taxes. In many instances, however, the precise nature of what needs to be implemented will be governed by bilateral Intergovernmental Agreements ("IGAs") between the United States and the countries in which we do business or have accounts. While many of these IGAs have been put into place, others have yet to be concluded. The FATCA rules will impact both U.S. and non-U.S. funds and subject us to extensive additional administrative burdens. The Organization for Economic Co-operation and Development has also recently launched the BEPS proposal that aims to rationalize tax treatment across jurisdictions. If the BEPS proposal becomes the subject of legislative action in the format proposed, it could have unintended taxation consequences for collective investment vehicles and our tax position, which could adversely affect our financial condition.

        In addition, certain individual EU Member States, such as France and Italy, have enacted national FTTs. There has also been renewed momentum by several other Member States to introduce FTTs, which would impose taxation on a broad range of financial instrument and derivatives transactions. In general, any tax on securities and derivatives transactions would impact investors and would likely have a negative impact on the liquidity of the securities and derivatives markets, could diminish the attractiveness of certain types of products that we manage in those countries and could cause clients to shift assets away from such products. An FTT could significantly increase the operational costs of our entering into, on behalf of our clients, securities and derivatives transactions that would be subjected to an FTT, which could adversely impact our financial results and clients' performance results.

        Our business could also be impacted to the extent there are other changes to tax laws. For example, the administration recently announced its proposed U.S. federal budget, which called for new industry fees for financial firms. To the extent such fees are adopted and found to apply to us, such fees could adversely affect our financial results.

        Alternative Investment Fund Managers Directive.    Our European business is impacted by the EU Alternative Investment Fund Managers Directive ("AIFMD"), which became effective on July 21, 2011. The AIFMD regulates managers of, and service providers to, a broad range of alternative investment funds ("AIFs") domiciled within and (depending on the precise circumstances) outside the EU. The AIFMD also regulates the marketing of all AIFs inside the European Economic Area ("EEA"). The AIFMD is being implemented in stages, which run through 2018. Compliance with the AIFMD's requirements restrict alternative investment fund marketing and impose additional compliance and disclosure obligations regarding remuneration, capital requirements, leverage, valuation, stakes in EU companies, depositaries, the domicile of custodians and liquidity management on GSG. These new compliance and disclosure obligations and the associated risk management and reporting requirements will subject us to additional expenses.

46


Table of Contents

        Undertakings for Collective Investment in Transferable Securities.    The EU has also adopted directives on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities ("UCITS") as regards depositary functions, remuneration policies and sanctions. The latest initiative in this area, UCITS V, which became effective in September 2014, seeks to align the depositary regime, remuneration rules and sanctioning powers of regulators under the UCITS Directive with the requirements of the AIFMD. UCITS V is required to be adopted in the national law of each EU member state during the second quarter of 2016. Similarly, in August 2014 ESMA revised the guidelines it initially published in 2012 on exchange-traded funds and other UCITS funds. The guidelines introduced new collateral management requirements for UCITS funds concerning collateral received in the context of derivatives using Efficient Portfolio Management ("EPM") techniques (including securities lending) and over-the-counter derivative transactions. These rules, which are now in effect, required us to make a series of changes to its collateral management arrangements applicable to the EPM of its UCITS fund ranges. Compliance with the UCITS directives will cause us to incur additional expenses associated with new risk management and reporting requirements.

Existing U.S. Regulation Overview

        GSG and certain of its U.S. subsidiaries are currently subject to extensive regulation, primarily at the federal level, by the SEC, the Department of Labor, FINRA and other government agencies and regulatory bodies. Certain of our U.S. subsidiaries are also subject to various anti-terrorist financing, privacy, anti-money laundering regulations and economic sanctions laws and regulations established by various agencies.

The Investment Advisers Act of 1940

        GSI is registered with the SEC under the Advisers Act and is regulated by and subject to examination by the SEC. The Advisers Act imposes numerous obligations on registered investment advisors including fiduciary duties, disclosure obligations and record keeping, operational and marketing requirements. The SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act, ranging from censure to termination of an investment advisor's registration. The failure of GSI to comply with the requirements of the SEC could have a material adverse effect on us.

        We derive a substantial majority of our revenues from investment advisory services through our various investment management agreements. Under the Advisers Act, our investment management agreements may not be assigned without the client's consent.

Broker-Dealer and Trading and Investment Regulation

        G.research is registered as broker-dealer with the SEC and is subject to regulation by FINRA and various states. In its capacity as a broker-dealer, G.research is required to maintain certain minimum net capital amounts. These requirements also provide that equity capital may not be withdrawn, advances to affiliates may not be made or cash dividends paid if certain minimum net capital requirements are not met. G.research's net capital, as defined, met or exceeded all minimum requirements as of December 31, 2014. As a registered broker-dealer, G.research is also subject to periodic examination by FINRA, the SEC and the state regulatory authorities.

        Our trading and investment activities for client accounts are regulated under the Exchange Act, as well as the rules of various U.S. and non-U.S. securities exchanges and self-regulatory organizations, including laws governing trading on inside information, market manipulation and a broad number of technical requirements (e.g., short sale limits, volume limitations and reporting obligations) and market regulation policies in the United States and globally. Violation of any of these laws and regulations could result in restrictions on our activities and damage our reputation.

47


Table of Contents

Potential Legislation Relating to Private Pools of Capital

        We manage a variety of private pools of capital, including hedge funds. Congress, regulators, tax authorities and others continue to explore, on their own and in response to demands from the investment community and the public, increased regulation related to private pools of capital, including changes with respect to investor eligibility, certain limitations on trading activities, record-keeping and reporting, the scope of anti- fraud protections, safekeeping of client assets and a variety of other matters. GSG may be materially and adversely affected by new legislation, rule-making or changes in the interpretation or enforcement of existing rules and regulations imposed by various regulators.

ERISA

        Subsidiaries of GSG are subject to ERISA and to regulations promulgated thereunder, insofar as they are "fiduciaries" under ERISA with respect to certain of their clients ERISA and applicable provisions of the Code, impose certain duties on persons who are fiduciaries under ERISA and prohibit certain transactions involving ERISA plan clients. Our failure to comply with these requirements could have a material adverse effect on us.

The Patriot Act

        The USA Patriot Act of 2001 contains anti-money laundering and financial transparency laws and mandates the implementation of various new regulations applicable to broker-dealers 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 United States contain some similar provisions. Our failure to comply with these requirements could have a material adverse effect on us.

Laws and Other Issues Relating to Taking Significant Equity Stakes in Companies

        Investments by GSG and on behalf of our advisory clients and Investment Partnerships often represent a significant equity ownership position in an issuer's class of stock. As of December 31, 2014, we had five percent or more beneficial ownership with respect to 120 equity securities (this is partially due to the fact that we may be deemed to be a member of "group" with GAMCO and therefore may be deemed to beneficially own the securities owned by that group). This activity raises frequent regulatory, legal and disclosure issues regarding our aggregate beneficial ownership level with respect to portfolio securities, including issues relating to issuers' stockholder rights plans or "poison pills," and various federal and state regulatory limitations, including state gaming laws and regulations, federal communications laws and regulations and federal and state public utility laws and regulations, as well as federal proxy rules governing stockholder communications and federal laws and regulations regarding the reporting of beneficial ownership positions. Our failure to comply with these requirements could have a material adverse effect on us.

Existing International Regulation Overview

        Our international operations are subject to the laws and regulations of a number of international jurisdictions, as well as oversight by numerous regulatory agencies and bodies in those jurisdictions. In some instances, they are also affected by U.S. laws and regulations that have extra-territorial application.

        Below is a summary of certain international regulatory standards to which GSG is subject. It is not meant to be comprehensive as there are parallel legal and regulatory arrangements in force in many jurisdictions where GSG's subsidiaries conduct business.

48


Table of Contents

        Of note among the various other international regulations to which GSG is subject, are the extensive and increasingly stringent regulatory reporting requirements that necessitate the monitoring and reporting of issuer exposure levels (thresholds) across the holdings of managed funds and accounts and those of GSG.

European Regulation

        The FCA currently regulates GSG in the United Kingdom. It also regulates those U.K. subsidiaries' branches established in other European countries and the U.K. branches of certain of GSG's U.S. subsidiaries. Authorization by the FCA is required to conduct certain financial services related business in the United Kingdom under the Financial Services and Markets Act 2000. The FCA's rules adopted under that Act govern the majority of a firm's capital resources requirements, senior management arrangements, conduct of business, interaction with clients and systems and controls. The FCA supervises GSG through a combination of proactive engagement, event-driven and reactive supervision and thematic based reviews in order to monitor our compliance with regulatory requirements. Breaches of the FCA's rules may result in a wide range of disciplinary actions against our U.K.-regulated subsidiaries and/or its employees.

        In addition, our U.K.-regulated subsidiaries and other European subsidiaries and branches must comply with the pan-European regulatory regime established by the Markets in Financial Instruments Directive ("MiFID"), which became effective on November 1, 2007 and regulates the provision of investment services and activities throughout the wider EEA. MiFID, the scope of which is being enhanced through MiFID 2 which is described more particularly under "—Global Regulatory Reform" above, sets out detailed requirements governing the organization and conduct of business of investment firms and regulated markets. It also includes pre- and post-trade transparency requirements for equity markets and extensive transaction reporting requirements. In addition, relevant entities must comply with revised obligations on capital resources for banks and certain investment firms (the Capital Requirements Directive), which became effective in January 2014. These include requirements not only on capital, but address matters of governance and remuneration as well. The obligations introduced through these directives will have a direct effect on some of our European operations.

        Our EU-regulated subsidiaries are additionally subject to an EU regulation on OTC derivatives, central counterparties and trade repositories, which was adopted in August 2012 and which requires (i) the central clearing of standardized OTC derivatives, (ii) the application of risk-mitigation techniques to non-centrally cleared OTC derivatives and (iii) the reporting of all derivative contracts from February 2014.

Regulation in the Asia-Pacific Region

        In Japan, a GSG subsidiary is subject to the Financial Instruments and Exchange Law (the "FIEL") and the Law Concerning Investment Trusts and Investment Corporations. These laws are administered and enforced by the Japanese Financial Services Agency (the "JFSA"), which establishes standards for compliance, including capital adequacy and financial soundness requirements, customer protection requirements and conduct of business rules. The JFSA is empowered to conduct administrative proceedings that can result in censure, fine, the issuance of cease and desist orders or the suspension or revocation of registrations and licenses granted under the FIEL. This Japanese subsidiary also holds a license for real estate brokerage activity which subjects it to the regulations set forth in the Real Estate Brokerage Business Act.

Regulatory Matters

        The investment management industry is likely to continue facing a high level of regulatory scrutiny and become subject to additional rules designed to increase disclosure, tighten controls and reduce

49


Table of Contents

potential conflicts of interest. In addition, the SEC has substantially increased its use of focused inquiries which request information from investment advisors regarding particular practices or provisions of the securities laws. We participate in some of these inquiries in the normal course of our business. Changes in laws, regulations and administrative practices by regulatory authorities, and the associated compliance costs, have increased our cost structure and could in the future have a material adverse impact. Although we have installed procedures and utilize the services of experienced administrators, accountants and lawyers to assist us in adhering to regulatory guidelines and satisfying these requirements, and maintain insurance to protect ourselves in the case of client losses, there can be no assurance that the precautions and procedures that we have instituted and installed, or the insurance that we maintain to protect ourselves in case of client losses, will protect us from all potential liabilities.

Legal Proceedings

        From time to time, we may be named in legal actions and proceedings. These actions may seek substantial or indeterminate compensatory as well as punitive damages or injunctive relief. We are also subject to governmental or regulatory examinations or investigations. Examinations or investigations can result in adverse judgments, settlements, fines, injunctions, restitutions or other relief. For any such matters, the combined consolidated financial statements include the necessary provisions for losses that we believe are probable and estimable. Furthermore, we evaluate whether there exist losses which may be reasonably possible and, if material, make the necessary disclosures.

Employees

        At the time of the spin-off, GSG is expected to have three executive officers and                other employees performing day-to-day management functions. Additionally, through the Administrative Agreement, employees of GAMCO will perform other functions. For more information, see "Management."

Real Estate Properties

        GSG owns no properties. GSG currently pays GAMCO an occupancy charge with respect to the office space it uses at GAMCO's offices at 401 Theodore Fremd Avenue in Rye, NY. GSG will continue to use the same space after the distribution pursuant to the Administrative and Management Services Agreement to be entered into with GAMCO.

Status as an Emerging Growth Company and a Smaller Reporting Company

        We are an "emerging growth company," as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies." These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

        Although we are still evaluating the JOBS Act, we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us as long as we qualify as an emerging growth company, except that we have irrevocably elected not to take advantage of the extension of time to comply with new or revised financial accounting standards available under Section 107(b) of the JOBS Act.

50


Table of Contents

        We will, in general, remain as an emerging growth company for up to five full fiscal years following the distribution. We would cease to be an emerging growth company and, therefore, become ineligible to rely on the above exemptions, if we:

    have more than $1 billion in annual revenue in a fiscal year;

    issue more than $1 billion of non-convertible debt during the preceding three-year period; or

    become a "large accelerated filer" as defined in Exchange Act Rule 12b-2, which would occur after: (i) we have filed at least one annual report pursuant to the Exchange Act; (ii) we have been an SEC-reporting company for at least 12 months; and (iii) the market value of GSG common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter.

        In addition, we qualify as a "smaller reporting company" under the Exchange Act. As a smaller reporting company, we enjoy many of the same exemptions as emerging growth companies, and those exemptions would continue to be available to us even after the emerging growth company status expires if we still are a smaller reporting company at such time.

51


Table of Contents


SELECTED HISTORICAL COMBINED CONSOLIDATED FINANCIAL DATA

        The selected historical combined consolidated financial data presented below has been derived in part from, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined consolidated financial statements and the notes thereto beginning on page F-1. Amounts included in the tables related to income statement data and balance sheet data are derived from audited combined consolidated financial statements.

 
  Year Ended December 31,  
Income Statement Data (in thousands)
  2014   2013   2012  

Revenues

                   

Investment advisory and incentive fees

  $ 9,779   $ 10,805   $ 8,952  

Distribution fees and other income

    2,090     677     1,644  

Institutional research services

    9,160     8,940     10,953  

Total revenues

    21,029     20,422     21,549  

Expenses:

                   

Compensation costs

    22,298     23,322     20,864  

Stock based compensation

    1,921     510     3,432  

Management fee

    392     4,998     1,380  

Other operating expenses

    6,771     6,624     8,771  

Total expenses

    31,382     35,454     34,447  

Operating loss

   
(10,353

)
 
(15,032

)
 
(12,898

)

Other income (expense), net

                   

Net gain from investments

    10,784     56,070     22,786  

Interest and dividend income

    4,416     5,865     4,419  

Interest expense

    (1,376 )   (1,908 )   (1,928 )

Total other income, net

    13,824     60,027     25,277  

Income before income taxes

    3,471     44,995     12,379  

Income tax provision

    2,127     14,774     3,666  

Net income before noncontrolling interests

    1,344     30,221     8,713  

Net income (loss) attributable to noncontrolling interests

    (4,157 )   463     170  

Net income

  $ 5,501   $ 29,758   $ 8,543  

 

 
  December 31,  
Balance Sheet Data (in thousands)
  2014   2013   2012  

Cash, cash equivalents and investments

  $ 653,308   $ 527,749   $ 524,633  

Long-term obligations

             

Other liabilities and noncontrolling interest

    172,195     94,227     79,948  

Total liabilities and noncontrolling interest

    172,195     94,227     79,948  

Total equity

  $ 582,499   $ 494,493   $ 509,767  

52


Table of Contents


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

        The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited combined consolidated financial statements and related notes beginning on page F-1 below. Some of the information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this information statement, particularly under "Special Note Regarding Forward-Looking Statements" and "Risk Factors."

Introduction

        Our primary sources of revenues are advisory fees, which are highly correlated to the amount of assets under our management, and incentive fee income, which is based on the investment performance of our funds. AUM, which are directly influenced by the level and changes of the overall equity markets, can also fluctuate through acquisitions, the creation of new products, the addition of new accounts or the loss of existing accounts. At times, the performance of our equity products may differ markedly from popular market indices, and this can also impact our revenues. It is our belief that general stock market trends will have the greatest impact on our level of AUM and hence, revenues. We may also generate gains or losses through our proprietary investment portfolio. This portfolio includes investments in securities, sponsored registered investment companies, investment partnerships and hedge funds and a money market mutual fund invested in U.S. Treasury Bills and Notes. The gains and losses from these investments are impacted by changes in interest rates and the overall equity markets and are included in Other income, net, in our Combined Consolidated Statements of Income.

