UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-06367 --------- Gabelli Equity Series Funds, Inc. ------------------------------------------------- (Exact name of registrant as specified in charter) One Corporate Center Rye, New York 10580-1422 ------------------------------------------------- (Address of principal executive offices) (Zip code) Bruce N. Alpert Gabelli Funds, LLC One Corporate Center Rye, New York 10580-1422 ------------------------------------------------- (Name and address of agent for service) registrant's telephone number, including area code: 1-800-422-3554 -------------- Date of fiscal year end: September 30 ------------ Date of reporting period: September 30, 2005 ------------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. THE GABELLI SMALL CAP GROWTH FUND ANNUAL REPORT (A) SEPTEMBER 30, 2005 TO OUR SHAREHOLDERS, During the fiscal year ended September 30, 2005, the Gabelli Small Cap Growth Fund (the "Fund") rose 20.58%, while the Russell 2000 Index and the Value Line Composite Index both rose by 17.95% and 19.24%, respectively. The Fund gained 4.72% year-to-date through September 30th, outperforming the Russell 2000 Index return of 3.38%. Enclosed are the investment portfolio and financial statements as of September 30, 2005. COMPARATIVE RESULTS - ------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2005 (A)(B) -------------------------------------------------------- Since Year to Inception Quarter Date 1 Year 3 Year 5 Year 10 Year (10/22/91) - ------------------------------------------------------------------------------------------------------------ GABELLI SMALL CAP GROWTH FUND CLASS AAA ...................... 3.27% 4.72% 20.58% 23.21% 11.91% 13.21% 15.46% Russell 2000 Index ............... 4.69 3.38 17.95 24.12 6.45 9.37 11.37 Value Line Composite Index ....... 4.88 4.75 19.24 26.86 10.69 12.84 13.64 Class A .......................... 3.27 4.72 20.57 23.22 11.91 13.21 15.46 (2.66)(c) (1.32)(c) 13.64(c) 20.81(c) 10.59(c) 12.54(c) 14.98(c) Class B .......................... 3.07 4.12 19.69 22.69 11.62 13.06 15.36 (1.93)(d) (0.88)(d) 14.69(d) 22.02(d) 11.36(d) 13.06(d) 15.36(d) Class C .......................... 3.10 4.15 19.69 22.69 11.62 13.06 15.36 2.10(d) 3.15(d) 18.69(d) 22.69(d) 11.62(d) 13.06(d) 15.36(d) (a) THE FUND'S FISCAL YEAR ENDS SEPTEMBER 30. (b) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS. TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND ARE NET OF EXPENSES. INVESTMENT RETURNS AND THE PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PERFORMANCE RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PRESENTED. VISIT WWW.GABELLI.COM FOR PERFORMANCE INFORMATION AS OF THE MOST RECENT MONTH END. INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS AND CHARGES AND EXPENSES OF THE FUND CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS MORE INFORMATION ABOUT THIS AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING. THE CLASS AAA SHARES' NET ASSET VALUES ARE USED TO CALCULATE PERFORMANCE FOR THE PERIODS PRIOR TO THE ISSUANCE OF CLASS A SHARES, CLASS B SHARES AND CLASS C SHARES ON DECEMBER 31, 2003. THE ACTUAL PERFORMANCE FOR THE CLASS B SHARES AND CLASS C SHARES WOULD HAVE BEEN LOWER DUE TO THE ADDITIONAL EXPENSES ASSOCIATED WITH THESE CLASSES OF SHARES. THE RUSSELL 2000 INDEX OF SMALL U.S. COMPANIES AND THE VALUE LINE COMPOSITE INDEX ARE UNMANAGED INDICATORS OF STOCK MARKET PERFORMANCE. DIVIDENDS ARE REINVESTED. (c) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF THE PERIOD. (d) INCLUDES THE EFFECT OF THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE AT THE END OF THE PERIOD SHOWN FOR CLASS B AND CLASS C SHARES, RESPECTIVELY. CLASS B SHARES ARE NOT AVAILABLE FOR NEW PURCHASES. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- We have separated the portfolio manager's commentary from the financial statements and investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that the content of the portfolio manager's commentary is unrestricted. The financial statements and investment portfolio are mailed separately from the commentary. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com/funds. - -------------------------------------------------------------------------------- PERFORMANCE DISCUSSION Small cap stocks made headway during the fiscal year ended September 30, 2005. The Gabelli Small Cap Fund gained 20.58% over the past twelve months, outperforming its benchmark, the Russell 2000 Index, which rose 17.95%. The year's nearly 15% outperformance over the Russell resulted primarily from our stocks reacting favorably to a series of company-specific positive news events, and to a lesser extent on merger and acquisition activity within the names we own. Winners outnumbered losers by over 2-to-1, and unlike in previous years, micro-cap names (under $100 million in market capitalization) were outshone by "larger" companies. As is often the case, our portfolio's greatest successes and disappointments came from a wide range of industry groups. Oil services equipment provider RPC topped our performance list, followed by the TV operator Liberty Corp., industrial parts manufacturer Precision Castparts, and medical appliances and equipment manufacturer Inamed. Other excellent performers included Kaman, Unova and Thomas & Betts. Laggards included auto parts manufacturer Standard Motor Products, broadcaster Spanish Broadcasting Systems, paper products company Nashua Corp., men's clothier Hartmarx Corp., and gaming company Boyd Gaming. In general, consumer-oriented stocks underperformed somewhat as investors worried about a potential decline in consumer spending. During the fiscal year, a number of portfolio holdings benefited from being takeover targets. These included Ascential Software, Cablevision, Catellus Development, Corixa, CTS, CUNO, Great Lakes Chemical, Hibernia, Inamed, Mykrolis, Neiman Marcus Group, Pulitzer Inc., Thomas Industries, Titan Corp., UnitedGlobalCom, Western Wireless, John Wiley & Sons and Wyndham International. As of September 30th, the Fund is overweight in Autos & Transportation, Consumer Discretionary, Consumer Staples, Producer Durables, Materials & Processing and Utilities compared to the benchmark Russell 2000 Index. Sectors that are underweight as of the end of the fiscal year included Energy, Financial Services, Healthcare and Technology. [GRAPHIC OMITTED] PLOT POINTS FOLLOW: COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GABELLI SMALL CAP GROWTH FUND CLASS AAA, THE RUSSELL 2000 INDEX, AND THE S&P 500 INDEX Gabelli Small Cap Growth Fund (Class AAA) Russell 2000 Index S&P 500 Index 10/22/91 10,000 10,000 10,000 9/30/92 13,186 10,854 11,174 9/30/93 17,228 14,456 12,623 9/30/94 17,999 14,835 13,088 9/30/95 21,504 18,307 16,976 9/30/96 23,871 20,710 20,426 9/30/97 33,950 27,584 28,684 9/30/98 29,356 22,338 31,288 9/30/99 35,005 26,597 39,983 9/30/00 42,356 32,818 45,289 9/30/01 39,192 25,858 33,238 9/30/02 39,736 23,453 26,434 9/30/03 50,775 32,013 32,876 9/30/04 61,641 38,022 37,433 9/30/05 74,330 44,852 41,580 - -------------------------------------------------------------------------------- Average Annual Total Return* - -------------------------------------------------------------------------------- 1 Year 5 Year 10 Year Life of Fund - -------------------------------------------------------------------------------- Class AAA 20.58% 11.91% 13.21% 15.46% - -------------------------------------------------------------------------------- *Past performance is not predictive of future results. The performance tables and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 2 THE GABELLI SMALL CAP GROWTH FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) For the Six Month Period from April 1, 2005 through September 30, 2005 EXPENSE TABLE - -------------------------------------------------------------------------------- We believe it is important for you to understand the impact of fees and expenses regarding your investment. All mutual funds have operating expenses. As a shareholder of a fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund's gross income, directly reduce the investment return of a fund. When a fund's expenses are expressed as a percentage of its average net assets, this figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period. The Expense Table below illustrates your Fund's costs in two ways: ACTUAL FUND RETURN: This section provides information about actual account values and actual expenses. You may use this section to help you to estimate the actual expenses that you paid over the period after any fee waivers and expense reimbursements. The "Ending Account Value" shown is derived from the Fund's ACTUAL return during the past six months, and the "Expenses Paid During Period" shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading "Expenses Paid During Period" to estimate the expenses you paid during this period. HYPOTHETICAL 5% RETURN: This section provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio. It assumes a hypothetical annualized return of 5% before expenses during the period shown. In this case -- because the hypothetical return used is NOT the Fund's actual return -- the results do not apply to your investment and you cannot use the hypothetical account value and expense to estimate the actual ending account balance or expenses you paid for the period. This example is useful in making comparisons of the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), redemption fees, or exchange fees, if any, which are described in the Prospectus. If these costs were applied to your account, your costs would be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The "Annualized Expense Ratio" represents the actual expenses for the last six months and may be different from the expense ratio in the Financial Highlights which is for the year ended September 30, 2005. Beginning Ending Annualized Expenses Account Value Account Value Expense Paid During 04/01/05 09/30/05 Ratio Period* - -------------------------------------------------------------------------------- GABELLI SMALL CAP GROWTH FUND - -------------------------------------------------------------------------------- ACTUAL FUND RETURN Class AAA $1,000.00 $1,067.30 1.48% $ 7.67 Class A $1,000.00 $1,067.30 1.50% $ 7.77 Class B $1,000.00 $1,063.30 2.23% $11.53 Class C $1,000.00 $1,063.30 2.24% $11.59 HYPOTHETICAL 5% RETURN Class AAA $1,000.00 $1,017.65 1.48% $ 7.49 Class A $1,000.00 $1,017.55 1.50% $ 7.59 Class B $1,000.00 $1,013.89 2.23% $11.26 Class C $1,000.00 $1,013.84 2.24% $11.31 * Expenses are equal to the Fund's annualized expense ratio for the last six months multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. 