        As of December 31, 2014, we had over $1.0 billion of AUM. We conduct our alternative investment management business through our 93.9% owned subsidiary, GSI, and Gabelli & Partners, a wholly owned subsidiary of GSI. GSI is an investment adviser registered under the Advisers Act. We also act as an underwriter and provide institutional research services through G.research, a broker-dealer subsidiary of GSI.

        GSI serves as the investment adviser to Investment Partnerships and separate accounts. Investment advisory fees, which are based on the amount and composition of the AUM in our client accounts, represent GSG's largest source of revenues. Advisory fees include both a management fee based on the level of AUM as well as an incentive allocation fee based on a percentage of the economic gain in the client accounts. Management fees are generally calculated on the assets at the beginning of the period, either monthly or quarterly, and incentive allocations are generally calculated on an annual basis. We recognize revenue only when the measurement period has been completed and when the incentive fees have been earned.

        Institutional research services revenues consist of brokerage commissions derived from securities transactions executed on an agency basis on behalf of mutual funds, Institutional and Private Wealth Management 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.

        In addition to the general level and trends of the stock market, growth in our revenues depends on good investment performance, which influences the value of existing AUM as well as contributes to higher investment and lower redemption rates, and facilitates the ability to attract additional investors while maintaining current fee levels. Growth in AUM is also dependent on being able to access various distribution channels, which is usually based on several factors, including performance and service.

53


Table of Contents

Historically, we have depended on direct distribution of our products and services. However, in recent years we have utilized third parties to augment our internal distribution capabilities. As a separate company from GAMCO, we hope to be able to utilize more third parties to distribute our products, some of whom may be direct competitors of GAMCO in the mutual fund and private wealth management areas.

        Net gain/(loss) from investments includes realized and unrealized gains and losses on our proprietary assets, which include investments in stocks, mutual funds and both affiliated and unaffiliated partnerships and offshore funds.

        Interest and dividend income includes interest income earned from cash equivalents that were invested in a money market mutual fund managed by Gabelli Funds, LLC, a wholly owned subsidiary of GAMCO and a registered investment advisor.

Assets Under Management Highlights

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

 
  Year Ended December 31,    
 
 
  CAGR(a)
2014/2010
 
 
  2014   2013   2012   2011   2010  

Event Merger Arbitrage

  $ 796   $ 691   $ 721   $ 513   $ 401     18.7 %

Event-Driven Value

    167     140     124     132     55     32.0 %

Other

    77     76     75     65     59     6.9 %

Total AUM

  $ 1,040   $ 907   $ 920   $ 710   $ 515     19.2 %

        Our net cash inflows or outflows by product line were as follows (in millions):

 
  Year Ended December 31,  
(unaudited)
  2014   2013   2012   2011   2010  

Event Merger Arbitrage

  $ 94   $ (58 ) $ 190   $ 96   $ 160  

Event-Driven Value

    24     2     (13 )   83     6  

Other

        (7 )   3     3     4  

Total AUM

  $ 118   $ (63 ) $ 180   $ 182   $ 170  

        Our net appreciation and depreciation by product line were as follows (in millions):

 
  Year Ended December 31,  
(unaudited)
  2014   2013   2012   2011   2010  

Event Merger Arbitrage

  $ 11   $ 28   $ 18   $ 16   $ 24  

Event-Driven Value

    3     14     5     (6 )   8  

Other

    1     8     7     3     8  

Total AUM

  $ 15   $ 50   $ 30   $ 13   $ 40  

(a)
Compound annual growth rate.

        Our AUM increased to over $1.0 billion at December 31, 2014 from $907 million at December 31, 2013. This increase was due to market appreciation of $15 million and inflows of $212 million, offset partially by outflows of $94 million. Our AUM decreased to $907 million at December 31, 2013 from $920 million at December 31, 2012. This decrease was due to outflows of $186 million, offset partially by market appreciation of $50 million and inflows of $123 million.

54


Table of Contents

Operating Results for the Year Ended December 31, 2014 as Compared to the Year Ended December 31, 2013

Revenues

        Total revenues were $21.0 million for the year ended December 31, 2014, $0.6 million, or 3.0%, higher than total revenues of $20.4 million for the year ended December 31, 2013. Total revenues by revenue component were as follows (dollars in thousands):

 
  Year Ended
December 31,
  Increase
(decrease)
 
(unaudited)
  2014   2013   $   %  

Investment advisory and incentive fees

  $ 9,779   $ 10,805   $ (1,026 )   (9.5 )%

Distribution fees and other income

    2,090     677     1,413     208.7  

Institutional research services

    9,160     8,940     220     2.5  

Total revenues

  $ 21,029   $ 20,422   $ 607     3.0  

        Investment advisory and incentive fees:    Investment advisory income is directly influenced by the level and mix of average AUM. We earn advisory fees based on the level of average AUM in our products.

        Advisory fees were $7.1 million for 2014 compared to $6.5 million for 2013, an increase of $0.6 million, or 9.2%. This increase is directly correlated to the increase in average AUM to $982 million in 2014 from $897 million in 2013, an increase of $85 million, or 9.5%.

        Incentive fees are directly related to the gains generated for our clients. We earn a percentage, usually 20%, of the economic gains of our clients' AUM. Incentive fees were $2.7 million in 2014, down $1.6 million, or 37.2%, from $4.3 million in 2013 as market appreciation in our clients' accounts were lower in 2014 as compared to 2013.

        Institutional research services:    Institutional research services revenues in 2014 were $9.2 million, a $0.3 million, or 2.5%, increase from $8.9 million in 2013 resulting from higher brokerage commissions derived from securities transactions executed on an agency basis.

        Distribution fees and other income:    Other income was $2.1 million for 2014 versus $0.7 million for 2013, an increase of $1.4 million. This increase was primarily from initiating an annual fee charged to affiliated entities for research services provided which totaled $1.5 million during 2014. There was no such fee charged in 2013.

Expenses

        Compensation:    Compensation costs, which include variable compensation, salaries, bonuses and benefits, were $22.3 million for the year ended December 31, 2014, a 4.3% decrease from $23.3 million for the year ended December 31, 2013. Fixed compensation costs, which include salaries, bonuses and benefits, increased 2.6% to $15.8 million in 2014 from $15.4 million in 2013 due primarily to higher salaries in 2014 than 2013. The remainder of the compensation expenses represents variable compensation that fluctuates with management fee and incentive allocation revenues. For 2014, variable payouts on revenues were $6.5 million, or 30.9% of revenues, down $1.4 million from the $7.9 million, or 38.7% of revenues in 2013. Variable payouts as a percent of revenues are impacted by the mix of products upon which performance fees are earned and the extent to which they may exceed their allocated costs.

55


Table of Contents

        Stock based compensation:    Stock based compensation was $1.9 million in 2014, an increase of $1.4 million, as compared to $0.5 million in 2013. The increase results from the issuance by GAMCO of 576,950 RSAs in the second half of 2013 and 158,600 RSAs during 2014.

        Management fees:    Management fee expense is incentive-based and entirely variable compensation in the amount of 10% of the aggregate pre-tax profits which is paid to Mario J. Gabelli pursuant to his employment agreement. In 2014 and 2013, GSG recorded a management fee expense of $0.4 million and $5.0 million, respectively, as presented in the combined consolidated statements of income.

        Other operating expenses:    Our other operating expenses were $6.8 million in 2014 compared to $6.6 million in 2013, an increase of $0.2 million, or 3.0%, which was spread among multiple categories of expense.

Other income/(expense)

        Net gain from investments:    Net gain from investments is directly related to the performance of our proprietary capital accounts. For the year ended December 31, 2014, net gains from investments were $10.8 million, lower by $45.3 million, or 80.7%, from the prior year's $56.1 million and was largely impacted by the relative market performance during these two years. In 2014, we realized gains in our trading portfolios of $9.5 million and gains from AFS securities of $3.0 million. In 2013, we realized gains in our trading portfolios of $11.3 million and gains from AFS securities of $16.4 million. Additionally, for the holdings in the proprietary portfolio that we held during each period, there were unrealized losses of $1.7 million in 2014, while there were unrealized gains of $28.4 million in 2013.

        Interest and dividend income:    Interest and dividend income decreased $1.5 million, or 25.4%, to $4.4 million in 2014 from $5.9 million in 2013 due to lower dividend income as interest income was $0.1 million in both periods.

        Interest expense:    Interest expense decreased to $1.4 million in 2014 from $1.9 million in 2013 primarily due to the paydown of $10 million of debt owed to GAMCO during 2013.

Income Taxes

        The U.S. generally accepted accounting principles ("GAAP") effective tax rate ("ETR") was 61.3% and 32.8% for the years ended December 31, 2014 and 2013, respectively. The ETR is impacted by the level of income or loss attributable to noncontrolling interests as these items do not result in any tax benefit or liability to GSG. Excluding noncontrolling interests, the ETR was 27.9% in 2014 and 33.2% in 2013. The decrease in ETR is due to the relative impact of book to tax differences on a lower taxable income in 2014.

Noncontrolling Interest

        Net income attributable to noncontrolling interests was a loss of $4.2 million in 2014 compared to income of $0.5 million in 2013, the result of currency fluctuations on Euro denominated share classes in the underlying investment partnerships consolidated for GAAP purposes.

Net Income

        Net income for the year ended December 31, 2014 was $5.5 million versus $29.8 million for the year ended December 31, 2013 substantially the result of the lower gains from GSG's proprietary investments offset by reduced operating losses.

56


Table of Contents

Operating Results for the Year Ended December 31, 2013 as Compared to the Year Ended December 31, 2012

Revenues

        Total revenues were $20.4 million for the year ended December 31, 2013, $1.1 million, or 5.2%, below total revenues of $21.5 million for the year ended December 31, 2012. Total revenues by revenue component were as follows (dollars in thousands):

 
  Year Ended
December 31,
  Increase
(decrease)
 
(unaudited)
  2013   2012   $   %  

Investment advisory and incentive fees

  $ 10,805   $ 8,952   $ 1,853     20.7 %

Distribution fees and other income

    677     1,644     (967 )   (58.8 )

Institutional research services

    8,940     10,953     (2,013 )   (18.4 )

Total revenues

  $ 20,422   $ 21,549   $ (1,127 )   (5.2 )

        Investment advisory and incentive fees:    Investment advisory income is directly influenced by the level and mix of average AUM. We earn advisory fees based on the level of average AUM in our products.

        Advisory fees were $6.5 million for 2013 compared to $6.2 million for 2012, an increase of $0.3 million, or 4.8%. This increase is directly correlated to the increase in average AUM to $897 million in 2013 from $844 million in 2012, an increase of $53 million, or 6.3%.

        Incentive fees are directly related to the gains generated for our clients. We earn a percentage, usually 20%, of the economic gains of our clients' AUM. Incentive fees were $4.3 million in 2013, increasing $1.6 million, or 59.3%, from $2.7 million in 2012 as market appreciation in our client's accounts was higher than in 2012.

        Institutional research services:    Institutional research services revenues in 2013 were $8.9 million, a $2.1 million, or 19.1%, decrease from $11.0 million in 2012 resulting from lower revenues from underwriting and syndicate activities. Brokerage commissions derived from securities transactions executed on an agency basis were higher, at $8.3 million in 2013 versus $7.9 million in 2012.

        Distribution fees and other income:    Other income was $0.7 million for 2013 versus $1.6 million for 2012, a decrease of $0.9 million, or 58.8%. This decrease was primarily related to lower distribution fees in 2013 as compared to 2012 of $1.0 million.

Expenses

        Compensation:    Compensation costs, which include variable compensation, salaries, bonuses and benefits, were $23.3 million for the year ended December 31, 2013, an 11.5% increase from $20.9 million for the year ended December 31, 2012. Fixed compensation costs, which include salaries, bonuses and benefits, increased 4.8% to $15.4 million in 2013 from $14.7 million in 2012 due primarily to higher salaries in 2013 than 2012. The remainder of the compensation expenses represents variable compensation that fluctuates with management fee and incentive allocation revenues. For 2013, variable payouts on revenues were $7.9 million, or 38.7% of revenues, increasing $1.7 million from the $6.2 million, or 28.8% of revenues in 2012. Variable payouts as a percent of revenues are impacted by the mix of products upon which performance fees are earned and the extent to which they may exceed their allocated costs.

        Stock based compensation:    Stock based compensation was $0.5 million in 2013, a decrease of $2.9 million, as compared to $3.4 million in 2012. The decrease results from the acceleration of RSAs

57


Table of Contents

vesting in 2012 which resulted in additional expense recognized in 2012 that would have been recognized from 2013 through 2016.

        Management fees:    Management fee expense is incentive-based and entirely variable compensation in the amount of 10% of the aggregate pre-tax profits which is paid to the Chairman (or his designee). In 2013 and 2012, GSG recorded a management fee expense of $5.0 million and $1.4 million, respectively, as presented in the combined consolidated statements of income.

        Other operating expenses:    Our other operating expenses were $6.6 million in 2013 compared to $8.8 million in 2012, a decrease of $2.2 million, or 25.0%. Of this decrease, $0.9 million was the result of lower amortization of advanced commission during 2013 as compared to 2012.

Other income/(expense)

        Net gain from investments:    Net gain from investments is directly related to the performance of our proprietary capital accounts. For the year ended December 31, 2013, net gains from investments were $56.1 million, rising $33.3 million, or 146%, from the prior year's $22.8 million. In 2013, we realized gains in our trading portfolios of $11.3 million and gains from AFS securities of $16.4 million. In 2012, we realized gains in our trading portfolios of $9.5 million and gains from AFS securities of $0.2 million. Additionally, for the holdings in the proprietary portfolio that we held during each period there were unrealized gains of $28.4 million in 2013 as compared to $13.1 million in 2012.

        Interest and dividend income:    Interest and dividend income increased by $1.5 million, or 34.1%, to $5.9 million in 2013 from $4.4 million in 2012.

Income Taxes

        Income tax expense was $14.8 million in 2013, versus $3.7 million in 2012. The ETR was 32.8% in 2013 and 29.6% in 2012. The increase in the ETR results from higher levels of taxable income.

Noncontrolling Interest

        Noncontrolling interest was an expense of $0.5 million in 2013 compared to $0.2 million in 2012.

Net Income

        Net income for the year ended December 31, 2013 was $29.8 million versus $8.5 million for the year ended December 31, 2012 largely the result of increased gains earned on our proprietary investments.

Liquidity and Capital Resources

        Our principal assets consist of cash equivalents, a U.S. Treasury money market mutual fund, that is invested 100% in U.S. treasuries, managed by Gabelli Funds, Inc., an affiliate. Although investments in Investment Partnerships are subject to restrictions as to the timing of distributions, the underlying investments of such Investment Partnerships are, for the most part, liquid, and the valuations of these products reflect that underlying liquidity.

58


Table of Contents

        Summary cash flow data is as follows (in thousands):

 
  Year Ended December 31,  
 
  2014   2013   2012  

Cash flows provided by (used in):

                   

Operating activities

  $ (56,595 ) $ 43,943   $ (9,771 )

Investing activities

    3,839     29,402     1,867  

Financing activities

    138,750     (53,655 )   (101,334 )

Net increase (decrease) in cash and cash equivalents

    85,994     19,690     (89,344 )

Cash and equivalents at beginning of year

    199,536     179,846     269,190  

Cash and equivalents at end of year

  $ 285,530   $ 199,536   $ 179,846  

        We require relatively low levels of capital expenditures and have a highly variable cost structure where costs increase and decrease based on the level of revenues we receive. Our revenues, in turn, are highly correlated to the level of AUM and to their investment performance. We anticipate that we will be able to continue to produce positive operating cash flows and that together with our available liquid assets should be sufficient to meet our cash requirements. At December 31, 2014, we had cash equivalents of $285.5 million, an increase of $86.0 million from the prior year-end.

        Net cash used in operating activities was $56.6 million for the year ended December 31, 2014, principally resulting from net purchases of securities and partnership interests in our proprietary accounts of $38.8 million, decreases in its accrued expenses and payables of $10.0 million and a $16.0 million increase in other assets offset by net income of $1.3 million and $7.8 million from timing differences in the settlement of trading securities. Net cash provided by operating activities was $43.9 million for the year ended December 31, 2013, principally due to net income of $30.2 million.

        Net cash provided by investing activities was $3.8 million in 2014 and $29.4 million in 2013, in both years largely due to proceeds from sales of AFS securities.

        Net cash provided by financing activities was $138.8 million for the year ended December 31, 2014, largely resulting from $65.7 million in net contributions from noncontrolling interests and $83.0 million in cash transfers from its parent. Net cash used in financing activities was $53.7 million for the year ended December 31, 2013, due to $11.1 million in net redemptions from noncontrolling interests and net transfers to its parent of $42.1 million.

        G.research is registered with the SEC as broker-dealers and is regulated by FINRA. As such, G.research is subject to the minimum net capital requirements promulgated by the SEC. G.research's net capital exceeded these minimum requirements at December 31, 2014. G.research computes its net capital under the alternative method permitted by the SEC, which requires minimum net capital of the greater of $250,000 or 2% of the aggregate debit items in the reserve formula for those broker-dealers subject to Rule 15c3-3 promulgated under the Exchange Act. As of December 31, 2014 and 2013, G.research had net capital, as defined, of approximately $1.6 million and $3.6 million, respectively, exceeding the regulatory requirement by approximately $1.4 million and $3.4 million, respectively. Net capital requirements for G.research may increase in accordance with rules and regulations to the extent it engages in other business activities.

        After the record date and before the distribution date, GAMCO expects to either sell or transfer to us shares of GAMCO Class A Stock that are currently held in treasury, newly issued preferred shares or a note of GAMCO or another party, or a combination of any or all three, in the amount of $         million to provide us with additional capital to, among other things, provide seed capital for Investment Partnerships that we expect to form. See "The Spin-OffThe Formation Transactions."

59


Table of Contents

Off-Balance Sheet Arrangements

        We are the general partner or co-general partner of various Investment Partnerships whose underlying assets consist primarily of marketable securities.

        Our income from these Investment Partnerships consists of our share of the management fees and a 20% incentive allocation on profits earned by the limited partners. We also receive a pro rata return on any investment we have in the Investment Partnership. We earned management fees of $2.9 million, $2.8 million and $3.1 million in 2014, 2013 and 2012, respectively, and incentive fees of $1.0 million, $1.5 million and $1.2 million in 2014, 2013 and 2012, respectively. Our pro rata gain on investments in these limited partnerships totaled $1.5 million, $1.9 million and $0.9 million in 2014, 2013 and 2012, respectively.

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

Contractual Obligations

        The following table sets forth our significant contractual cash obligations as of December 31, 2014 (in thousands):

Contractual Obligations:
  Total   2015   2016   2017   2018   2019   Thereafter  

Occupancy charge

  $ 4,004   $ 312   $ 284   $ 284   $ 284   $ 284   $ 2,556  

Total

  $ 4,004   $ 312   $ 284   $ 284   $ 284   $ 284   $ 2,556  

Market Risk

        Our primary market risk exposure is to changes in equity prices and interest rates. Because 100% of our AUM are equities, our financial results are subject to equity-market risk as revenues from our investment management services are sensitive to stock market dynamics. In addition, returns from our proprietary investment portfolio are exposed to interest rate and equity market risk.

        Historically, GAMCO's Chief Investment Officer has overseen our proprietary investment portfolios and allocations of proprietary capital among our various strategies, and he and the GAMCO Board reviewed our proprietary investment portfolios throughout the year. After the spin-off, it is expected that our Chief Investment Officer and our Board will perform these functions. Additionally, we will monitor our proprietary investment portfolios to ensure that they are in compliance with our guidelines.

Equity Price Risk

        We earn substantially all of our revenue as advisory and incentive fees from our Investment Partnership assets. Such fees represent a percentage of AUM, and the majority of these assets are in equity investments. Accordingly, since revenues are proportionate to the value of those investments, a substantial increase or decrease in equity markets overall will have a corresponding effect on our revenues.

        With respect to our proprietary investment activities, included in investments in securities and investments in sponsored registered investment companies of $260.1 million and $232.2 million at December 31, 2014 and 2013, respectively, were investments in United States Treasury Bills and Notes of $19.0 million and $38.0 million, respectively, mutual funds, largely invested in equity products, of $44.4 million and $69.0 million, respectively, a selection of common and preferred stocks totaling

60


Table of Contents

$195.0 million and $124.6 million, respectively, and other investments of approximately $1.7 million and $0.6 million, respectively.

        Investments in mutual funds generally have lower market risk through the diversification of financial instruments within each mutual fund's portfolio. In addition, we may alter our investment holdings from time to time in response to changes in market risks and other factors considered appropriate by management. Of the approximately $195.0 million and $124.6 million, invested in common and preferred stocks at December 31, 2014 and 2013, respectively, $103.9 million and $32.3 million, respectively, was invested in risk arbitrage opportunities in connection with mergers, consolidations, acquisitions, tender offers or other similar transactions. Securities sold, not yet purchased are financial instruments purchased under agreements to resell and financial instruments sold under agreement to repurchase. These financial instruments are stated at fair value and are subject to market risks resulting from changes in price and volatility. At December 31, 2014 and 2013, the fair value of securities sold, not yet purchased was $10.6 million and $6.2 million, respectively. Investments in partnerships and affiliates totaled $107.6 million and $96.0 million at December 31, 2014 and 2013, respectively, the majority of which consisted of investment partnerships and offshore funds which invest in risk arbitrage opportunities. These transactions generally involve announced deals with agreed upon terms and conditions, including pricing, which typically involve less market risk than common stocks held in a trading portfolio. The principal risk associated with risk arbitrage transactions is the inability of the companies involved to complete the transaction.

        The following table provides a sensitivity analysis for our investments in equity securities and partnerships and affiliates which invest primarily in equity securities, excluding arbitrage products for which the principal exposure is to deal closure and not overall market conditions, as of December 31, 2014. The sensitivity analysis assumes a 10% increase or decrease in the value of these investments (in thousands):

(unaudited)
  Fair Value   Fair Value
assuming
10% decrease in
equity prices
  Fair Value
assuming
10% increase in
equity prices
 

At December 31, 2014:

                   

Equity price sensitive investments, at fair value

  $ 204,779   $ 184,301   $ 225,257  

At December 31, 2013:

                   

Equity price sensitive investments, at fair value

  $ 248,300   $ 223,470   $ 273,130  

        Investment Partnership advisory fees are computed based on monthly or quarterly asset values. The incentive allocation or fee of 20% of the economic profit from Investment Partnerships is impacted by changes in the market prices of the underlying investments of these products and is not recognized until the end of the measurement period.

Interest Rate Risk

        Our exposure to interest rate risk results, principally, from our investment of excess cash in a money market fund that holds U.S. Government securities. These investments are primarily short term in nature, and the carrying value of these investments generally approximates fair value. Based on December 31, 2014 cash and cash equivalent balance of $285.5 million, a 1% increase in interest rates would increase our interest income by $2.9 million annually. Given that our current annualized return on these investments is close to 0%, an analysis of a 1% decrease is not meaningful.

61


Table of Contents

Critical Accounting Policies

        In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with GAAP. 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 critical assumptions and estimates are those applied to revenue recognition, the accounting for and valuation of investments in securities, partnerships, and offshore funds, goodwill and other long-lived intangibles, income taxes and stock based compensation accounting.

Revenue Recognition

        Our revenues are derived primarily from advisory fee income, incentive allocation income and gain/(loss) from investments.

        Advisory fee income is directly influenced by the level and mix of AUM as fees are derived from a contractually-determined percentage of AUM for each account. Advisory fees from Investment Partnerships are computed either monthly or quarterly, and amounts receivable are included in receivable from affiliates on the combined consolidated statements of financial condition. We derived approximately 34%, 32% and 29% of our total revenues from advisory fees, for the periods ended December 31, 2014, 2013 and 2012, respectively. These revenues vary depending upon the level of sales compared with redemptions, financial market conditions, performance and the fee structure for AUM.

        Revenues from Investment Partnerships also generally include an incentive allocation on the absolute gain in a portfolio or a fee of 20% of the economic profit as defined in the partnership agreement. The incentive allocation or fee is recognized at the end of the measurement period, which is annually, and amounts receivable are included in receivable from affiliates on the combined consolidated statements of financial condition. There were $1.9 million and $2.7 million in incentive allocations or fees receivable as of December 31, 2014 and 2013, respectively. We also receive incentive fees from separate accounts. These fees are based upon meeting or exceeding specific benchmark index or indices. Incentive fees refer to fees earned when the return generated for the client exceeds the benchmark and can be earned even if the return to the client is negative as long as the return exceeds the benchmark. These fees are recognized, for each respective account, at the end of the stipulated contract period which is both quarterly and annually and vary by account. There were $0.8 million and $1.2 million in incentive fees receivable relating to separate accounts as of December 31, 2014 and 2013, respectively.

Investments in Securities Transactions and Other Than Temporary Impairment

        Investments in securities are accounted for as either "trading securities" or "available for sale" and are stated at fair value. Management determines the appropriate classification of debt and equity securities at the time of purchase and reevaluates such designations as of each balance sheet date. U.S. Treasury Bills and Notes with maturities of greater than three months at the time of purchase are considered investments in securities. Securities that are not readily marketable are stated at their estimated fair values in accordance with GAAP. A substantial portion of investments in securities are held for resale in anticipation of short-term market movements and therefore are classified as trading securities. Trading securities are stated at fair value, with any unrealized gains or losses reported in current period earnings in net gain/(loss) from investments on the combined consolidated statements of income. AFS investments are stated at fair value, with any unrealized gains or losses, net of taxes, reported as a component of equity except for losses deemed to be other than temporary, which are recorded as realized losses on the combined consolidated statements of income. Securities transactions and any related gains and losses are recorded on a trade date basis. Realized gains and losses from

62


Table of Contents

securities transactions are recorded on the specific identified cost basis and are included in net gain/(loss) from investments on the combined consolidated statements of income.

        AFS securities are evaluated for other than temporary impairments each reporting period and any impairment charges are recorded in net gain/(loss) from investments on the combined consolidated statements of income. Management reviews all AFS securities whose cost exceeds their fair value to determine if the impairment is other than temporary. Management uses qualitative factors such as diversification of the investment, the intent to hold the investment, the amount of time that the investment has been impaired and the severity of the decline in determining whether the impairment is other than temporary.

        Securities sold but not yet purchased are recorded on the trade date, and are stated at fair value and represent obligations of GSG 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 combined 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. Realized gains and losses from covers of securities sold, not yet purchased transactions are included in net gain/(loss) from investments on the combined consolidated statements of income. Securities sold but not yet purchased are stated at fair value, with any unrealized gains or losses reported in current period earnings in net gain/(loss) from investments on the combined consolidated statements of income.

Investments in Partnerships and Affiliates

Affiliated Entities

        We are general partner or co-general partner of various sponsored limited partnerships and the investment manager of various sponsored offshore funds (collectively "affiliated entities"), whose underlying assets consist primarily of marketable securities. In accordance with the consolidation assessment models set forth in ASC 810-10 and 810-20, we consolidate all investments in partnerships and affiliates in which we have a controlling financial interest.

        We first determine whether an entity is a variable interest entity ("VIE"). A VIE is an entity in which either (a) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support or (b) the equity investors do not have the ability to make decisions about the entities' activities or obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity or (c) the voting rights are not proportional to their obligations to absorb the expected losses of the entity or their rights to receive the expected residual returns of the entity. We evaluate whether entities in which we have an interest are VIEs and whether we are the primary beneficiary of any VIEs identified in our analysis. We are determined to be the primary beneficiary if we absorb a majority of the VIE's expected losses, expected residual returns, or both. If we are the primary beneficiary of a VIE, we consolidate that entity. If we are not the primary beneficiary, we account for our investment under the equity method.

        In June 2009, the Financial Accounting Standards Board ("FASB") amended the guidance on VIEs when it issued ASU 2009-17. This guidance requires that if a decision maker has a variable interest in a VIE, the decision maker is not solely acting in a fiduciary capacity and would be required to consolidate the VIE if it has both the power to direct the most significant activities of the VIE and economic exposure that could potentially be significant to the VIE. If we were to apply such guidance, we would be required to consolidate most of our affiliated entities. In February 2010, the FASB issued ASU 2010-10, which indefinitely deferred the effective date of the amendments to ASC 810-10 made by ASU 2009-17, for a reporting entity's interest in certain entities. Currently, interests in entities that qualify for the deferral are evaluated by applying the VIE model in ASC 810-10 (i.e., before the amendments by ASU 2009-17), while interests in entities that do not qualify for the deferral must be

63


Table of Contents

evaluated under the amendments in ASU 2009-17. Because all of the entities with which we are involved that would have been subject to the guidance in ASU 2009-17 were determined to qualify for the FASB's deferral of such guidance, we apply the guidance for VIEs that existed prior to the issuance of ASU 2009-17.

        If the entity is not considered a VIE, it is treated as a voting interest entity ("VOE") and we apply the guidance in ASC 810-20 in determining whether the entity should be consolidated. Under ASC 810-20, the general partner or investment manager is deemed to control the entity and therefore must consolidate it unless the unaffiliated limited partners or stockholders have the ability (a) to remove the general partner or investment manager, without cause, (b) to dissolve the entity or (c) have substantive participating rights. If the unaffiliated limited partners or stockholders possess substantive rights, then we do not consolidate the entity, and the equity method of accounting is applied. If the unaffiliated limited partners or stockholders do not have such rights, we consolidate the entity.

        For those investments accounted for under the equity method, our share in net earnings or losses of these affiliated entities is reflected in income as earned and is included in net gain/(loss) from investments on the combined consolidated statements of income. Capital contributions are recorded as an increase in investments when paid, while withdrawals and distributions received are recorded as reductions of the investments. Depending on the terms of the investment, we may be restricted as to the timing and amounts of withdrawals.

        For consolidated feeder funds ("CFFs") that own 100% of their offshore master funds, we retain the feeder funds' specialized investment company accounting (i.e., the feeder funds accounts for its investment in the master fund at fair value).

        We record noncontrolling interests in consolidated entities for which our ownership is less than 100%.

Unaffiliated entities

        We also have investments in unaffiliated partnerships, offshore funds and other entities. We apply the same guidance to unaffiliated entities as we do for affiliated entities, first looking at the VIE criteria, then VOE criteria and finally applying the equity method, if applicable. Given that we are not a general partner or investment manager in any unaffiliated entities, we do not earn any management or incentive fees and we do not have a controlling financial interest, we do not currently consolidate any unaffiliated entities.

        Our balance sheet caption "investments in partnerships" includes those investments, in both affiliated and unaffiliated entities, which we account for under the equity method of accounting and certain investments in consolidated feeder funds that we account for at fair value, as described above. We reflect the equity in earnings of these equity method investees and the change in fair value of the consolidated feeder funds under the caption net gain/(loss) from investments on the combined consolidated statements of income.

Goodwill and Identifiable Intangible Assets

        Goodwill is initially measured as the excess of the cost of the acquired business over the sum of the amounts assigned to assets acquired less the liabilities assumed. At December 31, 2014 and 2013, goodwill recorded on the combined consolidated statements of financial condition was $3.3 million and $3.3 million, respectively. We assess the recoverability of goodwill at least annually, or more often should events warrant, using a qualitative assessment of whether it is more likely than not that an impairment has occurred to determine if a quantitative analysis is required.

64


Table of Contents

Income Taxes

        Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and the reported amounts on the combined consolidated financial statements using the statutory tax rates in effect for the year when the reported amount of the asset or liability is recovered or settled, respectively. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying values of deferred tax assets to the amount that is more likely than not to be realized. For each tax position taken or expected to be taken in a tax return, we determine whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is measured to determine the amount of benefit to recognize. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. We recognize the accrual of interest on uncertain tax positions and penalties in income tax provision on the combined consolidated statements of income.