3 SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED) The following table presents portfolio holdings as a percent of total net assets. THE GABELLI SMALL CAP GROWTH FUND Equipment and Supplies ......................... 12.4% Health Care .................................... 8.3% Diversified Industrial ......................... 7.8% Energy and Utilities ........................... 6.5% Hotels and Gaming .............................. 4.9% Specialty Chemicals ............................ 4.2% U.S. Government Obligations .................... 4.1% Food and Beverage .............................. 4.0% Automotive: Parts and Accessories .............. 3.9% Retail ......................................... 3.9% Aviation: Parts and Services ................... 3.7% Financial Services ............................. 3.5% Broadcasting ................................... 3.3% Publishing ..................................... 3.2% Business Services .............................. 3.2% Consumer Products .............................. 2.9% Cable .......................................... 2.4% Manufactured Housing and Recreational Vehicles ....................... 2.3% Communications Equipment ....................... 1.9% Entertainment .................................. 1.8% Telecommunications ............................. 1.4% Electronics .................................... 1.4% Wireless Communications ........................ 1.3% Consumer Services .............................. 1.2% Environmental Services ......................... 1.1% Real Estate .................................... 1.1% Computer Software and Services ................. 0.9% Transportation ................................. 0.9% Closed-End Funds ............................... 0.6% Metals and Mining .............................. 0.5% Satellite ...................................... 0.4% Automotive ..................................... 0.3% Paper and Forest Products ...................... 0.2% Building and Construction ...................... 0.2% Aerospace ...................................... 0.2% Home Furnishings ............................... 0.1% Educational Services ........................... 0.1% Other Assets and Liabilities -- Net ............ (0.1)% ------ 100.0% ====== THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q, THE LAST OF WHICH WAS FILED FOR THE QUARTER ENDED JUNE 30, 2005. SHAREHOLDERS MAY OBTAIN THIS INFORMATION AT WWW.GABELLI.COM OR BY CALLING THE FUND AT 800-GABELLI(800-422-3554). THE FUND'S FORM N-Q IS AVAILABLE ON THE SEC'S WEBSITE AT WWW.SEC.GOV AND MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PROXY VOTING The Fund files Form N-PX with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. A description of the Fund's proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities are available without charge, upon request, (i) by calling 800-GABELLI (800-422-3554); (ii) by writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; and (iii) by visiting the Securities and Exchange Commission's website at www.sec.gov. 4 THE GABELLI SMALL CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS -- 95.3% AEROSPACE -- 0.2% 60,000 Herley Industries Inc.+ ...........$ 1,169,703 $ 1,117,800 ------------ ------------ AGRICULTURE -- 0.0% 1,200 Cadiz Inc.+ ....................... 4,500 22,800 1,500 Mosaic Co.+ ....................... 10,470 24,030 ------------ ------------ 14,970 46,830 ------------ ------------ AUTOMOTIVE -- 0.3% 72,000 Adesa Inc. ........................ 1,258,284 1,591,200 6,000 Oshkosh Truck Corp. ............... 89,796 258,960 ------------ ------------ 1,348,080 1,850,160 ------------ ------------ AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.9% 3,816 Aftermarket Technology Corp.+ .......................... 47,013 70,176 80,000 BorgWarner Inc. ................... 1,711,945 4,516,800 40,000 Federal-Mogul Corp.+ .............. 79,500 19,996 200,000 Midas Inc.+ ....................... 2,538,716 3,976,000 210,000 Modine Manufacturing Co. .......... 4,904,094 7,702,800 7,875 Monro Muffler Brake Inc. .......... 52,860 206,876 120,000 Pep Boys - Manny, Moe & Jack ............... 1,628,358 1,660,800 199,693 Proliance International Inc.+ ..... 1,482,212 1,094,318 2,000 Puradyn Filter Technologies Inc.+ .............. 2,750 2,300 200,000 Raytech Corp.+ .................... 565,387 249,000 200,000 Scheib (Earl) Inc.+ ............... 1,331,353 750,000 33,500 Spartan Motors Inc. ............... 365,563 364,145 170,000 Standard Motor Products Inc. ...... 2,539,350 1,378,700 27,000 Strattec Security Corp.+ .......... 1,058,830 1,399,950 6,000 Superior Industries International Inc. .............. 167,156 129,120 230,000 Tenneco Automotive Inc.+ .......... 480,700 4,027,300 28,000 Thor Industries Inc. .............. 259,454 952,000 ------------ ------------ 19,215,241 28,500,281 ------------ ------------ AVIATION: PARTS AND SERVICES -- 3.7% 25,000 AAR Corp.+ ........................ 302,990 429,500 10,000 Astronics Corp.+ .................. 48,990 96,500 75,000 Aviall Inc.+ ...................... 544,108 2,533,500 7,000 Barnes Group Inc. ................. 119,437 251,020 61,200 Curtiss-Wright Corp. .............. 1,497,271 3,776,652 7,500 Ducommun Inc.+ .................... 80,125 165,000 20,000 EDO Corp. ......................... 441,767 600,600 30,000 Embraer-Empresa Brasileira de Aeronautica SA, ADR .......... 508,773 1,158,000 197,000 Fairchild Corp., Cl. A+ ........... 1,197,530 457,040 24,000 Gamesa Corporacion Tecnologica SA .................. 146,892 368,632 240,000 GenCorp Inc.+ ..................... 2,275,688 4,476,000 450,000 Kaman Corp., Cl. A ................ 7,139,210 9,202,500 105,000 Moog Inc., Cl. A+ ................. 668,914 3,099,600 8,000 Woodward Governor Co. ............. 347,309 680,400 ------------ ------------ 15,319,004 27,294,944 ------------ ------------ MARKET SHARES COST VALUE ------ ---- ------ BROADCASTING -- 3.1% 120,000 Acme Communications Inc.+ .........$ 919,240 $ 466,800 24,100 Beasley Broadcast Group Inc., Cl. A+ .......................... 271,741 338,605 2,000 Cogeco Inc. ....................... 39,014 46,882 255,000 Crown Media Holdings Inc., Cl. A+ .......................... 1,857,589 2,792,250 3,333 CTN Media Group Inc.+ (b) ...... 16,800 3 323,600 Granite Broadcasting Corp.+ ....... 643,723 126,204 390,000 Gray Television Inc. .............. 4,022,231 4,130,100 38,300 Gray Television Inc., Cl. A ....... 563,192 379,170 48,000 Hearst-Argyle Television Inc. ..... 425,523 1,233,120 183,900 Liberty Corp. ..................... 5,983,141 8,623,071 20,000 Nexstar Broadcasting Group Inc., Cl. A+ .............. 200,977 114,000 77,000 Paxson Communications Corp.+ ...... 448,973 34,650 94,650 Salem Communications Corp., Cl. A+ ................... 1,412,784 1,745,346 200,000 Sinclair Broadcast Group Inc., Cl. A ............... 2,156,325 1,774,000 57,000 Spanish Broadcasting System Inc., Cl. A+ ............. 508,514 409,260 127,300 Young Broadcasting Inc., Cl. A+ ... 1,933,112 444,277 ------------ ------------ 21,402,879 22,657,738 ------------ ------------ BUILDING AND CONSTRUCTION -- 0.2% 16,500 Florida Rock Industries Inc. ...... 96,939 1,057,485 25,000 Huttig Building Products Inc.+ .... 90,165 226,250 1,000 Universal Forest Products Inc. .... 12,125 57,320 ------------ ------------ 199,229 1,341,055 ------------ ------------ BUSINESS SERVICES -- 2.7% 2,000 Acco Brands Corp.+ ................ 52,700 56,440 220,000 AMICAS Inc.+ ...................... 981,583 1,188,000 6,000 BB Holdings Ltd. .................. 26,620 40,266 5,000 BrandPartners Group Inc.+ ......... 4,850 3,700 610,400 Career Blazers Inc.+ (b) .......... 236,019 107,125 2,400 Carlisle Group Ltd.+ .............. 3,630 6,773 1,000 CheckFree Corp.+ .................. 9,040 37,820 20,000 Donnelley (R.H.) Corp.+ ........... 269,035 1,265,200 232,000 Edgewater Technology Inc.+ ........ 979,622 1,106,640 79,800 GP Strategies Corp.+ .............. 258,537 718,998 80,000 Industrial Distribution Group Inc.+ ..................... 224,062 737,600 60,000 Interactive Data Corp. ............ 534,171 1,359,000 13,000 Landauer Inc. ..................... 234,859 637,000 4,000 MDC Partners Inc., Cl. A+ ......... 12,360 28,800 166,000 Nashua Corp.+ ..................... 1,597,567 1,029,200 100,000 Paxar Corp.+ ...................... 1,199,175 1,685,000 80,000 Sohgo Security Services Co. Ltd. .. 1,016,197 1,171,248 25,000 Stamps.com Inc.+ .................. 137,340 430,250 4,000 StarTek Inc. ...................... 62,677 52,800 80,000 The Brink's Co. ................... 1,986,050 3,284,800 100,000 Trans-Lux Corp. (a) ............... 821,193 605,000 130,000 UNOVA Inc.+ ....................... 2,457,802 4,547,400 ------------ ------------ 13,105,089 20,099,060 ------------ ------------ See accompanying notes to financial statements. 5 THE GABELLI SMALL CAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) CABLE -- 2.4% 230,000 Adelphia Communications Corp., Cl. A+ ...................$ 29,650 $ 20,700 510,000 Cablevision Systems Corp., Cl. A+ .......................... 3,013,883 15,641,700 9,329 Liberty Global Inc., Cl. A+ ...... 249,972 252,629 9,329 Liberty Global Inc., Cl. C+ ....... 240,169 240,222 97,500 Lin TV Corp., Cl. A+ .............. 1,956,277 1,360,125 4,000 Outdoor Channel Holdings Inc.+ .................. 44,765 59,040 ------------ ------------ 5,534,716 17,574,416 ------------ ------------ CLOSED-END FUNDS -- 0.6% 60,000 Central Europe and Russia Fund Inc. ....................... 920,409 2,946,000 36,700 Germany Fund Inc. ................. 386,832 317,455 50,000 MVC Capital Inc. .................. 461,995 590,000 54,000 New Germany Fund Inc. ............. 635,491 565,380 11,000 Spain Fund Inc. ................... 103,029 144,100 ------------ ------------ 2,507,756 4,562,935 ------------ ------------ COMMUNICATIONS EQUIPMENT -- 1.9% 100,000 Andrew Corp.+ ..................... 417,077 1,115,000 150,000 Communications Systems Inc. ....... 1,040,821 1,687,500 260,900 Sycamore Networks Inc.+ ........... 778,040 983,593 290,000 Thomas & Betts Corp.+ ............. 5,352,259 9,978,900 ------------ ------------ 7,588,197 13,764,993 ------------ ------------ COMPUTER SOFTWARE AND SERVICES -- 0.9% 73,000 Borland Software Corp.+ ........... 612,810 424,860 90,000 FalconStor Software Inc.+ ......... 636,867 545,400 20,900 Global Sources Ltd.+ .............. 306,293 165,131 50,000 Jupitermedia Corp.+ ............... 435,800 885,500 200 Macromedia Inc.+ .................. 2,371 8,134 20,187 MKS Instruments Inc.+ ............. 367,981 347,822 3,000 NAVTEQ Corp.+ ..................... 115,450 149,850 160,000 OpenTV Corp., Cl. A+ .............. 860,410 459,200 8,000 Phoenix Technologies Ltd.+ ........ 55,158 60,240 800,000 StorageNetworks Inc. Escrow+ (b) .. 0 24,000 360,000 Tyler Technologies Inc.+ .......... 1,411,950 2,980,800 230,000 Xanser Corp.+ ..................... 776,660 713,000 ------------ ------------ 5,581,750 6,763,937 ------------ ------------ CONSUMER PRODUCTS -- 2.9% 53,500 Action Performance Companies Inc. .................. 651,187 668,750 27,000 Adams Golf Inc.+ .................. 71,200 36,450 5,250 Alberto-Culver Co. ................ 169,298 234,937 16,000 Ashworth Inc.+ .................... 69,906 109,280 33,500 Chofu Seisakusho Co. Ltd. ......... 484,644 733,329 37,500 Church & Dwight Co. Inc. .......... 354,732 1,385,250 35,000 Coachmen Industries Inc. .......... 436,787 402,150 100,000 Department 56 Inc.+ ............... 1,188,025 1,250,000 6,000 Elizabeth Arden Inc.+ ............. 82,125 129,480 4,000 Genlyte Group Inc.+ ............... 8,580 192,320 2,000 Harley-Davidson Inc. .............. 4,713 96,880 180,000 Hartmarx Corp.+ ................... 830,789 1,179,000 MARKET SHARES COST VALUE ------ ---- ------ 80,000 Jacuzzi Brands Inc.+ ..............$ 534,949 $ 644,800 5,000 Levcor International Inc.+ ........ 7,650 6,050 4,000 Madden (Steven) Ltd.+ ............. 30,540 91,680 292,000 Marine Products Corp. ............. 194,337 3,220,760 52,000 National Presto Industries Inc. ... 1,811,655 2,226,120 90,000 Revlon Inc., Cl. A+ ............... 311,417 289,800 2,000 Scotts Miracle-Gro Co., Cl. A ..... 45,880 175,860 4,000 Spectrum Brands Inc.+ ............. 46,000 94,200 14,000 Stewart Enterprises Inc., Cl. A ... 65,467 92,820 87,425 Syratech Corp.+ ................... 17,426 6,994 11,000 Water Pik Technologies Inc.+ ...... 205,926 223,300 17,000 WD-40 Co. ......................... 470,278 450,670 699,100 Weider Nutrition International Inc.+ ............. 1,873,361 3,698,239 160,000 Wolverine World Wide Inc. ......... 1,487,475 3,368,000 ------------ ------------ 11,454,347 21,007,119 ------------ ------------ CONSUMER SERVICES -- 1.2% 30,500 Bowlin Travel Centers Inc.+ ....... 23,611 49,563 2,500 Collectors Universe Inc.+ ......... 8,720 31,750 10,000 eLong Inc., ADR+ .................. 115,711 124,650 40,000 Expedia Inc.+ ..................... 386,014 792,400 47,500 IAC/InterActiveCorp+ .............. 558,573 1,204,125 16,000 Martha Stewart Living Omnimedia Inc., Cl. A+ .......... 167,206 400,320 20,000 Response USA Inc.+ ................ 16,500 51 310,000 Rollins Inc. ...................... 2,677,158 6,051,200 10,000 TiVo Inc.+ ........................ 74,563 54,900 ------------ ------------ 4,028,056 8,708,959 ------------ ------------ DIVERSIFIED INDUSTRIAL -- 7.8% 173,000 Acuity Brands Inc. ................ 2,323,864 5,132,910 43,000 Amatsuji Steel Ball Mfg. Co. Ltd. . 357,633 560,606 100,000 Ampco-Pittsburgh Corp. ............ 972,481 1,550,000 6,000 Anixter International Inc.+ ....... 57,120 241,980 148,000 Baldor Electric Co. ............... 2,929,157 3,751,800 150,000 Crane Co. ......................... 3,282,255 4,461,000 100,000 Delta plc ......................... 212,289 234,584 5,000 ESCO Technologies Inc.+ ........... 83,189 250,350 803 Foster Wheeler Ltd.+ .............. 3,183 24,805 6,000 Gardner Denver Inc.+ .............. 103,046 267,600 155,500 Greif Inc., Cl. A ................. 3,074,650 9,345,550 1,000 Greif Inc., Cl. B ................. 29,800 57,570 141,100 Griffon Corp.+ .................... 3,518,477 3,471,060 26,000 Harbor Global Co. Ltd.+ ........... 63,215 236,600 5,000 Insteel Industries Inc. ........... 4,250 76,450 70,000 Katy Industries Inc.+ ............. 562,756 170,800 230,000 Lamson & Sessions Co.+ ............ 1,384,221 4,213,600 73,000 Lindsay Manufacturing Co. ......... 781,892 1,606,730 160,000 MagneTek Inc.+ .................... 1,053,438 540,800 37,000 Matthews International Corp., Cl. A ........................... 861,644 1,398,230 275,000 Myers Industries Inc. ............. 2,505,876 3,201,000 130,000 National Patent Development Corp.+ .............. 86,241 338,000 610,400 Noel Group Inc.+ (b) .............. 55,045 117,685 80,000 Oil-Dri Corporation of America .... 810,055 1,397,600 See accompanying notes to financial statements. 6 THE GABELLI SMALL CAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) DIVERSIFIED INDUSTRIAL (CONTINUED) 15,000 Olin Corp. ........................$ 232,292 $ 284,850 220,000 Park-Ohio Holdings Corp.+ ......... 1,220,379 3,863,200 100,000 Precision Castparts Corp. ......... 1,702,840 5,310,000 32,000 Roper Industries Inc. ............. 620,029 1,257,280 40,000 Sonoco Products Co. ............... 1,071,920 1,092,400 63,000 Standex International Corp. ....... 1,253,307 1,658,790 45,000 Tech/Ops Sevcon Inc. .............. 286,240 268,425 60,400 Tredegar Corp. .................... 831,508 785,804 45,048 WHX Corp.+ ........................ 929,655 495,528 ------------ ------------ 33,263,947 57,663,587 ------------ ------------ EDUCATIONAL SERVICES -- 0.1% 2,000 Career Education Corp.+ ........... 61,350 71,120 10,000 School Specialty Inc.+ ............ 399,980 487,800 ------------ ------------ 461,330 558,920 ------------ ------------ ELECTRONICS -- 1.4% 200,000 California Micro Devices Corp.+ ... 1,569,337 1,544,000 210,000 CTS Corp. ......................... 2,213,523 2,541,000 20,000 Fargo Electronics+ ................ 118,827 349,400 20,000 Greatbatch Inc.+ .................. 487,480 548,800 12,000 Imax Corp.+ ....................... 119,450 125,160 160,000 KEMET Corp.+ ...................... 1,303,236 1,340,800 22,000 Lowrance Electronics Inc. ......... 58,991 558,580 93,700 Park Electrochemical Corp. ........ 2,154,498 2,497,105 10,000 Trident Microsystems Inc.+ ........ 119,857 318,100 20,000 Zoran Corp.+ ...................... 121,523 286,000 ------------ ------------ 8,266,722 10,108,945 ------------ ------------ ENERGY AND UTILITIES -- 6.5% 5,000 AGL Resources Inc. ................ 85,875 185,550 420,000 Aquila Inc.+ ...................... 1,430,627 1,663,200 6,400 BIW Ltd. .......................... 94,562 126,080 95,000 Callon Petroleum Co.+ ............. 939,533 1,988,350 142,000 CH Energy Group Inc. .............. 5,982,836 6,742,160 12,000 Chesapeake Utilities Corp. ........ 236,752 421,800 120,000 CMS Energy Corp.+ ................. 715,100 1,974,000 23,000 Connecticut Water Service Inc. .... 464,832 568,560 180,000 Covanta Holding Corp.+ ............ 778,662 2,417,400 120,000 Duquesne Light Holdings Inc. ...... 1,663,452 2,065,200 150,000 El Paso Electric Co.+ ............. 1,983,209 3,127,500 20,000 Environmental Power Corp.+ ........ 110,000 159,000 99,000 Florida Public Utilities Co. ...... 784,438 1,572,120 43,000 Middlesex Water Co. ............... 743,997 965,350 10,000 Nicor Inc. ........................ 221,003 420,300 2,000 PetroQuest Energy Inc.+ ........... 5,250 20,880 436,500 RPC Inc. .......................... 1,028,612 11,244,240 35,000 SEMCO Energy Inc.+ ................ 218,317 230,650 48,000 SJW Corp. ......................... 1,557,739 2,317,440 52,500 Southern Union Co.+ ............... 682,575 1,352,925 112,000 Southwest Gas Corp. ............... 1,959,693 3,067,680 10,000 Tesoro Corp. ...................... 140,934 672,400 4,000 Toreador Resources Corp.+ ......... 15,250 141,600 10,000 Vestas Wind Systems A/S+ .......... 89,988 241,575 10,000 W-H Energy Services Inc.+ ......... 212,864 324,200 170,000 Westar Energy Inc. ................ 