Recent Accounting Developments

        In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers," which supersedes the revenue recognition requirements in the Accounting Standards Codification ("Codification") Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry topics of the Codification. The core principle of the new ASU No. 2014-09 is for companies to recognize revenue from the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. The ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods and is to be retrospectively applied. Early adoption is not permitted. GSG is currently evaluating this guidance and the impact it will have on its combined consolidated financial statements.

        In June 2014, the FASB issued an accounting update clarifying that entities should treat performance targets that could be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. Therefore, an entity would not record compensation expense (measured as of the grant date) for an award where transfer to the employee is contingent upon satisfaction of the performance target until it becomes probable that the performance target will be met. The guidance is effective for GSG beginning January 1, 2016. Early adoption is permitted. This guidance is not expected to have a material impact on our combined consolidated financial statements.

Seasonality and Inflation

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

65


Table of Contents


ARRANGEMENTS BETWEEN GAMCO AND GSG AFTER THE SPIN-OFF

General

        As of the date of this information statement, GAMCO owns 93.9% of GSI. On the distribution date, this interest, along with GAMCO's interest in the Select Energy Fund will be contributed to GSG. After the spin-off, GAMCO will not own any shares of GSG common stock and will not have any interest in the Select Energy Fund.

        We will enter into agreements with GAMCO prior to and concurrently with the spin-off to govern the terms of the spin-off and to define our ongoing relationship following the spin-off, allocating responsibility for obligations arising before and after the spin-off, including obligations with respect to liabilities relating to GAMCO's business and to GSG's business and obligations with respect to our employees and certain transitional services. We will enter into these agreements with GAMCO while GSI is still a majority-owned subsidiary of GAMCO, and certain terms of these agreements may not be as favorable to GSG as could have been negotiated between independent parties.

        The following descriptions are summaries of the terms of the agreements. These summaries are qualified in their entirety by reference to the full text of such agreements, the forms of which will be included as exhibits to our registration statement on Form 10 filed with the SEC, of which this information statement is a part. We encourage you to read, in their entirety, each of the material agreements when they become available. The terms of these agreements have not yet been finalized; changes, some of which may be material, may be made prior to the spin-off.

Separation and Distribution Agreement

        The Separation Agreement will set forth our agreements with GAMCO regarding the principal transactions necessary to separate us from GAMCO. It will also set forth other terms that govern certain aspects of our relationship with GAMCO after the completion of the separation. We will enter into the Separation Agreement concurrently with our spin-off from GAMCO.

Distribution of Shares

        GAMCO will distribute to its stockholders all the shares of GSG common stock that it owns on the terms described in this information statement. GAMCO's obligation to consummate the distribution is subject to the following conditions:

    the SEC has declared effective our registration statement on Form 10, of which this information statement is a part, under the Exchange Act, with no stop order in effect with respect to the Form 10;

    this information statement shall have been mailed to the holders of GAMCO common stock;

    the actions and filings, if any, necessary under securities and blue sky laws of the states of the United States and any comparable laws under any foreign jurisdictions must have been taken and become effective;

    no order, injunction, decree or regulation issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the spin-off will be in effect and no other event outside GAMCO's control will have occurred or failed to occur that prevents the consummation of the spin-off;

    the approval for listing of the GSG Class A Stock on the NYSE, subject to official notice of issuance, shall have been obtained; and

    no event or development has occurred or exists that, in the judgment of the GAMCO Board, in its sole discretion, makes the spin-off inadvisable.

66


Table of Contents

Mutual Release

        As of the time of the distribution, each party will release the other party and their respective affiliates and their directors, officers, employees and agents from all claims, demands and liabilities, in law and in equity, against such other party, which such releasing party has or may have had relating to events, circumstances or actions taken by such other party prior to the distribution. This release does not apply to claims arising from the Separation Agreement.

Indemnification

        From and after the distribution, GAMCO will indemnify GSG and its directors, officers, employees, agents and affiliates (collectively, "GSG indemnitees") against all losses, liabilities and damages incurred or suffered by any of the GSG indemnitees arising out of:

    GAMCO's business;

    the failure or alleged failure of GAMCO or any of its subsidiaries to pay, perform or otherwise discharge in due course any of GAMCO liabilities;

    a breach by GAMCO of any of its obligations under the Separation Agreement; and

    any untrue statement or alleged untrue statement of a material fact: (i) contained in any document filed with the SEC by GAMCO pursuant to any securities rule, regulation or law, (ii) otherwise disclosed by GAMCO or its subsidiaries to investors or potential investors in GAMCO or its subsidiaries or (iii) furnished to any GSG indemnitee by GAMCO or any of its subsidiaries for inclusion in any public disclosures to be made by any GSG indemnitee; or any omission or alleged omission to state in any information described in clauses (i), (ii) or (iii) a material fact necessary to make the statements not misleading. The indemnity described in this paragraph will be available only to the extent that GSG losses are caused by any such untrue statement or omission or alleged untrue statement or omission, and the information which is the subject of such untrue statement or omission or alleged untrue statement or omission was not supplied after the distribution by GSG or its agent.

        From and after the distribution, GSG will indemnify GAMCO and its directors, officers, employees, agents and affiliates (collectively, "GAMCO indemnitees") against all losses, liabilities and damages incurred or suffered by any of the GAMCO indemnitees arising out of:

    GSG's business;

    the failure or alleged failure of GSG or any of its subsidiaries to pay, perform or otherwise discharge in due course any of GSG liabilities;

    a breach by GSG of any of its obligations under the Separation Agreement; and

    any untrue statement or alleged untrue statement of a material fact: (i) contained in any document filed with the SEC by GSG following the distribution pursuant to any securities rule, regulation or law, (ii) otherwise disclosed following the distribution by GSG or its subsidiaries to investors or potential investors in GSG or its subsidiaries or (iii) furnished to any GAMCO indemnitee by GSG or any of its subsidiaries for inclusion in any public disclosures to be made by any GAMCO indemnitee; or any omission or alleged omission to state in any information described in clauses (i), (ii) or (iii) a material fact necessary to make the statements not misleading. The indemnity described in this paragraph will be available only to the extent that GAMCO losses are caused by any such untrue statement or omission or alleged untrue statement or omission, and the information which is the subject of such untrue statement or omission or alleged untrue statement or omission was not supplied by GAMCO or its agent.

67


Table of Contents

Employee Matters

        Certain GAMCO employees will be transferred to GSG on an "at-will" basis. GSG will assume all the obligations relating to these employees arising on or after the distribution, including all obligations relating to employee benefits, vacation, health insurance and severance.

Further Assurances

        Each of the parties will agree to cooperate with the other and use commercially reasonable efforts to take or to cause to be taken all actions, and to do, or to cause to be done, all things reasonably necessary under applicable law or contractual obligations to consummate and make effective the transactions contemplated by the Separation Agreement and the ancillary agreements.

Other Matters

        Other matters governed by the Separation Agreement include, without limitation, access to financial and other records and information, confidentiality and resolution of disputes between the parties relating to the Separation Agreement, the ancillary agreements and the agreements and transactions contemplated thereby.

Transitional Administrative and Management Services Agreement

        Concurrently with our separation from GAMCO, we will enter into the Administrative Agreement pursuant to which GAMCO will provide GSG with a variety of services following the spin-off. Among the principal services GAMCO will provide to us are:

    general corporate management services and supervision of certain tax and other regulatory matters;

    treasury services, including insurance and risk management services and administration of benefits;

    operational and general administrative assistance including office space, office equipment, administrative personnel, payroll and procurement services, as needed;

    accounting and related financial services;

    legal, regulatory and compliance advice; and

    human resources functions, including the temporary provision of a Chief Compliance Officer, sourcing of permanent and temporary employees as needed, recordkeeping, performance reviews and terminations.

        In providing the services pursuant to this agreement, GAMCO may, subject to the prior written consent of GSG, employ consultants and other advisers in addition to utilizing its own employees. In addition, Mr. Caterina, our Chief Financial Officer, will directly or indirectly supervise employees of GAMCO that may provide services to GSG pursuant to the Administrative Agreement.

        The services provided by GAMCO pursuant to the Administrative Agreement will be provided to GSG in exchange for a payment of $            per month.

        The Administrative Agreement has a term of twelve months, and may be extended in whole or in part by agreement of the parties. The Administrative Agreement is terminable by either party on 30 days' prior written notice to the other party.

68


Table of Contents

Tax Indemnity and Sharing Agreement

        GAMCO and we expect to enter into a Tax Indemnity and Sharing Agreement effective as of the distribution date that will provide for certain agreements and covenants related to tax matters involving GAMCO and us. This agreement will cover time periods before and after the distribution. Among the matters to be addressed in the agreement are filing of tax returns, retention and sharing of books and records, cooperation in tax matters, control of possible tax audits and contests and tax indemnities. The agreement will also provide for limitations on certain corporate transactions that could affect the qualification of the spin-off as tax free under the Code.

69


Table of Contents


MANAGEMENT

Executive Officers Following the Separation

        The following table sets forth the information as of April 17, 2015 regarding the individuals who are expected to serve as our executive officers following the spin-off.

Name
  Age   Title with Gabelli Securities Group, Inc.

Mario J. Gabelli

    72   Chairman and Chief Executive Officer

Marc Gabelli

    47   President

Kieran Caterina

    41   Chief Financial Officer

        The biographical information of each of our executive officers is set forth below:

        Mario J. Gabelli has served as Chairman, Chief Executive Officer, Chief Investment Officer—Value Portfolios and a director of GAMCO since November 1976. In connection with those responsibilities, he serves as director or trustee of registered investment companies managed by GAMCO and its affiliates. Mario J. Gabelli also serves as the Chief Executive Officer and Chief Investment Officer of the Value Team of GAMCO Asset Management Inc., GAMCO's wholly owned subsidiary. Mario J. Gabelli has been a portfolio manager for Teton Advisors, Inc. ("Teton") since 1998 through the present. Teton is an asset management company which was spun-off from GAMCO in March 2009. Mario J. Gabelli has served as Chairman of LICT Corporation ("LICT"), a public company engaged in broadband transport and other communications services, from 2004 to the present and has been the Chief Executive Officer of LICT since December 2010. He has also served as a director of CIBL, Inc., a holding company with operations in broadcasting and telecommunications that was spun-off from LICT in 2007, from 2007 to the present, and as the Chairman of Morgan Group Holding Co., a public holding company, from 2001 to the present. Mario J. Gabelli was the Chief Executive Officer of Morgan Group Holding Co. from 2001 to November 2012. He has served as a director of ICTC Group, Inc., a rural telephone company serving southeastern North Dakota from July 2013 to the present. In addition, Mario J. Gabelli is the Chief Executive Officer, a director and the controlling shareholder of GGCP, a private company which owns a majority of the GAMCO Class B Stock (and, upon completion of the spin-off, a majority of GSG Class B Stock) through Holdings, an intermediate subsidiary, and the Chairman of MJG Associates, Inc., which acts as an investment manager of various investment funds and other accounts. Mario J. Gabelli serves as Overseer of the Columbia University Graduate School of Business and as a Trustee of Boston College and Trustee of Roger Williams University. He also serves as Director of The Winston Churchill Foundation, The E. L. Wiegand Foundation, The American-Italian Cancer Foundation and The Foundation for Italian Art & Culture. He is also Chairman of the Gabelli Foundation, Inc., a Nevada private charitable trust. Mario J. Gabelli also serves as Co-President of Field Point Park Association, Inc.

        Marc Gabelli has been a director of GAMCO since November 2014. He has served as President and Managing Director of GGCP since GAMCO's initial public offering in February 1999. He is Co-Chairman of GSI, our majority controlled institutional research services and merger arbitrage investment partnerships business. Marc Gabelli's focus is global, catalyst-driven value investing across all market capitalizations and industry sectors. His portfolio assignments have included hedge fund management since 1990 and traditional asset management since 1994. He has managed several Morningstar five star mutual funds, and a Lipper #1 ranked global equity mutual fund in the United States. He helped lead GAMCO's initial public offering, built the GSI hedge fund platform, and expanded the business internationally, opening the Gabelli London and Tokyo offices. Marc Gabelli has also served as Chief Executive Officer of Gabelli Securities International Ltd. since 1994, Chairman of The LGL Group, Inc. since 2004, Managing Partner of Horizon Research since 2013, Managing Member of Commonwealth Management Partners LLC since 2008, and Director and Managing Partner of GAMA Funds Holdings GmbH since 2009. Marc Gabelli started his investment career in arbitrage

70


Table of Contents

at Lehman Brothers International. He holds an M.B.A. from the Massachusetts Institute of Technology (MIT) Sloan School of Management, and a B.A. from Boston College. He is a member of the New York Society of Securities Analysts. Marc Gabelli has been registered since 2011 with the FCA to undertake the controlled functions of a CF1 Director and CF3 Chief Executive. He is involved with various educational charities in the United States and Europe. Marc Gabelli is a son of Mario J. Gabelli.

        Kieran Caterina has served as the Finance Director and Co-Chief Accounting Officer of GAMCO since March 2012 and as a Vice President since January 2007. He served as Finance Director and Co-Principal Accounting Officer of GAMCO from July 2008 to March 2012, as Acting Co-Chief Financial Officer from July 2007 to July 2008, as Chief Accounting Officer from January 2007 to July 2008 and as Controller from January 2002 to July 2008. Mr. Caterina joined GAMCO in March 1998 as a staff accountant.

Our Board Following the Separation

General

        Under Delaware law, the business and affairs of GSG will be managed under the direction of our Board. Our certificate of incorporation and bylaws will provide that the number of directors may be fixed by our Board from time to time, provided that there are always at least three and no more than twelve directors. As of the distribution date, our Board is expected to consist of the individuals listed below (ages as of April 17, 2015), three of whom are currently serving on the GAMCO Board. Richard L. Bready is expected to resign from the GAMCO Board on the distribution date. The present principal occupation or employment and five-year employment history of each individual is set forth below under "—Biographical Information Relating to Directors." Each of the individuals listed below is a citizen of the United States.

Name
  Age  

Mario J. Gabelli (Chairman)

    72  

Marc Gabelli

    47  

Richard L. Bready

    70  

Daniel R. Lee

    58  

Bruce M. Lisman

    68  

Salvatore F. Sodano (Vice Chairman)

    59  

Biographical Information Relating to Directors

        The present principal occupation or employment and five-year employment history of each of our directors is set forth below:

        Mario J. Gabelli.    For biographical information relating to Mario J. Gabelli, please refer to "—Executive Officers Following the Separation" above.

        Our Board believes that Mario J. Gabelli's qualifications to serve on the GSG board include his thirty-eight years of experience as CEO of GAMCO and his involvement with GSI since its inception and his control of GSG through his majority beneficial ownership.

        Marc Gabelli.    For biographical information relating to Marc Gabelli, please refer to "—Executive Officers Following the Separation" above.

        Our Board believes that Marc Gabelli's qualifications to serve on our Board include his extensive knowledge of GSG's business and industry, his financial and leadership expertise as an executive of various investment firms and as a director of other public companies.

71


Table of Contents

        Richard L. Bready has been a director of GAMCO since May 2006 and is expected to resign from the GAMCO Board on the distribution date. Mr. Bready previously served as Chairman and Chief Executive Officer of Nortek, Inc., a manufacturer and distributor of building products for residential and commercial applications, from December 1990 until July 2011. He joined Nortek, Inc. in 1975 as Treasurer, was elected a director in 1976 and was appointed Executive Vice President and Chief Operating Officer in 1979. Prior to joining Nortek, Inc., Mr. Bready was an independent financial consultant and an audit manager with a major public accounting firm. He serves on the Board of Directors/Trustees of Professional Facilities Management, Inc., Providence Performing Arts Center, Rhode Island Public Expenditure Council (RIPEC), The International Yacht Restoration School, Saint Anselm College, Johnson & Wales University, as Chairman of Roger Williams University and is a Trustee Emeritus of Trinity Repertory Company. Mr. Bready has also served as a director of the Bank RI since 2007 and Bancorp Rhode Island, Inc. since 2007, and is on the Advisory Board of Sterling Investment Partners. He is a Corporation Member and serves on the National Council, Alumni Executive Forum and Audit Committee of Northeastern University. Mr. Bready is also a Corporation Member of Rhode Island Hospital. Nortek, Inc. filed for a prepackaged bankruptcy on October 21, 2009 and emerged from bankruptcy on December 17, 2009.