2,801,066 4,102,100 ------------ ------------ 24,947,166 48,112,260 ------------ ------------ MARKET SHARES COST VALUE ------ ---- ------ ENTERTAINMENT -- 1.8% 42,500 Canterbury Park Holding Corp. .....$ 594,314 $ 606,050 500 Discovery Holding Co., Cl. A+ ..... 6,095 7,220 200,000 Dover Motorsports Inc. ............ 1,098,503 1,368,000 78,000 Fisher Communications Inc.+ ....... 4,537,195 3,631,680 151,000 GC Companies Inc.+ (b) ............ 164,590 129,860 572,000 Gemstar-TV Guide International Inc.+ ............. 3,194,364 1,693,120 16,000 International Speedway Corp., Cl. A .................... 515,479 839,520 2,500 International Speedway Corp., Cl. B .................... 45,000 128,750 5,000 Liberty Media Corp., Cl. A+ ....... 37,439 40,250 10,000 Metromedia International Group Inc.+ ..................... 6,700 18,400 330,000 Six Flags Inc.+ ................... 1,664,994 2,372,700 200,000 Topps Co. Inc. .................... 1,626,618 1,642,000 50,000 World Wrestling Entertainment Inc. .............. 581,120 650,000 38,000 WPT Enterprises Inc.+ ............. 298,988 335,160 ------------ ------------ 14,371,399 13,462,710 ------------ ------------ ENVIRONMENTAL SERVICES -- 1.1% 225,000 Allied Waste Industries Inc.+ ..... 2,183,048 1,901,250 25,000 Catalytica Energy Systems Inc.+ ... 201,360 35,000 175,000 Republic Services Inc. ............ 2,490,315 6,175,750 ------------ ------------ 4,874,723 8,112,000 ------------ ------------ EQUIPMENT AND SUPPLIES -- 12.4% 170,000 AMETEK Inc. ....................... 1,017,397 7,304,900 425,000 Baldwin Technology Co. Inc., Cl. A+ .......................... 1,353,684 1,831,750 74,500 Belden CDT Inc. ................... 1,222,516 1,447,535 12,000 C&D Technologies Inc. ............. 235,929 112,920 50,000 Capstone Turbine Corp.+ ........... 103,400 177,500 205,000 CIRCOR International Inc. ......... 3,175,395 5,627,250 424,000 CLARCOR Inc. ...................... 2,615,605 12,177,280 235,000 Core Molding Technologies Inc.+ ... 406,193 1,332,450 180,000 Crown Holdings Inc.+ .............. 727,278 2,869,200 2,000 Danaher Corp. ..................... 34,106 107,660 66,000 Donaldson Co. Inc. ................ 761,576 2,014,980 97,300 Entegris Inc.+ .................... 781,566 1,099,490 440,000 Fedders Corp. ..................... 1,988,849 941,600 205,000 Flowserve Corp.+ .................. 3,728,714 7,451,750 176,000 Franklin Electric Co. Inc. ........ 1,428,629 7,284,640 40,000 General Magnaplate Corp.+ (b) ..... 83,762 60,000 151,200 Gerber Scientific Inc.+ ........... 1,463,943 1,185,408 100,343 Gorman-Rupp Co. ................... 1,956,301 2,413,249 84,000 Graco Inc. ........................ 928,834 2,879,520 150,000 GrafTech International Ltd.+ ...... 1,005,827 814,500 4,000 Hughes Supply Inc. ................ 28,473 130,400 60,000 IDEX Corp. ........................ 556,738 2,553,000 20,000 Imagistics International Inc.+ .... 387,725 837,000 160,000 Interpump Group SpA ............... 628,395 1,078,781 4,500 Jarden Corp.+ ..................... 12,770 184,815 10,000 K-Tron International Inc.+ ........ 74,932 338,300 32,200 L.S. Starrett Co., Cl. A .......... 604,032 589,582 See accompanying notes to financial statements. 7 THE GABELLI SMALL CAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) EQUIPMENT AND SUPPLIES (CONTINUED) 28,000 Littelfuse Inc.+ ..................$ 538,592 $ 787,640 108,000 Lufkin Industries Inc. ............ 1,037,615 4,703,400 55,000 Maezawa Kyuso Industries Co. Ltd. ............. 359,609 995,640 20,000 Met-Pro Corp. ..................... 192,469 310,200 1,000 Middleby Corp.+ ................... 37,310 72,500 19,000 Mueller Industries Inc. ........... 577,116 527,630 10,000 Plantronics Inc. .................. 246,559 308,100 50,000 Robbins & Myers Inc. .............. 1,023,975 1,124,000 40,500 Sequa Corp., Cl. A+ ............... 1,502,140 2,389,500 80,000 Sequa Corp., Cl. B+ ............... 3,631,577 4,810,400 92,000 SL Industries Inc.+ ............... 1,070,831 1,312,840 15,000 Smith (A.O.) Corp., Cl. A ......... 336,569 427,500 5,000 Teleflex Inc. ..................... 76,167 352,500 48,000 Tennant Co. ....................... 1,556,465 1,967,040 5,000 Valmont Industries Inc. ........... 40,625 146,800 7,875 Watsco Inc., Cl. B ................ 23,627 414,225 190,500 Watts Water Technologies Inc., Cl. A ..................... 3,366,746 5,495,925 15,000 Wolverine Tube Inc.+ .............. 150,915 112,500 ------------ ------------ 43,081,476 91,103,800 ------------ ------------ FINANCIAL SERVICES -- 3.5% 10,500 Alleghany Corp.+ .................. 1,893,812 3,213,000 40,000 Argonaut Group Inc.+ .............. 867,813 1,080,400 92,900 Bancshares of Florida Inc.+ ....... 1,393,500 2,054,948 66,000 Bankgesellschaft Berlin AG+ ....... 1,280,794 237,173 79,000 BKF Capital Group Inc. ............ 1,528,661 2,443,470 365,000 CNA Surety Corp.+ ................. 4,005,795 5,190,300 4,000 Crazy Woman Creek Bancorp Inc. .................... 51,340 59,200 37,000 Epoch Holding Corp.+ .............. 63,098 185,000 3,000 Federal Agricultural Mortgage Corp., Cl. C ........... 24,000 73,020 33,000 First Republic Bank ............... 636,067 1,162,590 94,100 Flushing Financial Corp. .......... 1,374,594 1,540,417 22,500 Hibernia Corp., Cl. A ............. 389,057 675,900 50,000 LaBranche & Co. Inc.+ ............. 428,836 434,500 1,000 LandAmerica Financial Group Inc. ...................... 12,175 64,650 1,500 Leucadia National Corp. ........... 24,354 64,650 107,500 Midland Co. ....................... 822,714 3,873,225 1,500 NetBank Inc. ...................... 6,000 12,465 25,000 NewAlliance Bancshares Inc. ....... 373,848 366,000 38,400 Sterling Bancorp .................. 670,453 864,384 20,000 SWS Group Inc. .................... 338,350 328,000 50,000 Wilmington Trust Corp. ............ 1,574,410 1,822,500 ------------ ------------ 17,759,671 25,745,792 ------------ ------------ FOOD AND BEVERAGE -- 4.0% 30,000 Boston Beer Co. Inc., Cl. A+ ...... 468,757 750,000 24,000 Brown-Forman Corp., Cl. A ......... 665,535 1,482,000 11,250 Cheesecake Factory Inc.+ .......... 37,036 351,450 100 Compania Cervecerias Unidas SA, ADR .................. 2,455 2,594 MARKET SHARES COST VALUE ------ ---- ------ 38,000 Corn Products International Inc. ..............$ 617,424 $ 766,460 19,282 Cruzan International Inc.+ ........ 326,522 540,089 100,000 Del Monte Foods Co.+ .............. 997,536 1,073,000 85,000 Denny's Corp.+ .................... 132,580 352,750 40,000 Dynasty Fine Wines Group Ltd.+ .... 13,958 15,211 100 Embotelladora Andina SA, Cl. A, ADR ...................... 1,295 1,562 25,000 Farmer Brothers Co. ............... 389,323 504,750 290,000 Flowers Foods Inc. ................ 2,382,449 7,911,200 500 Genesee Corp., Cl. A+ ............. 0 800 21,500 Genesee Corp., Cl. B+ ............. 32,823 36,550 701,500 Grupo Continental SA .............. 1,058,724 1,227,315 10,000 Hain Celestial Group Inc.+ ........ 184,774 194,000 6,000 J & J Snack Foods Corp. ........... 100,375 346,800 210,000 Kikkoman Corp. .................... 1,375,672 2,016,385 20,000 Meiji Seika Kaisha Ltd. ........... 87,470 103,770 35,000 MGP Ingredients Inc. .............. 243,900 392,000 10,000 Nathan's Famous Inc.+ ............. 82,691 90,000 5,000 Northland Cranberries Inc., Cl. A . 4,200 1,100 4,000 Omni Nutraceuticals Inc.+ ......... 13,562 5 20,000 PepsiAmericas Inc. ................ 286,588 454,600 55,000 Ralcorp Holdings Inc. ............. 828,181 2,305,600 64,000 Smucker (J.M.) Co. ................ 1,518,450 3,106,560 100,000 The Steak n Shake Co.+ ............ 1,088,229 1,815,000 38,857 Tootsie Roll Industries Inc. ...... 596,810 1,233,710 50,000 Triarc Companies Inc., Cl. A ...... 355,474 840,000 120,000 Triarc Companies Inc., Cl. B ...... 1,025,442 1,832,400 100 Vina Concha Y Toro SA, ADR ........ 8,305 8,500 1,000 Willamette Valley Vineyards Inc.+ ................. 3,994 5,030 ------------ ------------ 14,930,534 29,761,191 ------------ ------------ HEALTH CARE -- 8.3% 50,000 Align Technology Inc.+ ............ 444,171 336,000 90,000 AngioDynamics Inc.+ ............... 2,021,360 1,890,000 5,000 Anika Therapeutics Inc.+ .......... 64,475 59,100 15,000 Animas Corp.+ ..................... 313,462 235,500 55,000 ArthroCare Corp.+ ................. 1,133,267 2,212,100 7,800 Bio-Rad Laboratories Inc., Cl. A+ .......................... 309,943 428,922 1,000 Biomet Inc. ....................... 30,350 34,710 10,000 Biosite Inc.+ ..................... 253,600 618,600 9,000 Bruker BioSciences Corp.+ ......... 34,729 39,420 205,000 Chemed Corp. ...................... 3,405,548 8,884,700 1,000 CNS Inc. .......................... 12,240 26,070 45,500 CONMED Corp.+ ..................... 1,337,014 1,268,540 82,000 Del Global Technologies Corp.+ .... 260,262 205,000 1,000 Digene Corp.+ ..................... 8,000 28,500 95,000 Edwards Lifesciences Corp.+ ....... 3,358,437 4,218,950 1,102 Enzo Biochem Inc.+ ................ 13,091 16,927 65,000 Exactech Inc.+ .................... 920,376 962,000 8,000 Fisher Scientific International Inc.+ ............. 184,007 496,400 48,000 Henry Schein Inc.+ ................ 844,631 2,045,760 34,000 ICU Medical Inc.+ ................. 1,015,386 977,840 112,000 INAMED Corp.+ ..................... 2,038,734 8,476,160 See accompanying notes to financial statements. 8 THE GABELLI SMALL CAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) HEALTH CARE (CONTINUED) 2,000 Integra LifeSciences Holdings+ .......................$ 43,600 $ 76,520 33,000 Inverness Medical Innovations Inc.+ ............... 604,926 875,490 26,000 Invitrogen Corp.+ ................. 