        Our Board believes that Mr. Bready's qualifications to serve on our Board include his former position as Chairman and Chief Executive Officer of Nortek, Inc. and his position as a director of other public companies and charitable organizations.

        Daniel R. Lee served as a director of Lynch Interactive Corporation from 2000-2005, and from January 2010 to July 2013. He has also served in a number of senior executive and financial positions over the course of a long and distinguished business career. Mr. Lee is currently the Chief Executive Officer, President and a director of Full House Resorts, Inc., a developer and manager of gaming properties headquartered in Las Vegas, NV. He has held these positions since December 1, 2014. Previously, he served as Chairman and Chief Executive Officer of F.P. Holdings, LP, the owner and operator of The Palms Casino Resort in Las Vegas, NV, from September 2013 to July 2014. Prior to that, he was Managing Partner of Creative Casinos, LLC, a casino developer and operator of gaming casinos. He also served as Chairman and Chief Executive Officer of Pinnacle Entertainment, Inc., a New York Stock Exchange listed company, from 2002-2009. He held the positions of Chief Financial Officer, Treasurer and Senior Vice President-Finance of Mirage Resorts, Inc., from 1992-1999. Previously, he was a Managing Director of a major brokerage firm and is a Chartered Financial Analyst.

        Our Board believes that Mr. Lee's substantial financial experience and expertise, his experience in the financial services industry, and his executive management experience as CEO of a large public corporation make him well-qualified to serve on the Company's board.

        Bruce M. Lisman has served as a director of National Life Group, a mutual life insurance company with approximately $2 billion in revenues, since 2004. Mr. Lisman has also served as a director of PC Construction, an engineering and construction company with approximately $500 million in annual revenues, since August 2013. Mr. Lisman has served as a director of Merchants Bancshares (NasdaqGS: MBVT), a community bank with $1.8 billion of assets, since 2005. In addition, he serves on the boards of American Forests, Smithsonian Libraries, and the National Gardening Association. Mr. Lisman was Research Director (1984 to 1987) and Co-Head of the Institutional Equity Division (1987 to 2008) for Bear Stearns Companies Inc. With his leadership, revenues grew from $50 million to $2.47 billion; head count grew from 150 to 2,350; and product and distribution expanse from U.S.-only to operations in Europe, Latin America, Asia ex-China, and China. Pretax income reached $670 million in 2007. After Bear Stearns was acquired by JP Morgan Chase & Co. (NYSE: JPM) in 2008, he became Chairman of JP Morgan's Global Equity Division, retiring in 2009. He also was responsible for Equity Capital Markets and worked extensively with CEOs, CFOs, and boards of directors across a variety of industries. Earlier in his career Mr. Lisman was Director of Global Research at Lehman Brothers and

72


Table of Contents

before that he was an analyst covering banking companies (voted to Institutional Investor's Analyst All Star Team four times for banking industry analysis), as well as distribution, real estate, and capital goods companies. He has also served on the boards of Central Vermont Public Service, a public company from 2004 to 2009 and has also served on the boards of the Hewitt School, Pace University, HS Broadcasting, BRUT, Inc., Vermont Electric Power Company, Inc. (VELCO), STRYKE Trading, Shelburne Museum, and the Vermont Symphony Orchestra. Mr. Lisman graduated from the University of Vermont in 1969 and also served as its Chair for two years.

        Our Board believes that Mr. Lisman's qualifications to serve on our Board include his extensive board experience as a chair, vice chair, and committee chair/member in a broad range of businesses and civic organizations, in addition to his experience serving as an executive officer and his investment experience.

        Salvatore F. Sodano has served as chairman and chief executive officer of Worldwide Capital Advisory Partners, LLC ("Worldwide Capital") since April 2013. Worldwide Capital provides research and advisory services on corporate finance and investment activities, management, operations and technology matters. Since October 2012, Mr. Sodano has also served as a senior advisor to the chief executive officer of Burke & Quick Partners, where he previously served as chairman of strategy and business development from October 2012 to August 2013. Mr. Sodano has served as Vice Chairman and a member of the board of directors of GSI since September 2014 and has served as Chairman of the Audit Committee of the board of directors of GSI since January 2015. In January 2015, Mr. Sodano also became Chairman of the Board of Directors and Chairman of the Executive Committee and the Executive Compensation Committee of Catholic Health Services, a 17,000-employee healthcare system. From June 2006 to June 2010, Mr. Sodano served as the Dean of the Frank G. Zarb School of Business at Hofstra University. Mr. Sodano also served as Chairman of Hofstra University's Board of Trustees for the maximum three one-year terms from October 2002 through October 2005. From 1997 to 2004, Mr. Sodano held increasingly senior roles at the National Association of Securities Dealers, Inc. (the "NASD") and its affiliated companies. Mr. Sodano was serving as Deputy Chief Operating Officer and Chief Financial Officer of the NASD in 1998 when the NASD acquired the American Stock Exchange (the "AMEX"). From 1999 to 2000, Mr. Sodano simultaneously served as Chairman and Chief Executive Officer of the AMEX and Chief Operating Officer and Chief Financial Officer of the NASD. He served as a member of the Board of Governors of the NASD from 1999 to 2004. Mr. Sodano was appointed Vice Chairman of the NASD Board of Governors in 2000, at which point he relinquished his roles as Chief Operating Officer and Chief Financial Officer of the NASD. Mr. Sodano served as Vice Chairman of the NASD Board of Governors and Chairman and Chief Executive Officer of the AMEX until it was sold in 2004. He remained Chairman of the AMEX until he retired in 2005. Mr. Sodano is the Sorin Distinguished Teaching Fellow at the Frank G. Zarb School of Business at Hofstra University.

        Our Board believes that Mr. Sodano's qualifications to serve on our Board include his business and academic experience, his financial expertise, including his audit committee experience, his experience as a member of the GSI board of directors and as the Chairman of the GSI Audit Committee.

Corporate Governance

General

        We expect GSG Class A Stock to be approved for listing on the NYSE under the symbol "        ." As a result, we expect that we will be subject to NYSE corporate governance listing standards.

73


Table of Contents

Controlled Company Exception

        Upon completion of the spin-off, Mario J. Gabelli and his affiliates will control a majority of the voting power of the GSG common stock. As a result, we will be a "controlled company" within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain corporate governance requirements, including the requirements (1) that a majority of our Board consist of independent directors, (2) that our Board have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities, (3) that our Board have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities and (4) that our Board conduct an annual performance evaluation of the nominating and corporate governance committee and the compensation committee. For at least some period following the spin-off, we intend to utilize these exemptions. As a result, immediately following the spin-off, we do not expect that any committees of our Board (other than our Audit Committee) will be composed entirely of independent directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of these corporate governance requirements. In the event that we cease to be a "controlled company" and our shares continue to be listed on the NYSE, we will be required to comply with these provisions within the applicable transition periods.

Corporate Governance Guidelines

        Our Board will adopt Corporate Governance Guidelines. These guidelines will set forth our practices and policies with respect to, among other things, board composition, board member qualifications, responsibilities and education, management succession and self-evaluation. The full text of our Corporate Governance Guidelines will be available on our website at www.GabelliSecuritiesGroup.com on or prior to the distribution date. Any stockholder may also obtain a copy of our Corporate Governance Guidelines upon request when they become available. Stockholders may address a written request for a printed copy of the Corporate Governance Guidelines to our Secretary at Gabelli Securities Group, Inc., One Corporate Center, Rye, NY 10580-1422.

Code of Business Conduct

        We will adopt a Code of Business Conduct (the "Code of Conduct") that applies to all of our officers, directors and staff members with additional requirements for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Conduct will be available on our website at www.GabelliSecuritiesGroup.com on or prior to the distribution date. Any stockholder may also obtain a copy of the Code of Conduct upon request when it becomes available. Stockholders may address a written request for a printed copy of the Code of Conduct to our Secretary at Gabelli Securities Group, Inc., One Corporate Center, Rye, NY 10580-1422. We intend to satisfy the disclosure requirement regarding any amendment to, or a waiver of, a provision of the Code of Conduct by posting such information on our website.

Leadership Structure; Meetings of Independent Directors

        Our Board believes that the most effective leadership structure is for our Chief Executive Officer to serve as Chairman given that Mario J. Gabelli is the controlling stockholder of GSG. By having Mario J. Gabelli serve as the Chief Executive Officer and as Chairman, our Board believes that it enables Mario J. Gabelli to ensure that our Board's agenda responds to strategic challenges, that our Board is presented with information required for it to fulfill its responsibilities, and that Board meetings are as productive and effective as possible.

74


Table of Contents

        Upon completion of the spin-off, our non-management directors will meet, without any management directors or employees present, immediately after our regular quarterly board meetings. At least once each year, our independent directors are expected to meet in a separate executive session. Mr. Sodano is expected to serve as lead independent director and chair the meetings of our non-management and independent directors.

Communications with Our Board

        Prior to the distribution date, our Board will establish a process for stockholders and other interested parties to send communications to our Board. Stockholders or other interested parties who wish to communicate with our Board, the non-management or independent directors, or a particular director may send a letter to our Secretary at Gabelli Securities Group, Inc., One Corporate Center, Rye, NY 10580-1422. The mailing envelope must contain a clear notation indicating that the enclosed letter is a "Board Communication" or "Director Communication." All such letters must identify the author and clearly state whether the intended recipients are all members of our Board or just certain specified individual directors. The Secretary will make copies of all such letters and circulate them to the appropriate director or directors.

Transactions with Related Persons

        Our Board has adopted written procedures governing the review, approval or ratification of any transactions with related persons required to be reported pursuant to the rules of the SEC. The procedures require that all related party transactions, other than certain pre-approved categories of transactions, be reviewed and approved by our Governance Committee or our Board. Under the procedures, directors may not participate in any discussion or approval by our Board of related party transactions in which they or a member of their immediate family is a related person, except that they shall provide information to our Board concerning the transaction. Only transactions that are found to be in the best interests of GSG will be approved.

        Currently, we have a number of policies and procedures addressing conflicts of interest. Our Code of Conduct addresses the responsibilities of our officers, directors and staff to disclose conflicts of interest to our Legal/Compliance Department, which determines whether the matter constitutes a related party transaction that should be reviewed by our Governance Committee or our Board. Generally, matters involving employer-employee relationships, including compensation and benefits, ongoing arrangements that existed prior to our GAMCO's initial public offering and financial service relationships, including investments in our funds are not presented for review, approval or ratification by our Governance Committee or our Board.

        Furthermore, our certificate of incorporation provides that no contract, agreement, arrangement or transaction, or any amendment, modification or termination thereof, or any waiver of any right thereunder (each a "Transaction"), between GSG and:

    (i)
    Mario J. Gabelli, any member of his immediate family who is at the time an officer or director of GSG and any entity in which one or more of the foregoing beneficially own a controlling interest of the outstanding voting securities or comparable interests (each a "Gabelli"),

    (ii)
    any customer or supplier or any entity in which a director of GSG has a financial interest (a "Related Entity"), or

    (iii)
    one or more of the directors or officers of GSG or any Related Entity,

will be voidable solely because any of the persons or entities listed in (i) through (iii) above are parties thereto, if the standard specified below is satisfied. Further, no Transaction will be voidable solely because any such directors or officers are present at or participate in the meeting of our Board or

75


Table of Contents

committee thereof that authorizes the Transaction or because their votes are counted for such purpose, if the standard specified below is satisfied. That standard will be satisfied, and such Gabelli, the Related Entity, and the directors and officers of GSG or the Related Entity (as applicable) will be deemed to have acted reasonably and in good faith (to the extent such standard is applicable to such person's conduct) and fully to have satisfied any duties of loyalty and fiduciary duties they may have to GSG and its stockholders with respect to such Transaction, if any of the following four requirements are met:

    (i)
    the material facts as to the relationship or interest and as to the Transaction are disclosed or known to our Board or the committee thereof that authorizes the Transaction, and our Board or such committee in good faith approves the Transaction by the affirmative vote of a majority of the disinterested directors on our Board or such committee, even if the disinterested directors are less than a quorum;

    (ii)
    the material facts as to the relationship or interest and as to the Transaction are disclosed or known to the holders of Voting Stock (as defined in our certificate of incorporation) entitled to vote thereon, and the Transaction is specifically approved by vote of the holders of a majority of the voting power of the then outstanding Voting Stock not owned by such Gabelli or such Related Entity, voting together as a single class;

    (iii)
    the Transaction is effected pursuant to guidelines that are in good faith approved by a majority of the disinterested directors on our Board or the applicable committee thereof or by vote of the holders of a majority of the then outstanding Voting Stock not owned by such Gabelli or such Related Entity, voting together as a single class; or

    (iv)
    the Transaction is fair to GSG as of the time it is approved by our Board, a committee thereof or the stockholders of GSG.

        Our certificate of incorporation also provides that any such Transaction authorized, approved, or effected, and each of such guidelines so authorized or approved, as described in (i), (ii) or (iii) above, will be deemed to be entirely fair to GAMCO and its stockholders, except that, if such authorization or approval is not obtained, or such Transaction is not so effected, no presumption will arise that such Transaction or guideline is not fair to GAMCO and its stockholders. In addition, our certificate of incorporation provides that a Gabelli will not be liable to GAMCO or its stockholders for breach of any fiduciary duty that a Gabelli may have as a stockholder of GAMCO by reason of the fact that a Gabelli takes any action in connection with any transaction between such Gabelli and GAMCO. For purposes of these provisions, interests in an entity that are not equity or ownership interests or that constitute less than 10% of the equity or ownership interests of such entity will not be considered to confer a financial interest on any person who beneficially owns such interests.

        A description of certain related party transactions appears under the heading "Certain Relationships and Related Party Transactions."

Committees of Our Board

        Our Board will have an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee and each of these standing committees will adopt a charter. Our Audit Committee will be composed exclusively of independent directors, as defined by the listing standards of the stock exchange on which GSG common stock will be listed, which we expect to be the NYSE. Moreover, the Compensation Committee will be composed exclusively of individuals referred to as "non-employee directors" in Rule 16b-3 of the Exchange Act and "outside directors" in Section 162(m) of the Code.

76


Table of Contents

Audit Committee

        At the time of the distribution, our Audit Committee will consist of at least three members each of whom will be independent and financially literate under the rules of the stock exchange on which our stock will be listed, which we expect to be the NYSE, and at least one of whom will be an "audit committee financial expert," as that term is defined by the SEC. We expect that the initial members of our Audit Committee will be Messrs. Salvatore F. Sodano, Richard L. Bready and Bruce M. Lisman. Mr. Sodano is expected to serve as Chairperson of the Audit Committee. The Audit Committee will be responsible for, among other things, engaging an independent registered public accounting firm, reviewing with the independent registered public accounting firm the plans and results of the audit engagement, approving professional services provided by the independent registered public accounting firm, reviewing the independence of the independent registered public accounting firm, considering the range of audit and non-audit fees and assisting our Board in its oversight of our internal controls over financial reporting.

        On or prior to the distribution date, our Audit Committee charter will be available on our website at www.GabelliSecuritiesGroup.com and will also be available without charge to stockholders upon written request to our Secretary at Gabelli Securities Group, Inc., One Corporate Center, Rye, NY 10580-1422.

Compensation Committee

        The Compensation Committee will be responsible for, among other things, determining compensation for our executive officers, administering and monitoring our equity compensation plans, evaluating the performance of our executive officers and producing an annual report on executive compensation for inclusion in our annual meeting proxy statement. The Compensation Committee may delegate some or all of its duties to a subcommittee comprising one or more members of the Compensation Committee.

        On or prior to the distribution date, our Compensation Committee charter will be available on our website at www.GabelliSecuritiesGroup.com and will also be available without charge to stockholders upon written request to our Secretary at Gabelli Securities Group, Inc., One Corporate Center, Rye, NY 10580-1422.

Nominating and Corporate Governance Committee

        The Nominating and Corporate Governance Committee will be responsible for, among other things, seeking, considering and recommending to our Board qualified candidates for election as directors and recommending a slate of nominees for election as directors at the annual meeting. It will also periodically prepare and submit to our Board for adoption the Nominating and Corporate Governance Committee's selection criteria for director nominees. It will review and make recommendations on matters involving general operation of our Board, including director compensation plans and practices and our corporate governance and annually recommend to our Board nominees for each committee of our Board. In addition, the Nominating and Corporate Governance Committee will annually facilitate the assessment of our Board's performance as a whole and of the individual directors and report thereon to our Board. As a controlled company, we will rely upon the exemption from the requirement that we have a nominating and corporate governance committee composed entirely of independent directors.

        On or prior to the distribution date, our Nominating and Corporate Governance Committee charter will be available on our website at www.GabelliSecuritiesGroup.com and will also be available without charge to stockholders upon written request to our Secretary at Gabelli Securities Group, Inc., One Corporate Center, Rye, NY 10580-1422.

77


Table of Contents

Compensation of Directors

        Our executive officers that serve on our Board do not receive compensation for such service. It is expected that all non-executive directors will receive annual cash retainers and meeting fees in amounts to be determined. In addition, it is expected that our directors will receive annual equity awards in a form and in amounts to be determined. Mr. Sodano currently receives quarterly director fees of $33,000 for serving as Vice Chairman and Chairman of the Audit Committee of GSI, and Mr. Lee currently receives quarterly director fees of $3,000 for serving as a director of GSI. From and after the distribution date, Mr. Sodano and Mr. Lee are not expected to receive fees for serving as members of the board of directors of GSI and will only receive fees and equity awards for serving as directors of GSG.

Stock Ownership of Directors and Executive Officers

        See "Security Ownership of Certain Beneficial Owners and Management."

78


Table of Contents


EXECUTIVE COMPENSATION

        Mario J. Gabelli, our Executive Chairman and Chief Executive Officer, is also Chairman and Chief Executive Officer of GAMCO. Set forth below is the initial annual base salary for our Chief Executive Officer and the two executive officers other than our Chief Executive officers that we expect will be our most highly compensated executive officers in 2015 (the "named executive officers"). We expect to make restricted stock awards to the named executive officers, the number of which is expected to be determined subsequently in 2015.

Name and Position
  Annual Base Salary(1)

Mario J. Gabelli, Executive Chairman and Chief Executive Officer

   

Marc Gabelli, President and Director

   

Kieran Caterina

   

(1)
Amounts of annual compensation for 2015 are annualized projections of salary for the year ending December 31, 2015 based on the expected salaries to be paid to our named executive officers.

Equity Award Adjustment

        At the time of the spin-off, all RSAs under GAMCO's 2002 Stock Award and Incentive Plan will be supplemented by the awarding of GSG equity awards such that each GAMCO award's pre-spin-off value will equate to the post-spin-off combined value of the GAMCO and associated GSG equity awards. Specifically, outstanding RSAs relating to GAMCO will remain unchanged, with each RSA holder also receiving an equal number of RSAs relating to GSG. The terms of the new GSG RSAs will remain substantially the same as the terms of the pre-spin-off GAMCO RSAs.

Employment Agreement with Mario J. Gabelli

        In connection with the spin-off, we expect to enter into an employment agreement with Mario J. Gabelli, which is expected to provide for, among other things, the payment of a management fee in the amount 10% of our aggregate pre-tax profits, before consideration of this fee and before consideration of the various consolidated feeder funds and partnerships, to Mario J. Gabelli or his designees. Mario J. Gabelli is currently entitled to a 10% management fee with respect to GAMCO pursuant to his employment agreement with GAMCO (the "GAMCO Employment Agreement"). Pursuant to the GAMCO Employment Agreement, Mario J. Gabelli was paid $391,551, $4,998,004 and $1,380,264 by GAMCO for his 10% management fee with respect to the Gabelli Securities Group in 2014, 2013 and 2012, respectively.

Stock Award and Incentive Plan

General

        We expect to adopt, with the approval of our sole stockholder, the Gabelli Securities Group, Inc. 2015 Stock Award and Incentive Plan (the "Plan"), which is substantially similar to the current GAMCO stock award and incentive plan. A summary of the expected terms of the Plan is included below.

Purpose of the Plan

        The purpose of the Plan will be to afford an incentive to selected employees, directors and independent contractors of GSG and its affiliates to acquire a proprietary interest in GSG, to continue to perform their roles for GSG, to increase their efforts on behalf of GSG and to promote the success of GSG's business.

79


Table of Contents

Administration of the Plan

        The Plan will be administered by the Compensation Committee of our Board. Our Compensation Committee will consist of non-employee directors and will be organized in a manner so as to satisfy the provisions of the federal securities and tax laws applicable to such plans. Our Compensation Committee will have the authority, subject to the provisions of the Plan, to determine the individuals to whom awards will be granted, the types of awards to be granted, the number of shares to be made subject to particular awards and the terms, conditions, restrictions and performance criteria relating to the awards as well as to interpret the Plan and prescribe, amend and rescind rules and regulations relating to the Plan.

Eligibility

        In general, awards may be granted at the discretion of our Compensation Committee to officers, independent contractors, employees and directors of GSG or of any of its subsidiaries and affiliates at the discretion of our Compensation Committee. In determining the individuals to whom awards are granted and the type of any award (including the number of shares to be covered by such award), our Compensation Committee will take into account such factors as our Compensation Committee considers to be relevant in connection with accomplishing the purposes of the Plan. Incentive stock options may not be granted to independent contractors. An individual may not receive awards with respect to more than                  shares in any one calendar year.

Shares Available For Awards

        The Plan will provide for an aggregate of not more than                  shares of GSG Class A Stock, par value $0.001, to be reserved for issuance under the Plan, subject to adjustment as described below. The                  shares will represent approximately        % of the number of shares of GSG common stock outstanding. The number of shares reserved for issuance under the Plan will be increased automatically on the first business day of each of our fiscal years during the term of the plan, commencing in 2016, by a number equal to the smallest of:                  shares;        % of the number of shares of GSG common stock outstanding on December 31 of the prior year; and the number of shares determined by our Board. Generally, shares subject to an award that remain unissued upon expiration or cancellation of awards will be available for other awards under the Plan.

Adjustment for Change in Capitalization

        In the event that our Compensation Committee determines that any dividend or other distribution, recapitalization, stock split, reverse split, reorganization, merger, consolidation, spin-off, combination, share repurchase or exchange, or other similar corporate transaction or event affects the GSG Class A Stock such that an adjustment would be appropriate in order to prevent dilution or enlargement of the rights of participants under the Plan, then our Compensation Committee will make such equitable changes or adjustments as it deems necessary to the number and kind of shares of GSG Class A Stock or other property which may thereafter be issued in connection with awards, the number and kind of shares of GSG Class A Stock subject to each outstanding award, and the exercise price, grant price or purchase price of each award.

Types of Awards

        The Plan will provide for the grant of stock options (including "incentive stock options" and "nonqualified stock options"), stock appreciation rights (either in connection with options granted under the Plan or independently of options), restricted stock, restricted stock units, dividend equivalents and other stock- or cash-based awards. These awards are discussed in more detail below.

80


Table of Contents

The Plan will not be subject to any provisions of ERISA, nor will the Plan be a qualified plan within the meaning of Section 401(a) of the Code.

Stock Options and Appreciation Rights

        Stock options may be either "incentive stock options," as such term is defined in Section 422 of the Code, or nonqualified stock options ("NSOs"). The exercise price of any stock option may be above or at (but not below) the fair market value per share of GSG Class A Stock on the date of grant. Subject to the terms of individual award agreements, the exercise price may be paid in cash, by the surrender of GSG Class A Stock, through a "net" exercise involving the surrender of shares subject to the award, or through a "broker's cashless exercise" procedure meeting the requirements of applicable securities rules.

        Our Compensation Committee may grant stock appreciation rights alone or in tandem with stock options. A stock appreciation right is a right to be paid an amount equal to the excess of the fair market value of a share of GSG Class A Stock on the date the stock appreciation right is exercised over either the fair market value of a share of GSG Class A Stock on the date of grant (in the case of a free standing stock appreciation right) or the exercise price of the related stock option (in the case of a tandem stock appreciation right), with payment to be made in cash, GSG Class A Stock or both, as specified in the award agreement or determined by our Compensation Committee.

        Stock options and stock appreciation rights will be exercisable at such times and upon such conditions as our Compensation Committee may determine, as reflected in the applicable award agreement. In addition, unless otherwise provided in an award agreement, all stock options and stock appreciation rights will become exercisable in the event of a change in control of GSG, which our Board may determine in their discretion. The exercise period will be determined by our Compensation Committee except it may not exceed ten years from the date of grant of such incentive stock option.

        Except to the extent that the applicable award agreement will provide otherwise, the participant's right to exercise stock options and stock appreciation rights will also cease shortly after the employment of the participant terminates.

Restricted Stock and Restricted Stock Units

        A restricted stock award is an award of actual shares of GSG Class A Stock ("restricted stock") and a restricted stock unit award is an award of the right to receive cash or shares of GSG Class A Stock ("restricted stock unit"). These awards are called "restricted" because they are subject to such restrictions on transferability, maintenance of employment and other matters as our Compensation Committee may impose at the date of grant, which restrictions may lapse separately or in combination at such times, under such circumstances, in such installments or otherwise, as our Compensation Committee may determine. Except to the extent restricted under the award agreement relating to the restricted stock, a participant granted restricted stock will have all of the rights of a stockholder, including without limitation the right to vote and the right to receive dividends thereon. Our Compensation Committee has the authority to cancel all or any portion of any outstanding restrictions at any time. In addition, all restrictions affecting the awarded shares or units will lapse in the event of a "change in control" of GSG.

        Upon termination of the participant's relationship with GSG during the applicable restriction period, restricted stock, restricted stock units and any accrued and unpaid dividends or dividend equivalents that are at that time subject to restrictions will be forfeited unless our Compensation Committee determines, as a general matter or in any individual case, that restrictions or forfeiture conditions relating to restricted stock will be waived in whole or in part in the event of terminations resulting from specified causes. Our Compensation Committee may also waive in whole or in part the forfeiture of restricted stock in other circumstances.

81


Table of Contents

Other Awards

        Our Compensation Committee may grant to a participant the right to receive cash equal to the amount of dividends paid with respect to a specified number of shares of GSG Class A Stock ("dividend equivalents"). Dividend equivalents may be awarded on a free-standing basis or in connection with another award, and may be paid currently or on a deferred basis. Our Compensation Committee is expected to also be authorized to grant GSG Class A Stock as a bonus or on a tax-deferred basis or to grant other awards in lieu of our commitments to pay cash under other plans or compensatory arrangements, on such terms as are determined by our Compensation Committee.

Nontransferability

        Unless otherwise determined by our Compensation Committee and provided in an agreement evidencing the grant of an award, awards may not be transferred by the grantee except by will or the laws of descent and distribution and will be exercisable during the lifetime of the grantee only by the grantee or his or her guardian or legal representative.

Withholding of Taxes

        The Plan will provide that GSG or any subsidiary or affiliate may withhold from any award granted, any payment relating to an award under the Plan or any other payment to a grantee, amounts of withholding and other taxes due in connection with any transaction involving an award. Our Compensation Committee may also take whatever action it considers advisable to enable us and grantees to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any award.

No Stockholder Rights

        The holder of an award granted under the Plan will have no rights as a stockholder with respect to any shares of GSG Class A Stock covered by an award until the date of issuance of a stock certificate to him or her for such shares related to such award.

Effect of Change in Control

        In the event of a change in control and unless otherwise determined by our Board, all outstanding options and stock appreciation rights not then exercisable will become fully exercisable, and all outstanding restricted stock, restricted stock unit, dividend equivalent or other stock- or cash-based awards not then fully vested will become fully vested.

Amendment or Termination of the Plan

        Our Board may alter, amend, suspend or terminate the Plan, in whole or in part, except that no amendment that requires stockholder approval in order for the Plan to reprice stock options or stock appreciation rights, to avoid the application of Section 162(m) of the Code for federal income tax purposes, or for the Plan to comply with state law, stock exchange requirements or other applicable law will be effective unless such amendment has received the requisite approval of stockholders. In addition, no amendment may be made which adversely affects any of the rights of a participant under any award previously granted, without such participant's consent.

Certain Federal Income Tax Effects

        The following discussion of certain relevant federal income tax effects that will be applicable to stock options and other stock-based awards granted under the Plan is a summary only, focuses on their tax consequences to GSG, and reference is made to the Code for a complete statement of all relevant

82


Table of Contents

federal tax provisions. Generally, GSG will become entitled to tax deductions at the same time and in the same amount that the award grantee recognizes as ordinary income, with no such income or GSG deduction occurring at the time a grant occurs.

Stock Options and Stock Appreciation Rights

        At the time of exercise of such NSO (and in the case of an untimely exercise of an Incentive Stock Option (an "ISO")), the grantee will recognize ordinary income for federal income tax purposes in an amount equal to the excess of the fair market value of the shares purchased over the option price, and GSG will generally be entitled to a corresponding tax deduction. Similarly, with respect to the exercise of a stock appreciation rights, GSG's tax deduction will equal the grantee's ordinary income from the GSG shares or other property that the grantee receives, at the time of exercise. On the other hand, GSG will not be entitled to a tax deduction if an ISO is exercised while the grantee remains an employee of GSG or a subsidiary at all times during the period beginning on the date of grant of the ISO and ending on the date three months before the date of exercise (or one year before the date of exercise in the case of a disabled grantee), and if stock acquired pursuant to the timely exercise of an ISO is not disposed of by the grantee prior to the expiration of two years from the date of grant of the ISO or within one year from the date such stock is transferred to the grantee upon exercise. In the case of a disqualifying disposition by a grantee, GSG may claim a federal income tax deduction at the time of such disqualifying disposition for the amount taxable to the grantee as ordinary income.

Restricted Stock and Restricted Stock Unit Awards

        A grantee of restricted stock or restricted stock unit awards generally will recognize ordinary income in an amount equal to the fair market value of shares of GSG Class A Stock subject to the award at the time the shares are no longer subject to a substantial risk of forfeiture (as defined in the Code), at which time GSG will be entitled to a deduction in the amount that the grantee recognizes ordinary income. However, a grantee may elect (not later than 30 days after acquiring such shares) to recognize ordinary income at the time the restricted shares are awarded in an amount equal to their fair market value at that time, notwithstanding the fact that such shares are subject to restrictions and a substantial risk of forfeiture. If this election is made, no additional taxable income will be recognized by the grantee at the time the restrictions lapse. GSG will be entitled to a tax deduction at the time when, and to the extent that, income is recognized by the grantee.

83


Table of Contents


DESCRIPTION OF CAPITAL STOCK

        Our certificate of incorporation and bylaws will be amended and restated prior to the spin-off. The following is a summary of the material terms of our capital stock that will be contained in our amended and restated certificate of incorporation and bylaws. The summaries and descriptions below do not purport to be complete statements of the relevant provisions of our amended and restated certificate of incorporation or our amended and restated bylaws to be in effect at the time of the spin-off and are qualified in their entirety by reference to these documents, which you should read (along with the applicable provisions of Delaware law) for complete information on our capital stock as of the time of the spin-off. Our amended and restated certificate of incorporation and bylaws to be in effect at the time of the spin-off will be included as exhibits to our registration statement on Form 10, of which this information statement forms a part, and this summary is qualified in its entirety by such exhibits.

General

        We are currently authorized to issue 100 shares of common stock. Prior to the distribution, we will amend and restate our certificate of incorporation to provide authorization for us to issue 210,000,000 shares of GSG common stock, consisting of: (i) 100,000,000 shares of GSG Class A Stock; (ii) 100,000,000 shares of GSG Class B Stock; and (i) 10,000,000 shares of preferred stock.

        The GSG Class B Stock is not being registered on the Form 10, of which this information statement is a part.

GSG Class A Stock and GSG Class B Stock

Voting Rights

        The holders of GSG Class A Stock and the GSG Class B Stock have identical voting rights except that:

    holders of GSG Class A Stock are entitled to one vote per share while holders of GSG Class B Stock are entitled to ten votes per share on all matters to be voted on by stockholders; and

    holders of GSG Class A Stock are not eligible to vote on matters relating exclusively to GSG Class B Stock and vice versa.

        Holders of shares of GSG Class A Stock and GSG Class B Stock are not entitled to cumulate their votes in the election of directors. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes that are entitled to be cast by the holders of all shares of GSG Class A Stock and GSG Class B Stock present in person or represented by proxy, voting together as a single class, subject to any voting rights granted to holders of any preferred stock. Except as otherwise provided by law, and subject to any voting rights granted to holders of any outstanding preferred stock, amendments to the certificate of incorporation generally must be approved by a majority of the combined voting power of all GSG Class A Stock and GSG Class B Stock voting together as a single class. Amendments to the certificate of incorporation that would alter or change the powers, preferences or special rights of the GSG Class A Stock or the GSG Class B Stock so as to affect them adversely also must be approved by a majority of the votes entitled to be cast by the holders of the shares affected by the amendment, voting as a separate class.