1,338,072 1,955,980 100,000 Lifecore Biomedical Inc.+ ......... 958,195 1,209,000 15,000 MWI Veterinary Supply Inc.+ ....... 285,435 299,250 15,000 Nabi Biopharmaceuticals+ .......... 105,625 196,500 3,000 NeoPharm Inc.+ .................... 29,760 37,200 5,000 NeuroMetrix Inc.+ ................. 132,176 148,850 1,300 Nobel Biocare Holding AG .......... 100,171 306,284 10,600 NWH Inc. .......................... 161,306 152,110 34,000 Orthofix International NV+ ........ 1,133,250 1,482,400 2,000 OrthoLogic Corp.+ ................. 6,750 7,660 35,000 Owens & Minor Inc. ................ 692,324 1,027,250 60,000 Penwest Pharmaceuticals Co.+ ............ 482,987 1,051,800 18,900 Possis Medical Inc.+ .............. 194,460 207,144 43,000 Priority Healthcare Corp., Cl. B+ . 862,278 1,197,980 30,000 PSS World Medical Inc.+ ........... 367,273 400,200 150,000 Quidel Corp.+ ..................... 666,409 1,419,000 100,000 Regeneration Technologies Inc.+ .............. 1,003,406 817,000 44,200 Schick Technologies Inc.+ ......... 383,549 1,162,460 590,000 Snia SpA+ ......................... 133,755 73,746 50,000 Sonic Innovations Inc.+ ........... 244,370 221,200 1,880,000 Sorin SpA+ ........................ 6,403,312 5,174,208 20,000 SSL International plc ............. 101,906 95,068 2,500 Straumann Holding AG .............. 224,697 669,634 4,200 Stryker Corp. ..................... 162,570 207,606 155,000 Sybron Dental Specialties Inc.+ ... 2,964,637 6,444,900 41,000 Thoratec Corp.+ ................... 491,798 728,160 1,000 Wright Medical Group Inc.+ ........ 16,460 24,680 5,100 Young Innovations Inc. ............ 128,516 193,086 ------------ ------------ 38,427,056 61,323,565 ------------ ------------ HOME FURNISHINGS -- 0.1% 15,000 Bassett Furniture Industries Inc. . 262,461 279,300 4,000 Bed Bath & Beyond Inc.+ ........... 11,125 160,720 1,000 Foamex International Inc.+ ........ 8,062 43 30,000 La-Z-Boy Inc. ..................... 250,200 395,700 ------------ ------------ 531,848 835,763 ------------ ------------ HOTELS AND GAMING -- 4.9% 269,000 Aztar Corp.+ ...................... 4,420,952 8,287,890 12,000 Boyd Gaming Corp. ................. 90,225 517,440 70,000 Churchill Downs Inc. .............. 2,235,482 2,472,400 80,000 Dover Downs Gaming & Entertainment Inc. .............. 796,488 1,088,000 150,000 Gaylord Entertainment Co.+ ........ 4,244,031 7,147,500 10,002 Harrah's Entertainment Inc. ....... 498,147 652,030 5,000 Jury's Doyle Hotel Group plc ...... 27,762 112,974 60,000 Kerzner International Ltd.+ ....... 1,415,009 3,333,000 370,000 La Quinta Corp.+ .................. 936,975 3,215,300 145,000 Lakes Entertainment Inc.+ ......... 766,240 1,482,625 MARKET SHARES COST VALUE ------ ---- ------ 1,200 Las Vegas Sands Corp.+ ............$ 34,800 $ 39,492 355,000 Magna Entertainment Corp., Cl. A+ .......................... 2,312,344 2,364,300 20,000 Marcus Corp. ...................... 377,480 400,800 82,000 Penn National Gaming Inc.+ ........ 186,907 2,551,020 95,000 Pinnacle Entertainment Inc.+ ...... 828,043 1,741,350 3,000 Station Casinos Inc. .............. 11,670 199,080 16,000 Wynn Resorts Ltd.+ ................ 231,002 722,400 20,000 Youbet.com Inc.+ .................. 51,494 114,600 ------------ ------------ 19,465,051 36,442,201 ------------ ------------ MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 2.3% 58,000 Cavco Industries Inc.+ ............ 1,127,032 2,104,240 335,000 Champion Enterprises Inc.+ ........ 3,495,127 4,951,300 17,000 Drew Industries Inc.+ ............. 296,303 438,770 205,000 Fleetwood Enterprises Inc.+ ....... 2,634,462 2,521,500 70,000 Monaco Coach Corp. ................ 1,540,819 1,031,800 141,000 Skyline Corp. ..................... 4,489,399 5,730,240 36,000 Southern Energy Homes Inc.+ ....... 265,405 253,800 ------------ ------------ 13,848,547 17,031,650 ------------ ------------ METALS AND MINING -- 0.5% 70,000 Arizona Star Resource Corp.+ ...... 283,185 276,990 10,000 Ivanhoe Mines Ltd.+ ............... 74,658 83,600 142,115 Kinross Gold Corp.+ ............... 984,488 1,091,443 10,000 Meridian Gold Inc.+ ............... 75,630 219,100 10,000 Novelis Inc. ...................... 231,913 214,400 70,000 Placer Dome Inc. .................. 653,970 1,200,500 190,000 Royal Oak Mines Inc.+ ............. 322,487 665 30,148 Stillwater Mining Co.+ ............ 389,561 275,854 ------------ ------------ 3,015,892 3,362,552 ------------ ------------ PAPER AND FOREST PRODUCTS -- 0.2% 40,000 Packaging Dynamics Corp. .......... 296,567 504,000 64,000 Pope & Talbot Inc. ................ 1,044,880 653,440 18,000 Schweitzer-Mauduit International Inc. .............. 424,690 401,760 22,000 Wausau Paper Corp. ................ 255,362 275,220 ------------ ------------ 2,021,499 1,834,420 ------------ ------------ PUBLISHING -- 3.2% 307,237 Independent News & Media plc ...... 431,671 897,285 40,000 Journal Communications Inc., Cl. A ........................... 759,162 596,000 110,000 Journal Register Co. .............. 1,779,817 1,779,800 11,000 Lee Enterprises Inc. .............. 261,685 467,280 53,000 McClatchy Co., Cl. A .............. 1,581,315 3,457,190 67,000 Media General Inc., Cl. A ......... 1,841,424 3,886,670 23,000 Meredith Corp. .................... 429,183 1,147,470 310,000 News Corp., Cl. A ................. 912,485 4,832,900 1,050,000 Penton Media Inc.+ ................ 951,840 525,000 400,000 PRIMEDIA Inc.+ .................... 1,290,397 1,636,000 215,000 Thomas Nelson Inc. ................ 2,192,528 4,033,400 4,000 Value Line Inc. ................... 162,772 156,560 12,000 Wiley (John) & Sons Inc., Cl. B ... 46,500 499,800 ------------ ------------ 12,640,779 23,915,355 ------------ ------------ See accompanying notes to financial statements. 9 THE GABELLI SMALL CAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) REAL ESTATE -- 1.1% 190 Case Pomeroy & Co. Inc., Cl. A ...........................$ 222,300 $ 294,500 170,000 Griffin Land & Nurseries Inc.+ .... 2,202,169 4,165,000 9,000 Gyrodyne Company of America Inc.+ ................... 135,071 396,000 20,000 Malan Realty Investors Inc. (b) ... 139,429 73,800 110,000 Morguard Corp. .................... 1,392,683 2,961,720 ------------ ------------ 4,091,652 7,891,020 ------------ ------------ RETAIL -- 3.9% 11,000 Aaron Rents Inc. .................. 98,389 232,650 145,000 Aaron Rents Inc., Cl. A ........... 522,819 2,856,500 35,000 Big 5 Sporting Goods Corp. ........ 657,716 835,100 98,000 Burlington Coat Factory Warehouse Corp. ................ 1,058,146 3,727,920 8,000 Casey's General Stores Inc. ....... 124,503 185,600 50,000 Coldwater Creek Inc.+ ............. 155,995 1,261,000 12,000 CoolBrands International Inc.+ .... 63,032 25,290 80,000 CSK Auto Corp.+ ................... 1,331,224 1,190,400 4,000 Gander Mountain Co.+ .............. 66,680 35,960 175,000 Ingles Markets Inc., Cl. A ........ 2,176,507 2,765,000 35,000 Movado Group Inc. ................. 515,027 655,200 130,000 Neiman Marcus Group Inc., Cl. B ........................... 4,106,529 12,977,900 1,500 The Sports Authority Inc.+ ...... 9,198 44,160 40,000 Weis Markets Inc. ................. 1,174,744 1,600,400 ------------ ------------ 12,060,509 28,393,080 ------------ ------------ SATELLITE -- 0.4% 27,000 Pegasus Communications Corp., Cl. A+ ................... 228,644 88,830 200,000 Sirius Satellite Radio Inc.+ ...... 981,915 1,310,000 35,000 XM Satellite Radio Holdings Inc., Cl. A+ ........... 302,980 1,256,850 ------------ ------------ 1,513,539 2,655,680 ------------ ------------ SPECIALTY CHEMICALS -- 4.2% 30,000 Airgas Inc. ....................... 183,650 888,900 48,000 Albemarle Corp. ................... 1,295,613 1,809,600 42,000 Arch Chemicals Inc. ............... 905,730 976,500 65,000 Chemtura Corp. .................... 714,772 807,300 10,000 Cytec Industries Inc. ............. 278,296 433,800 7,000 Dionex Corp.+ ..................... 210,000 379,750 180,000 Ferro Corp. ....................... 3,999,568 3,297,600 125,000 Fuller (H.B.) Co. ................. 2,208,515 3,885,000 10,000 Hawkins Inc. ...................... 134,968 137,000 430,000 Hercules Inc.+ .................... 4,166,174 5,254,600 145,000 MacDermid Inc. .................... 2,527,513 3,807,700 170,000 Material Sciences Corp.+ .......... 1,589,043 2,561,900 130,000 Omnova Solutions Inc.+ ............ 810,622 568,100 50,000 Penford Corp. ..................... 539,601 668,500 10,000 Quaker Chemical Corp. ............. 181,138 173,800 20,000 Schulman (A.) Inc. ................ 240,000 359,000 273,000 Sensient Technologies Corp. ....... 5,506,095 5,173,350 ------------ ------------ 25,491,298 31,182,400 ------------ ------------ MARKET SHARES COST VALUE ------ ---- ------ TELECOMMUNICATIONS -- 1.4% 29,425 ALLTEL Corp. ......................$ 178,507 $ 1,915,862 9,200 Atlantic Tele-Network Inc. ........ 92,644 305,440 200,000 Cincinnati Bell Inc.+ ............. 517,183 882,000 80,000 Commonwealth Telephone Enterprises Inc. ................ 1,919,652 3,016,000 6,795 Community Service Communications Inc.+ ............ 0 22,593 46,950 D&E Communications Inc. ........... 605,207 425,836 277 NTL Inc.+ ......................... 8,407 18,504 80,525 Rogers Communications Inc., Cl. B ........................... 762,545 3,176,711 20,000 Shenandoah Telecommunications Co. .......... 296,543 823,800 10,000 Stratos International Inc.+ ....... 46,334 58,400 621 Telewest Global Inc.+ ............. 8,867 14,252 53,000 Winstar Communications Inc.+ ............ 133 53 ------------ ------------ 4,436,022 10,659,451 ------------ ------------ TRANSPORTATION -- 0.9% 130,000 GATX Corp. ........................ 