Dividends

        Holders of GSG Class A Stock and GSG Class B Stock will receive an equal amount per share in any dividend declared by our Board, subject to any preferential rights of any outstanding preferred

84


Table of Contents

stock. Dividends consisting of shares of GSG Class A Stock and GSG Class B Stock may be paid only as follows:

    shares of GSG Class A Stock may be paid only to holders of GSG Class A Stock and shares of GSG Class B Stock may be paid only to holders of GSG Class B Stock; and

    shares will be paid proportionally with respect to each outstanding share of GSG Class A Stock and GSG Class B Stock.

Other Rights

        On liquidation, dissolution or winding up of GSG, after payment in full of the amounts required to be paid to holders of preferred stock, if any, all holders of GSG common stock, regardless of class, are entitled to share ratably in any assets available for distribution to holders of shares of common stock. No shares of GSG common stock are subject to redemption or have preemptive rights to purchase additional shares of GSG common stock.

        In the event of any corporate merger, consolidation, purchase or acquisition of property or stock, or other reorganization in which any consideration is to be received by the holders of GSG Class A Stock or the holders of GSG Class B Stock as a class, the holders of GSG Class A Stock and the holders of GSG Class B Stock will receive the same consideration on a per share basis; except that, if such consideration shall consist in any part of voting securities (or of options or warrants to purchase, or of securities convertible into or exchangeable for, voting securities), the holders of GSG Class B Stock may receive, on a per share basis, voting securities with up to ten times the number of votes per share as those voting securities to be received by the holders of GSG Class A Stock (or options or warrants to purchase, or securities convertible into or exchangeable for, voting securities with up to ten times the number of votes per share as those voting securities issuable upon exercise of the options or warrants, or into which the convertible or exchangeable securities may be converted or exchanged, received by the holders of GSG Class A Stock). Accordingly, except with respect to voting rights, the holders of GSG Class B Stock will not receive greater value than the holders of GSG Class A Stock in an extraordinary corporate transaction involving GSG.

Special Stockholder Meetings

        Our bylaws provide that special meetings of its stockholders may be called by the Chairman, the President or a resolution of our Board.

No Cumulative Voting for Directors

        Our certificate of incorporation and bylaws do not provide for cumulative voting in the election of directors.

Amendments to GSG's Bylaws

        Our certificate of incorporation and bylaws provide that our Board shall have the power to make, alter or repeal our bylaws, subject to the power of the stockholders to alter or repeal the bylaws made or altered by our Board.

Anti-Takeover Provisions

        In our certificate of incorporation, we have elected not to be governed by Section 203 of the DGCL. Section 203 of the DGCL generally provides that if a person acquires 15% or more of the voting stock of a Delaware corporation, such person is an "interested stockholder" and may not engage in certain "business combinations" with the corporation for a period of three years from the time such person became an interested stockholder, unless one of the following exceptions applies: (1) prior to

85


Table of Contents

the time the stockholder became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (2) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (3) at or subsequent to such time the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 662/3% of the outstanding voting stock which is not owned by the interested stockholder.

Litigation Cost-Shifting Provision

        Our bylaws provide, to the fullest extent permitted by law, for the shifting of litigation expenses to an unsuccessful plaintiff in intra-corporate litigation who does not obtain a judgment on the merits that substantially achieves, in substance and amount, the full remedy sought.

Litigation Forum Selection Clause

        Our bylaws provide that, to the fullest extent permitted by law, a plaintiff in intra-corporate litigation filed in a court other than a court located within the State of Delaware shall be deemed to consent to personal jurisdiction of the state and federal courts of the State of Delaware and have service of process made upon such plaintiff in any such action by service upon such plaintiff's counsel as agent.

Our Board

        GSG's bylaws provide that directors shall be elected at each annual stockholder meeting by a plurality of the votes cast and shall hold office for a term expiring at the next annual meeting of stockholders, with each director to hold office until his or her successor has been duly elected and qualified. All vacancies on our Board, including those created by an increase in the size of the board, shall be filled by vote of the remaining directors, even if less than a quorum.

Transfer Agent and Registrar

        Computershare Trust Company, N.A. is the transfer agent and registrar for the GSG common stock. Our stockholders can contact the transfer agent and registrar at:

Computershare Trust Company, N.A.
250 Royall Street
Canton, Massachusetts 02021-1011
Telephone: (877) 282-1168 or
(781) 575-2879 (outside the United States, Canada and Puerto Rico)

86


Table of Contents


CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

        Following the distribution, we will be a public company, and GAMCO will have no ownership interest in us. However, GGCP, through Holdings, will own a majority of the GSG Class B Stock and 32,000 shares of the GSG Class A Stock, together representing approximately 94% of the combined voting power and approximately 72% of the outstanding shares of GSG common stock. Mario J. Gabelli serves as the Chief Executive Officer, a director and is the controlling shareholder of GGCP. Marc Gabelli (a son of Mario J. Gabelli and a member of the GAMCO Board), is President of GGCP. Various other family members of Mario J. Gabelli are shareholders of GGCP, including Marc Gabelli. Mario J. Gabelli is also the Chairman and Chief Executive Officer of GAMCO. In addition, on the distribution date, GGCP is expected to have the same voting and ownership percentages of GAMCO common stock as it will of GSG common stock.

        Mario J. Gabelli and GGCP will enter into a registration rights agreement with GSG, which will become effective upon the distribution date (the "Gabelli Registration Rights Agreement"). Under the Gabelli Registration Rights Agreement, GSG will provide Mario J. Gabelli and GGCP with certain demand and piggyback registration rights with respect to their shares of GSG Class A Stock (including those issued upon conversion of their shares of GSG Class B Common Stock). The Gabelli Registration Rights Agreement will be filed as an exhibit to the registration statement, of which this information statement forms a part, prior to the distribution date, and the foregoing discussion of the Gabelli Registration Rights Agreement is qualified in its entirety by reference to Gabelli Registration Rights Agreement that will be filed prior to the distribution date.

        GAMCO has historically performed many corporate functions for the Gabelli Securities Group. Also, in connection with the spin-off, GSG has entered into certain other agreements with GAMCO to define GSG's ongoing relationship with GAMCO after the spin-off. These other agreements define responsibility for obligations arising before and after the distribution date, including obligations relating to GSG's employees, certain transitional services and taxes. See "Arrangements Between GAMCO and GSG After the Spin-Off."

        GSI invests a substantial amount of its cash equivalents in a money market mutual fund managed by Gabelli Funds, LLC, which is owned 100% by GAMCO. GSG had $285.5 million, $199.0 million and $179.7 million in these money market funds at December 31, 2014, 2013 and 2012, respectively, and earned $3,838, $17,723 and $49,677 for the years ended December 31, 2014, 2013 and 2012, respectively.

        GSI is charged or incurs certain overhead expenses that are also attributable to other affiliates. These overhead expenses are allocated to GSG by GAMCO, if general and administrative related, and by GSI to other affiliates, if payroll or expense reimbursement related, as the expenses are incurred, based upon methodologies periodically reviewed by the management of GSG and the affiliates for reasonableness. The methodologies of the allocation are based on usage of shared services, whether personnel, administrative or other. Each service is analyzed by management as to the users of the service and is allocated in proportion to that usage at the cost of the particular service.

        The Gabelli Securities Group entered into a $15,000,000 demand loan with GAMCO on March 15, 2004 at a rate of 5.5% per year. Of the $15,000,000 borrowed, $5,000,000 was paid back to GAMCO on February 28, 2007. The Gabelli Securities Group entered into an additional demand loan for $16,000,000 with GAMCO on August 17, 2010 at a rate of 5.5% per year. On March 7, 2014, the Gabelli Securities Group repaid $10,000,000 of the loan to GAMCO. The balances on these demand loans were $16,000,000, $26,000,000 and $26,000,000 as of December 31, 2014, 2013 and 2012, respectively. These loans are due on demand by GAMCO, and the Gabelli Securities Group has a prepayment option. The interest paid was $980,833, $1,430,000 and $1,430,000 for 2014, 2013 and 2012, respectively. The largest aggregate amount outstanding any time since January 1, 2012 was $26,000,000.

87


Table of Contents

        We had an aggregate investment in affiliated partnerships and offshore funds of approximately $94.2 million, $82.0 million and $83.9 million at December 31, 2014, 2013 and 2012, respectively.

        After the record date and before the distribution date, GAMCO expects to either sell or transfer to us shares of GAMCO Class A Stock that are currently held in treasury, newly issued preferred shares or a note of GAMCO or another party, or a combination of any or all three, in the amount of $             million to provide us with additional capital to, among other things, provide seed capital for Investment Partnerships that we expect to form.

        Gabelli Securities International Limited ("GS International") was formed in 1994 to provide management and investment advisory services to offshore funds and accounts. Marc Gabelli (a son of Mario J. Gabelli and a member of the GAMCO Board) owns 55% of GS International, and GSG owns the remaining 45%. In 1994, Gabelli International Gold Fund Limited ("GIGFL"), an offshore investment company investing primarily in securities of issuers with gold-related activities, was formed and GS International entered into an agreement to provide management services to GIGFL. GSG in turn entered into an agreement with GS International to provide investment advisory services to GIGFL in return for receiving all investment management fees paid by GIGFL. Pursuant to such agreement, GSG received investment management fees of $11,096 and no incentive fees for 2014, investment management fees of $13,478 and no incentive fees for 2013 and investment management fees of $23,192 and no incentive fees for 2012. As of December 31, 2014, 2013 and 2012, there were $2,936, $50,639 and $11,957, respectively, payable to GIGFL included in payables to affiliates on the combined consolidated statements of financial condition relating to management fees.

        In April 1999, Gabelli Global Partners, Ltd. ("GGP Ltd."), an offshore investment fund, was incorporated. GS International and Gemini Capital Management, LLC ("Gemini"), an entity owned by Marc Gabelli, a director of GSG and GAMCO and the son of GSG's and GAMCO's Chairman, were engaged by GGP Ltd. as investment advisors as of July 1, 1999. GGP Ltd. paid all of the management fees for 2014, 2013 and 2012 in the amounts of $286,360, $148,909 and $80,761, respectively, to GS International. For 2014 and 2013, GGP Ltd. paid all of the incentive fees in the amount of $20,886 and $31,217, respectively, to GS International. There was no incentive fee earned in 2012.

        In April 1999, GSI formed Gabelli Global Partners, L.P., an investment limited partnership for which GSI and Gemini are the general partners. In March 2002, Gabelli Global Partners, L.P. changed its name to Gemini Global Partners, L.P. Gemini and GSI each received half of the management fee paid by the partnership to the general partners in the amount of $78,288, $76,776 and $76,548 for 2014, 2013 and 2012, respectively. In 2014 and 2013, the incentive fees earned were $178 and $16,740, respectively. There was no incentive fee earned in 2012. As of December 31, 2014, 2013 and 2012, there were $98,144, $19,678 and $36,257, respectively, receivable from Gemini Global Partners, L.P. included in receivables from affiliates on the combined consolidated statements of financial condition.

        Mario J. Gabelli and GSI serve as co-general partners of Gabelli Associates Fund, LP ("GAF"). Mario J. Gabelli receives portfolio manager and relationship manager compensation through an incentive allocation directly from GAF. In 2014, Mario J. Gabelli earned $348,274 in incentive fees from GAF, of which he allocated $107,172 to other professional staff, and his net compensation was $241,102. In 2013, Mario J. Gabelli earned $487,353 in incentive fees from GAF, of which he allocated $148,328 to other professional staff, and his net compensation was $339,025. In 2012, Mario J. Gabelli earned $419,077 in incentive fees from GAF, of which he allocated $128,171 to other professional staff, and his net compensation was $290,906.

        At December 31, 2014, 2013 and 2012, approximately $80 million, $81 million and $85 million, respectively, of our proprietary investment accounts were managed by our analysts or portfolio managers other than Mario J. Gabelli. The individuals managing these accounts receive 20% of the net profits, if any, earned on the accounts; however, some of the analysts are required to meet a hurdle rate of 5% before earning this 20% payout. In August 2006, Matthew Gabelli, a son of

88


Table of Contents

Mario J. Gabelli, was given responsibility for managing a proprietary investment account on which he would be paid, on an annual basis, 20% of any net profits earned on the account for the year. The account was initially funded with approximately $40 million during 2006. During the period from inception through December 31, 2014, market appreciation totaled $13 million and redemptions totaling $31 million were transferred from the account managed by the Chairman's son back to the Gabelli Securities Group's proprietary account and is no longer subject to the 20% payout. For 2014, 2013 and 2012, this account was up 1.6%, 41.9% and 14.3%, respectively, and therefore he earned approximately $0.1 million, $1.5 million and $0.2 million, respectively, for managing this account. At December 31, 2014, there was $22 million in this account.

        At December 31, 2014, 2013 and 2012, the Gabelli Securities Group had investments of $285.5 million, $199.0 million and $179.7 million, respectively, invested in the Gabelli U.S. Treasury Money Market Fund, which is a fund operated by a subsidiary of GAMCO. Investments in affiliated equity mutual funds ("Funds"), which are advised by Gabelli Funds, LLC, a subsidiary of GAMCO, and Teton Advisors, Inc., which is majority-owned by GGCP Holdings LLC, which is also the majority stockholder of GAMCO, at December 31, 2014, 2013 and 2012 totaled $40.9 million, $45.7 million and $63.6 million, respectively. The Gabelli Securities Group earned $3,838, $17,723 and $49,677 in 2014, 2013 and 2012, respectively, in interest income from the investment in the money market mutual fund. Dividend income earned from the Funds, excluding the money market mutual fund, was $2.1 million, $2.3 million and $1.8 million in 2014, 2013 and 2012, respectively.

        As required by our Code of Ethics, our staff members are required to maintain their brokerage accounts at G.research, Inc. unless they receive permission to maintain an outside account. G.research, Inc. offers all of these staff members the opportunity to engage in brokerage transactions at discounted rates. Accordingly, many of our staff members, including the executive officers or entities controlled by them, have brokerage accounts at G.research, Inc. and have engaged in securities transactions through it at discounted rates.

        In connection with his employment agreement, Mario J. Gabelli will enter into a service restrictive covenant according to which Mr. Gabelli shall not provide investment management services for compensation other than in his capacity as an officer or employee of GSG or GAMCO or their subsidiaries except as to certain funds which were in existence at the time of the GAMCO initial public offering and which are subject to performance fee arrangements (collectively "Permissible Accounts"). The Permissible Accounts may include new investors, provided that all of the performance fees, less expenses, earned on assets attributable to these investors ("Post-IPO AUM") are paid to GSG. Post-IPO AUM in Permissible Accounts totaled $104.9 million, $63.2 million and $29.2 million as of December 31, 2014, 2013 and 2012, respectively. Performance fees, less expenses, earned on Post-IPO AUM totaled $58,567, $393,924 and $82,541 for the three years ended December 31, 2014, 2013, and 2012, respectively.

89


Table of Contents


LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

Limitation of Liability of Directors

        GSG's certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable to the corporation or its stockholders for monetary damages for breach of their fiduciary duties as directors, except for liability:

    for any breach of their duty of loyalty to the corporation or its stockholders;

    for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

    under Section 174 of the Delaware General Corporation Law relating to unlawful payments of dividends or unlawful stock repurchases or redemptions; or

    for any transaction from which the director derived an improper personal benefit.

        The limitation of liability does not apply to liabilities arising under the federal or state securities laws and does not affect the availability of equitable remedies, such as injunctive relief or rescission.

Indemnification of Officers and Directors

        GSG's certificate of incorporation and bylaws provide that each person who was or is a director or officer shall be indemnified to the fullest extent permitted by Delaware law, including those circumstances in which indemnification would otherwise be discretionary, and states that GSG may advance expenses to its officers and directors as incurred in connection with proceedings against them for which they may be indemnified.

        We expect to obtain directors and officers liability insurance for the benefit of our directors and officers.