3,650,103 5,141,500 125,000 Grupo TMM SA, Cl. A, ADR+ ......... 946,399 512,500 2,000 Irish Continental Group plc+ ...... 17,829 23,532 50,000 OMI Corp. ......................... 313,120 893,500 5,100 Providence & Worcester Railroad Co. .................... 42,979 71,349 ------------ ------------ 4,970,430 6,642,381 ------------ ------------ WIRELESS COMMUNICATIONS -- 1.3% 16,000 Alamosa Holdings Inc.+ ............ 110,079 273,760 45,000 Centennial Communications Corp.+ .......................... 465,380 674,100 72,000 Price Communications Corp.+ ....... 905,273 1,184,400 55,000 Rural Cellular Corp., Cl. A+ ...... 374,090 668,800 10,000 SunCom Wireless Holdings Inc., Cl. A+ .......................... 69,480 34,400 5,000 UbiquiTel Inc.+ ................... 2,700 43,700 148,000 Vimpel-Communications, ADR+ ....... 1,261,093 6,577,120 ------------ ------------ 3,188,095 9,456,280 ------------ ------------ TOTAL COMMON STOCKS ............... 416,128,202 701,545,230 ------------ ------------ PREFERRED STOCKS -- 0.3% BROADCASTING -- 0.2% 1,063 Granite Broadcasting Corp., 12.750% Pfd.+ ................... 439,682 170,080 100 Gray Television Inc., 8.000% Cv. Pfd., Ser. C (b)(d)(e) ................ 1,000,000 1,010,000 1,103 PTV Inc., 10.000% Pfd., Ser. A ............ 0 1,627 ------------ ------------ 1,439,682 1,181,707 ------------ ------------ See accompanying notes to financial statements. 10 THE GABELLI SMALL CAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ PREFERRED STOCKS (CONTINUED) BUSINESS SERVICES -- 0.1% 22,483 Interep National Radio Sales Inc., 4.000% Cv. Pfd., Ser. A+ (b)(d)(e) ...............$ 2,163,147 $ 786,901 ------------ ------------ DIVERSIFIED INDUSTRIAL -- 0.0% 151 Foster Wheeler Ltd., Pfd., Ser. B+ ................... 38,060 120,800 ------------ ------------ TOTAL PREFERRED STOCKS ............ 3,640,889 2,089,408 ------------ ------------ WARRANTS -- 0.2% AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.0% 1,213 Exide Technologies, expire 05/05/11+ ................ 2,247 667 ------------ ------------ BUSINESS SERVICES -- 0.2% 250,000 GP Strategies Corp., expire 08/14/08+ (b)(e) ......... 637,065 929,126 125,000 Interep National Radio Sales Inc., expire 05/06/07+ (b)(d)(e) ...... 0 0 ------------ ------------ 637,065 929,126 ------------ ------------ COMPUTER SOFTWARE AND SERVICES -- 0.0% 430 Anacomp Inc., Cl. B, expire 12/10/06+ ................ 0 25 ------------ ------------ DIVERSIFIED INDUSTRIAL -- 0.0% 379,703 National Patent Development Corp., expire 08/14/08+ (b)(e) ........ 0 146,241 13,217 WHX Corp., expire 02/28/08+ ....... 52,373 34,695 ------------ ------------ 52,373 180,936 ------------ ------------ HEALTH CARE -- 0.0% 14,424 Del Global Technologies Corp., expire 03/28/08+ ................ 24,809 22,357 ------------ ------------ TELECOMMUNICATIONS -- 0.0% 86 NTL Inc., expire 01/13/11+ ........ 124 53 ------------ ------------ TOTAL WARRANTS .................... 716,618 1,133,164 ------------ ------------ PRINCIPAL AMOUNT ------ CORPORATE BONDS -- 0.2% AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.0% $ 800,000 Exide Technologies, 2.900%, 12/15/05, Escrow+(b)(e) ................... 0 0 ------------ ------------ AVIATION: PARTS AND SERVICES -- 0.0% 300,000 GenCorp Inc., Sub. Deb. Cv., 5.750%, 04/15/07 ................ 288,064 329,625 ------------ ------------ BUSINESS SERVICES -- 0.2% 2,000,000 GP Strategies Corp., Sub. Deb., 6.000%, 08/14/08 (b)(e) ......... 1,552,703 1,339,125 ------------ ------------ COMPUTER SOFTWARE AND SERVICES -- 0.0% 300,000 Exodus Communications Inc., Sub. Deb. Cv., 5.250%, 02/15/08+ (b)(c) ........ 1,185 0 ------------ ------------ PRINCIPAL MARKET AMOUNT COST VALUE -------- ---- ------ HEALTH CARE -- 0.0% $ 28,847 Del Global Technologies Corp., 6.000%, 03/28/07 (b) ............$ 28,847 $ 21,636 ------------ ------------ TOTAL CORPORATE BONDS ............. 1,870,799 1,690,386 ------------ ------------ U.S. GOVERNMENT OBLIGATIONS -- 4.1% 30,279,000 U.S. Treasury Bills, 3.166% to 3.522%++, 10/06/05 to 12/29/05 ............ 30,085,360 30,091,311 ------------ ------------ TOTAL INVESTMENTS -- 100.1% ...........$452,441,868 736,549,499 ============ OTHER ASSETS AND LIABILITIES (NET) -- (0.1)% ..... (432,688) ------------ NET ASSETS -- 100.0% .............................$736,116,811 ============ - ---------------- (a) Security considered an affiliated holding because the Fund owns at least 5% of the outstanding shares. (b) Security fair valued under procedures established by the Board of Directors. The procedures may include reviewing available financial information about the company and reviewing valuation of comparable securities and other factors on a regular basis. At September 30, 2005, the market value of fair valued securities amounted to $4,745,502 or 0.64% of total net assets. (c) Security is in default. (d) Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2005, the market value of Rule 144A securities amounted to $1,796,901 or 0.24% of total net assets. (e) At September 30, 2005, the Fund held restricted and illiquid securities amounting to $4,211,393 or 0.57% of net assets, which were valued under methods approved by the Board, as follows: ACQUISITION 09/30/05 SHARES/ CARRYING PRINCIPAL ACQUISITION ACQUISITION VALUE AMOUNT ISSUER DATE COST PER UNIT ------ ------ ----------- ----------- -------- $ 800,000 Exide Technologies, 2.900%, 12/15/05, Escrow .......05/10/04 $ 0.00 $ 0.0000 2,000,000 GP Strategies Corp., Sub. Deb., 6.000%, 08/14/08 ...............08/08/03 1,362,935 66.9563 250,000 GP Strategies Corp. warrants expire 08/14/08 ................08/08/03 637,065 3.7165 100 Gray Television Inc., 8.000% Cv. Pfd., Ser. C ...............04/22/02 1,000,000 10,100.0000 22,483 Interep National Radio Sales Inc., 4.000% Cv. Pfd., Ser. A ........05/03/02 2,163,147 35.0000 125,000 Interep National Radio Sales Inc. warrants expire 05/06/07 .......05/03/02 0.00 0.0000 379,703 National Patent Development Corp. warrants expire 08/14/08 ................11/24/04 0.00 0.3851 + Non-income producing security. ++ Represents annualized yield at date of purchase. ADR American Depository Receipt See accompanying notes to financial statements. 11 THE GABELLI SMALL CAP GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- ASSETS: Investments, at value (cost $451,620,675) ............... $ 735,944,499 Investments in affiliate, at value (cost $821,193) ....................................... 605,000 Foreign currency, at value (cost $11,075) ........................................ 11,260 Cash .................................................... 29,754 Receivable for Fund shares sold ......................... 1,513,268 Receivable for investments sold ......................... 720,754 Dividends and interest receivable ....................... 520,120 Other assets ............................................ 4,696 ------------- TOTAL ASSETS ............................................ 739,349,351 ------------- LIABILITIES: Payable for investments purchased ....................... 1,255,007 Payable for Fund shares redeemed ........................ 919,210 Payable for investment advisory fees .................... 605,720 Payable for distribution fees ........................... 152,382 Payable for shareholder services fees ................... 127,996 Payable for shareholder communications fees ............. 89,257 Other accrued expenses .................................. 82,968 ------------- TOTAL LIABILITIES ....................................... 3,232,540 ------------- NET ASSETS applicable to 24,564,713 shares outstanding .................................... $ 736,116,811 ============= NET ASSETS CONSIST OF: Capital stock, each class at $0.001 par value ........... $ 24,565 Additional paid-in capital .............................. 413,855,315 Accumulated net investment loss ......................... (31,521) Accumulated net realized gain on investments and foreign currency transactions ..................... 38,160,953 Net unrealized appreciation on investments .............. 284,107,631 Net unrealized depreciation on foreign currency translations ................................. (132) ------------- NET ASSETS .............................................. $ 736,116,811 ============= SHARES OF CAPITAL STOCK: CLASS AAA: Net Asset Value, offering and redemption price per share ($732,964,619 / 24,458,826 shares outstanding; 150,000,000 shares authorized) ........... $29.97 ====== CLASS A: Net Asset Value and redemption price per share ($1,515,470 / 50,551 shares outstanding; 50,000,000 shares authorized) ......................... $29.98 ====== Maximum offering price per share (NAV / 0.9425, based on maximum sales charge of 5.75% of the offering price) ................................... $31.81 ====== CLASS B: Net Asset Value and offering price per share ($138,177 / 4,671 shares outstanding; 50,000,000 shares authorized) ......................... $29.58(a) ====== CLASS C: Net Asset Value and offering price per share ($1,498,545 / 50,665 shares outstanding; 50,000,000 shares authorized) ......................... $29.58(a) ====== - ----------------- (a) Redemption price varies based on length of time held. STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of foreign taxes of $23,348) ............. $ 9,182,778 Dividends from affiliate ................................ 14,000 Interest ................................................ 524,958 ------------- TOTAL INVESTMENT INCOME ................................. 9,721,736 ------------- EXPENSES: Investment advisory fees ................................ 