90


Table of Contents


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth information with respect to the anticipated beneficial ownership of GSG Class A Stock and GSG Class B Stock by:

    each stockholder who is expected following the spin-off to beneficially own more than 5% of GSG common stock;

    each executive officer named in the Summary Compensation Table;

    each person expected to serve on our Board as of the distribution date; and

    all of our executive officers and directors as a group.

        We have based the percentage of class amounts set forth below on each indicated person's beneficial ownership of GAMCO common stock as of March 1, 2015, unless we indicate some other basis for the share amounts, and based on the distribution of one share of GSG Class A Stock for each one share of GAMCO Class A Stock outstanding as of the record date and one share of GSG Class B Stock for each one share of GAMCO Class B Stock outstanding as of the record date. To the extent our directors and executive officers own shares of GAMCO common stock or GAMCO restricted stock awards at the time of the spin-off, they will participate in the distribution of shares of GSG common stock in the spin-off on the same terms as other holders of GAMCO common stock. Following the spin-off, we will have an aggregate of approximately 25,837,926 shares of GSG common stock outstanding, based on approximately 25,837,926 shares of GAMCO common stock outstanding on March 1, 2015. The number of shares beneficially owned by each stockholder, director or officer is determined according to the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Unless otherwise indicated, to our knowledge, the persons or entities named in the table below have sole voting and investment power with respect to all shares indicated as beneficially owned by those persons.

 
   
   
   
   
   
   
  Percentage of
Combined
Voting Power
of All
Classes
of Stock(2)
 
 
  Number of Shares Beneficially Owned   Percentage of Shares
Beneficially Owned(1)
 
Name of Beneficial Owner*
  Class A   Class B   Total   Class A   Class B   Total  

5% or More Stockholders

                                           

Frederick J. Mancheski

    1,725,974 (3)       1,725,974     26.1 %       6.7 %   **  

Keeley Asset Management Corp. 

    345,000 (4)       345,000     5.2 %       **     **  

E.S. Barr & Company

    392,988 (5)       392,988     5.9 %       **     **  

Directors and Executive Officers

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Mario J. Gabelli

    45,000 (6)   18,868,683 (7)   18,913,683     **     98.2 %   73.2 %   94.9 %

Marc Gabelli

    20,766 (8)   1,237     22,003     **     **     **     **  

Kieran Caterina

    8,750 (9)       8,750     **         **     **  

Richard L. Bready

    11,000         11,000     **         **     **  

Daniel R. Lee

                                           

Bruce M. Lisman

    5,000 (10)       5,000     **         **     **  

Salvatore F. Sodano

                **         **     **  

All Directors and Executive Officers as a Group (7 persons)

    90,516     18,869,920     18,960,436     1.4 %   98.2 %   73.4 %   95.0 %

(*)
The address of each beneficial owner of more than 5% of the GSG Class A Stock or GSG Class B Stock is as follows: Frederick J. Mancheski, 1060 Vegas Valley Drive, Las Vegas, NV 89109; Keeley Asset Management Corp., 111 West Jackson Boulevard, Suite 810, Chicago, IL 60604: E.S. Barr & Company, 1999 Richmond Road, Suite 1B, Lexington, KY 40502 and Mario J. Gabelli, GAMCO Investors, Inc., One Corporate Center, Rye, NY 10580.

91


Table of Contents

(**)
Represents beneficial ownership of less than 1%.

(1)
Based on 6,618,666 shares of GAMCO Class A Stock and 19,219,260 shares of GAMCO Class B Stock outstanding as of March 1, 2015.

(2)
These percentages reflect the combined voting rights of GSG Class A Stock and GSG Class B Stock. On all matters submitted to a vote of our stockholders, GSG Class A Stock entitles its holders to one vote per share and GSG Class B Stock entitles its holders to ten votes per share.

(3)
As reported in Amendment No. 5 to Schedule 13D filed with the SEC by Frederick J. Mancheski on January 9, 2013, Mr. Mancheski beneficially owns 1,725,974 shares of Class A Stock. According to this filing, 822,735 of the shares are owned by Mr. Mancheski, 758,397 shares are held by Mancheski, LLC and 144,842 shares are owned by the Frederick J. Mancheski 2009 Irrevocable Trust.

(4)
As reported in Amendment No. 5 to Schedule 13G that was filed with the SEC by Keeley Asset Management Corp., Keeley Small Cap Value Fund and John L. Keeley, Jr., on February 9, 2015. According to this filing, Keeley Asset Management Corp. and Keeley Small Cap Value Fund share beneficial ownership over the same 345,000 shares. Keeley Asset Management Corp. holds the sole voting and investment power with respect to these shares.

(5)
As reported in Amendment No. 5 to Schedule 13G that was filed with the SEC by E.S. Barr & Company on February 17, 2015. According to this filing, E.S. Barr & Company beneficially owns 392,988 shares, Edward S. Barr beneficially owns 396,603 shares (6.06% of the shares) which includes 3,615 shares he holds individually (or through retirement accounts for his benefit), and E.S. Barr Holdings, LLC beneficially owns 392,988 shares. E.S. Barr & Company, Edward S. Barr and E.S. Barr Holdings, LLC hold no voting power and a shared investment power with respect to 392,988 shares. Edward S. Barr holds the sole voting and investment power with respect to 3,615 shares he holds individually.

(6)
Includes 35,000 shares held by GGCP. Mario J. Gabelli has voting and dispositive control of these shares.

(7)
Of this amount, 224,942 are owned directly by Mario J. Gabelli and 18,643,741 of these shares are owned by Holdings via GGCP. Mario J. Gabelli may be deemed to have beneficial ownership of the GSG Class B Stock held by Holdings on the basis of (i) his position as the Chief Executive Officer of, a director of, and the controlling shareholder of GGCP which is the manager and the majority member of Holdings, and (ii) a certain profit interest in Holdings. Mario J. Gabelli disclaims beneficial ownership of the shares owned by Holdings except to the extent of his pecuniary interest therein.

(8)
Includes 10,000 GSG RSAs that Marc Gabelli will receive in the spin-off with respect to the 10,000 GAMCO RSAs he currently owns.

(9)
Includes 8,000 GSG RSAs that Kieran Caterina will receive in the spin-off with respect to the 8,000 GAMCO RSAs he currently owns.

(10)
Shares are held through a family trust.

92


Table of Contents


WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the SEC a registration statement on Form 10 under the Exchange Act relating to the GSG common stock being distributed in the spin-off. This information statement forms a part of that registration statement but does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. For further information relating to us and the shares of GSG common stock, reference is made to the registration statement, including its exhibits and schedules. Statements made in this information statement relating to any contract or other document are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract or document. You may review a copy of the registration statement, including its exhibits and schedules, at the SEC's Public Reference Room, located at 100 F Street, NE, Washington, DC 20549 or on the SEC's website at http://www.sec.gov. You may obtain a copy of the registration statement from the SEC's Public Reference Room upon payment of prescribed fees. Please call the SEC at (800) SEC-0330 for further information on the operation of the Public Reference Room.

        As a result of the spin-off, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance with the Exchange Act, we will file periodic reports, proxy statements and other information with the SEC. Those periodic reports, proxy statements and other information will be available for inspection and copying at the SEC's Public Reference Room and the SEC's website at http://www.sec.gov.

        We intend to furnish holders of GSG common stock with annual reports containing financial statements prepared in accordance with GAAP and audited and reported on, with an opinion expressed, by an independent registered public accounting firm.

        We plan to make available free of charge on our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. All of these documents will be made available free of charge on our website, www.GabelliSecuritiesGroup.com, and will be provided free of charge to any stockholders requesting a copy by writing to: Gabelli Securities Group, Inc., One Corporate Center, Rye, NY 10580-1422, Attention: Corporate Secretary.

        The information on our website is not, and shall not be deemed to be, a part of this information statement or incorporated into any other filings we make with the SEC.

        No person is authorized to give any information or to make any representations with respect to the matters described in this information statement other than those contained in this information statement or in the documents incorporated by reference in this information statement and, if given or made, such information or representation must not be relied upon as having been authorized by us or GAMCO. Neither the delivery of this information statement nor consummation of the spin-off shall, under any circumstances, create any implication that there has been no change in our affairs or those of GAMCO since the date of this information statement, or that the information in this information statement is correct as of any time after its date.

93


Table of Contents


COMBINED CONSOLIDATED FINANCIAL STATEMENTS

Gabelli Securities Group and Subsidiaries
Years ended December 31, 2014, 2013 and 2012

With Independent Auditors' Report

F-1


Table of Contents


Gabelli Securities Group and Subsidiaries

Combined Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

Contents

F-2


Table of Contents

GRAPHIC


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Boards of Directors of GAMCO Investors, Inc., and Gabelli Securities Group
Rye, New York

        We have audited the accompanying combined consolidated balance sheets of GAMCO Investors, Inc.'s subsidiary, Gabelli Securities Group and Subsidiaries (the "Company"), as of December 31, 2014 and 2013, and the related combined consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2014. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, such combined consolidated financial statements present fairly, in all material respects, the financial position of Gabelli Securities Group and Subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

        As discussed in Note A to the combined consolidated financial statements, the Company is comprised of the assets and liabilities used in managing and operating the Company. The combined consolidated financial statements also include certain cash accounts, investments in securities, investments in investment partnerships and offshore funds owned by GAMCO Investors, Inc. that were transferred to the Company as well as certain investments in investment partnerships and offshore funds in which the Company has a controlling financial interest. These combined consolidated financial statements may not be reflective of the actual level of assets, liabilities, or costs which would have been incurred had the Company operated as a separate entity apart from GAMCO Investors, Inc.

/s/ DELOITTE & TOUCHE LLP

New York, New York
May 12, 2015

F-3


Table of Contents


Gabelli Securities Group and Subsidiaries

Combined Consolidated Statements of Income

(in thousands)

 
  For the year ended December 31,  
 
  2014   2013   2012  

Revenues

                   

Investment advisory and incentive fees

  $ 9,779   $ 10,805   $ 8,952  

Distribution fees and other income

    2,090     677     1,644  

Institutional research services

    9,160     8,940     10,953  

Total revenues

    21,029     20,422     21,549  

Expenses

                   

Compensation

    22,298     23,322     20,864  

Stock based compensation

    1,921     510     3,432  

Management fee

    392     4,998     1,380  

Other operating expenses

    6,771     6,624     8,771  

Total expenses

    31,382     35,454     34,447  

Operating loss

    (10,353 )   (15,032 )   (12,898 )

Other income (expense)

                   

Net gain from investments

    10,784     56,070     22,786  

Interest and dividend income

    4,416     5,865     4,419  

Interest expense

    (1,376 )   (1,908 )   (1,928 )

Total other income (expense), net

    13,824     60,027     25,277  

Income before income taxes

    3,471     44,995     12,379  

Income tax provision

    2,127     14,774     3,666  

Net income before noncontrolling interests

    1,344     30,221     8,713  

Net income (loss) attributable to noncontrolling interests

    (4,157 )   463     170  

Net income

  $ 5,501   $ 29,758   $ 8,543  

   

See accompanying notes.

F-4


Table of Contents


Gabelli Securities Group and Subsidiaries

Combined Consolidated Statements of Comprehensive Income

(in thousands)

 
  Year ended December 31,  
 
  2014   2013   2012  

Net income before noncontrolling interests

  $ 1,344   $ 30,221   $ 8,713  

Other comprehensive income, net of tax:

                   

Net unrealized gains/(losses) on securities available for sale(a)

    (2,426 )   (2,961 )   2,584  

Other comprehensive income

    (2,426 )   (2,961 )   2,584  

Comprehensive income/(loss)

   
(1,082

)
 
27,260
   
11,297
 

Less: Comprehensive (income)/loss attributable to noncontrolling interests

    4,157     (463 )   (170 )

Comprehensive income attributable to Gabelli Securities Group

  $ 3,075   $ 26,797   $ 11,127  

(a)
Net of income tax expense (benefit) of ($1,424), ($1,739) and $1,518 for 2014, 2013 and 2012, respectively.

   

See accompanying notes.

F-5


Table of Contents


Gabelli Securities Group and Subsidiaries

Combined Consolidated Statements of Financial Condition

(in thousands)

 
  December 31,  
 
  2014   2013  

ASSETS

             

Cash and cash equivalents

 
$

285,530
 
$

199,536
 

Investments in securities

    220,595     188,182  

Investments in sponsored registered investment companies

    39,537     44,042  

Investments in partnerships

    107,646     95,989  

Receivable from brokers

    74,407     48,850  

Investment advisory fees receivable

    4,145     5,251  

Receivable from affiliates

    402     826  

Goodwill

    3,254     3,254  

Other assets

    19,178     2,790  

Total assets

  $ 754,694   $ 588,720  

LIABILITIES AND EQUITY

             

Payable to brokers

 
$

43,397
 
$

10,001
 

Income taxes payable and deferred tax liabilities

    16,363     22,836  

Compensation payable

    9,607     14,969  

Securities sold, not yet purchased

    10,595     6,178  

Mandatorily redeemable noncontrolling interests

    1,302     1,355  

Payable to affiliates

    20,733     29,346  

Accrued expenses and other liabilities

    1,864     2,791  

Total liabilities

    103,861     87,476  

Redeemable noncontrolling interests

   
68,334
   
6,751
 

Equity

   
573,321
   
482,889
 

Accumulated comprehensive income

    9,178     11,604  

Total equity

    582,499     494,493  

Total liabilities and equity

  $ 754,694   $ 588,720  

   

See accompanying notes.

F-6


Table of Contents


Gabelli Securities Group and Subsidiaries

Combined Consolidated Statements of Equity

(in thousands)

 
  Equity   Accumulated
Comprehensive
Income
  Total
Equity
  Redeemable
Noncontrolling
Interests
 

Balance at December 31, 2011

  $ 584,561   $ 11,981   $ 596,542   $ 6,071  

Redemptions from noncontrolling interest

                (13,069 )

Contributions from redeemable noncontrolling interest

                24,190  

Net income

    8,543         8,543     170  

Net unrealized gains on securities available for sale, net of income tax benefit ($1,518)

        2,584     2,584      

Stock based compensation expense

    3,432         3,432      

Net transfers (to) / from Parent

    (101,334 )       (101,334 )    

Balance at December 31, 2012

  $ 495,202   $ 14,565   $ 509,767   $ 17,362  

   

See accompanying notes.

F-7


Table of Contents


Gabelli Securities Group and Subsidiaries

Combined Consolidated Statements of Equity (Continued)

(in thousands)

 
  Equity   Accumulated
Comprehensive
Income
  Total
Equity
  Redeemable
Noncontrolling
Interests
 

Balance at December 31, 2012

  $ 495,202   $ 14,565   $ 509,767   $ 17,362  

Redemptions from noncontrolling interest

    (523 )       (523 )   (16,224 )

Contributions from redeemable noncontrolling interest

                5,150  

Net income

    29,758         29,758     463  

Net unrealized gains on securities available for sale, net of income tax ($4,280)

        7,287     7,287      

Amounts reclassified from accumulated other comprehensive income, net of income tax benefit ($6,019)

        (10,248 )   (10,248 )    

Stock based compensation expense

    510         510      

Net transfers (to) / from Parent

    (42,058 )       (42,058 )    

Balance at December 31, 2013

  $ 482,889   $ 11,604   $ 494,493   $ 6,751  

   

See accompanying notes.

F-8


Table of Contents


Gabelli Securities Group and Subsidiaries

Combined Consolidated Statements of Equity (Continued)

(in thousands)

 
  Equity   Accumulated
Comprehensive
Income
  Total
Equity
  Redeemable
Noncontrolling
Interests
 

Balance at December 31, 2013

  $ 482,889   $ 11,604   $ 494,493   $ 6,751  

Redemptions from noncontrolling interest

                (6,353 )

Contributions from redeemable noncontrolling interest

                72,093  

Net income (loss)

    5,501         5,501     (4,157 )

Net unrealized losses on securities available for sale, net of income tax benefit ($328)

        (559 )   (559 )    

Amounts reclassified from accumulated other comprehensive income, net of income tax benefit ($1,096)

        (1,867 )   (1,867 )    

Stock based compensation expense

    1,921         1,921      

Net transfers (to) / from Parent

    83,010         83,010      

Balance at December 31, 2014

  $ 573,321   $ 9,178   $ 582,499   $ 68,334  
</