6,897,602 Distribution fees -- Class AAA .......................... 1,720,695 Distribution fees -- Class A ............................ 1,630 Distribution fees -- Class B ............................ 1,332 Distribution fees -- Class C ............................ 6,968 Shareholder services fees ............................... 727,662 Shareholder communications expenses ..................... 241,767 Custodian fees .......................................... 121,118 Legal and audit fees .................................... 59,926 Registration fees ....................................... 42,098 Directors' fees ......................................... 38,300 Miscellaneous expenses .................................. 101,981 ------------- TOTAL EXPENSES .......................................... 9,961,079 Less: Custodian fee credits ............................. (2,134) ------------- NET EXPENSES ............................................ 9,958,945 ------------- NET INVESTMENT LOSS ..................................... (237,209) ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain on investments ........................ 42,632,458 Net realized loss on foreign currency transactions .......................................... (2,568) Net change in unrealized appreciation/ depreciation on investments and foreign currency translations ................................. 83,565,118 ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY ................... 126,195,008 ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................. $ 125,957,799 ============= See accompanying notes to financial statements. 12 THE GABELLI SMALL CAP GROWTH FUND STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ OPERATIONS: Net investment loss ................................ $ (237,209) $ (923,061) Net realized gain on investments, futures contracts and foreign currency transactions ..... 42,629,890 27,631,501 Net change in unrealized appreciation/depreciation on investments, futures contracts and foreign currency translations .................... 83,565,118 87,063,565 ------------- ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................... 125,957,799 113,772,005 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Net realized gain on investments Class AAA ........................................ (27,271,963) (4,352,438) Class A .......................................... (6,636) -- Class B .......................................... (5,930) -- Class C .......................................... (5,584) -- ------------- ------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................ (27,290,113) (4,352,438) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Class AAA ........................................ 14,081,158 (29,481,563) Class A .......................................... 1,389,944 57,577 Class B .......................................... 69,962 54,633 Class C .......................................... 1,402,027 24,010 ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS .................. 16,943,091 (29,345,343) ------------- ------------- REDEMPTION FEES .................................... 35,284 -- ------------- ------------- NET INCREASE IN NET ASSETS ......................... 115,646,061 80,074,224 NET ASSETS: Beginning of period ................................ 620,470,750 540,396,526 ------------- ------------- End of period ...................................... $ 736,116,811 $ 620,470,750 ============= ============= See accompanying notes to financial statements. 13 THE GABELLI SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. ORGANIZATION. The Gabelli Small Cap Growth Fund (the "Fund") is a series of Gabelli Equity Series Funds, Inc. (the "Corporation"), which was organized on July 25, 1991 as a Maryland corporation. The Fund is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), and one of three separately managed portfolios (collectively, the "Portfolios") of the Corporation, each with four separate classes of shares outstanding known as Class AAA, Class A, Class B and Class C. The Fund's primary objective is capital appreciation. The Fund commenced investment operations on October 22, 1991. 2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. SECURITY VALUATION. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market's official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the "Board") so determines, by such other method as the Board shall determine in good faith, to reflect its fair market value. Portfolio securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market, as determined by Gabelli Funds, LLC (the "Adviser"). Portfolio securities primarily traded on foreign markets are generally valued at the preceding closing values of such securities on their respective exchanges or if after the close of the foreign markets, but prior to the close of business on the day the securities are being valued, market conditions change significantly, certain foreign securities may be fair valued pursuant to procedures established by the Board. Debt instruments with remaining maturities of 60 days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities' fair value, in which case these securities will be valued at their fair value as determined by the Board. Debt instruments having a maturity greater than 60 days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded. Securities and assets for which market quotations are not readily available are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons to the valuation and changes in valuation of similar securities, including a comparison of foreign securities to the equivalent U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security. REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with primary government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System or with other brokers or dealers that meet credit guidelines established by the Adviser and reviewed by the Board. Under the terms of a typical repurchase agreement, the Fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the Fund's holding period. The Fund will 14 THE GABELLI SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- always receive and maintain securities as collateral whose market value, including accrued interest, will be at least equal to 102% of the dollar amount invested by the Fund in each agreement. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. FUTURES CONTRACTS. The Fund may engage in futures contracts for the purpose of hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase. Upon entering into a futures contract, the Fund is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the "initial margin". Subsequent payments ("variation margin") are made or received by the Fund each day, depending on the daily fluctuation of the value of the contract. The daily changes in the contract are included in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed. At September 30, 2005, there were no open futures contracts. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments, which may not correlate with the change in value of the hedged investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign exchange contracts for hedging a specific transaction with respect to either the currency in which the transaction is denominated or another currency as deemed appropriate by the Adviser. Forward foreign exchange contracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealized appreciation/depreciation on investments and foreign currency translations. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of forward foreign exchange contracts does not eliminate fluctuations in the underlying prices of the Fund's portfolio securities, but it does establish a rate of exchange that can be achieved in the future. Although forward foreign exchange contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. At September 30, 2005, there were no open forward foreign exchange contracts. FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained in United States (U.S.) dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period, and purchases and sales of investment securities, income and expenses are translated at the exchange rate prevailing on the respective dates of such transactions. Unrealized gains and losses that result from changes in foreign exchange rates and/or changes in market prices of securities have been included in unrealized appreciation/depreciation on investments and foreign currency translations. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities transactions, foreign currency transactions and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial trade date and subsequent sale trade date is included in realized gain/(loss) on investments. FOREIGN SECURITIES. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include 15 THE GABELLI SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- possible revaluation of currencies, the ability to repatriate funds, less complete financial information about companies and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers. RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in securities for which the markets are illiquid. Illiquid securities include securities the disposition of which is subject to substantial legal or contractual restrictions. The sale of illiquid securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale. Securities freely salable among qualified institutional investors under special rules adopted by the Securities and Exchange Commission ("SEC") may be treated as liquid if they satisfy liquidity standards established by the Board of Directors. The continued liquidity of such securities is not as well assured as that of publicly traded securities, and accordingly the Board of Directors will monitor their liquidity. FOREIGN TAXES. The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon their current interpretation of tax rules and regulations that exist in the markets in which they invest. SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are accounted for on the trade date with realized gain or loss on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded as earned. Dividend income is recorded on the ex-dividend date. DETERMINATION OF NET ASSET VALUE AND CALCULATION OF EXPENSES. Certain administrative expenses are common to, and allocated among, various affiliated funds. Such allocations are made on the basis of each Fund's average net assets or other criteria directly affecting the expenses as determined by the Adviser pursuant to procedures established by the Board. In calculating net asset value per share of each class, investment income, realized and unrealized gains and losses, redemption fees and expenses other than class specific expenses, are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. Distribution expenses are borne solely by the class incurring the expense. CUSTODIAN FEE CREDITS. When cash balances are maintained in the custody account, the Fund receives credits which are used to offset custodian fees. The gross expenses paid under the custody arrangement are included in custodian fees in the Statement of Operations with the corresponding expense offset shown as "custodian fee credits". DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are recorded on the ex-dividend date. Distributions to shareholders are based on income and capital gains as determined in accordance with Federal income tax regulations, which may differ from income and capital gains as determined under U.S. generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterizations of distributions made by the Fund. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, adjustments are made to the appropriate equity accounts in the fiscal year that the differences arise. For the fiscal year ended September 30, 2005, reclassifications were made to decrease accumulated net investment loss by $311,517 and decrease accumulated net realized gain on investments by $311,517. 16 THE GABELLI SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- The tax character of distributions paid during the fiscal years ended September 30, 2005 and September 30, 2004 were as follows: FISCAL YEAR ENDED FISCAL YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ DISTRIBUTIONS PAID FROM: Ordinary income (inclusive of short-term capital gains) .................. -- $2,246,976 Net long-term capital gains ....... $27,290,113 2,105,462 ----------- ---------- Total distributions paid .......... $27,290,113 $4,352,438 =========== ========== PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains. Therefore, no provision for Federal income taxes is required. Dividends and interest from non-U.S. sources received by the Fund are generally subject to non-U.S. withholding taxes at rates ranging up to 30%. Such withholding taxes may be reduced or eliminated under the terms of applicable U.S. income tax treaties, and the Fund intends to undertake any procedural steps required to claim the benefits of such treaties. As of September 30, 2005, the components of accumulated earnings/(losses) on a tax basis were as follows: Undistributed ordinary income (inclusive of short-term capital gains) .......... $ 648,028 Undistributed long-term capital gains .............. 40,034,261 Post-October losses ................................ (2,880) Net unrealized appreciation ........................ 281,589,154 Other temporary differences ........................ (31,632) ------------ Total accumulated earnings ....................... $322,236,931 ============ Under the current tax law, capital losses related to securities and foreign currency realized after October 31 and prior to the Fund's fiscal year end may be treated as occurring on the first day of the following year. For the fiscal year ended September 30, 2005, the Fund deferred capital losses of $2,880. The difference between book and tax basis undistributed ordinary income is primarily due to the continued accrual of defaulted interest for tax purposes which has been written down for book purposes and tax adjustments due to a partnership security. The difference between book and tax basis unrealized appreciation is primarily due to deferral of losses from wash sales for tax purposes. The following summarizes the tax cost of investments and related unrealized appreciation/depreciation at September 30, 2005: GROSS GROSS NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION/ COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ ------------ -------------- Investments ......$454,139,152 $309,378,643 $(27,573,296) $281,805,347 Investments in affiliates .. 821,193 0 (216,193) (216,193) ------------ ------------ ------------ ------------ $454,960,345 $309,378,643 $(27,789,489) $281,589,154 ============ ============ ============ ============ 3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment advisory agreement (the "Advisory Agreement") with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of its average daily net assets. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Fund's portfolio, oversees the administration of all aspects of the Fund's business and affairs and pays the compensation of all Officers and Directors of the Fund who are affiliated persons of the Adviser. 17 THE GABELLI SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the "Plan") for each class of shares pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. ("Gabelli & Company"), an affiliate of the Adviser, serves as distributor of the Fund. Under the Class AAA, Class A, Class B and Class C Share Plans, payments are authorized to Gabelli & Company at annual rates of 0.25%, 0.25%, 1.00% and 1.00%, respectively, of the average daily net assets of those classes, the annual limitations under each Plan. Such payments are accrued daily and paid monthly. 5. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for the fiscal year ended September 30, 2005, other than short-term securities, aggregated $46,513,832 and $56,223,415, respectively. 6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30, 2005, the Fund paid brokerage commissions of $154,741 to Gabelli & Company. Additionally, Gabelli & Company informed the Fund that it received $8,528 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares. The cost of calculating the Fund's net asset value per share is a Fund expense pursuant to the Advisory Agreement between the Fund and the Adviser. During the fiscal year ended September 30, 2005, the Fund reimbursed the Adviser $42,450 in connection with the cost of computing the Fund's net asset value, which is included in miscellaneous expenses in the Statement of Operations. 7. LINE OF CREDIT. The Fund has access to an unsecured line of credit of up to $25,000,000 from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at 0.75% above the Federal Funds rate on outstanding balances. At September 30, 2005, there were no borrowings outstanding from the line of credit. The average daily amount of borrowings outstanding from the line of credit within the fiscal year ended September 30, 2005 was $167,124 with a weighted average interest rate of 2.77%. The maximum amount borrowed at any time during the fiscal year ended September 30, 2005 was $4,354,000. 8. CAPITAL STOCK TRANSACTIONS. The Fund currently offers four classes of shares - -- Class AAA Shares, Class A Shares, Class B Shares and Class C Shares. Class AAA Shares are offered only to investors who acquire them directly from Gabelli & Company or through selected broker/dealers without a sales charge. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class B Shares are subject to a contingent deferred sales charge ("CDSC") upon redemption within six years of purchase and automatically convert to Class A Shares after eight years from the original purchase. The applicable CDSC is equal to a declining percentage of the lesser of the net asset value per share at the date of the original purchase or at the date of redemption, based on the length of time held. Class C Shares are subject to a 1% CDSC for one year after purchase. As of July 27, 2004, Class B Shares are available only through exchange of Class B Shares of other Funds distributed by Gabelli & Company. The Board has approved Class I Shares which have not been offered publicly. Effective June 15, 2005, the Fund imposed a redemption fee of 2.00% on Class AAA Shares, Class A Shares, Class B Shares and Class C Shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. (Prior to June 15, 2005, the Fund imposed a redemption fee on shares that were redeemed or exchanged within the sixtieth day after the date of a purchase.) The redemption fee is deducted from the proceeds otherwise payable to the redeeming shareholders and is retained by the Fund. The redemption fees retained by the Fund during the fiscal year ended September 30, 2005 amounted to $35,284. The redemption fee does not apply to shares purchased through programs that the Adviser determined to have appropriate short-term trading policies in place. Additionally, certain recordkeepers for qualified and non-qualified retirement plans that could not collect the redemption fee at the participant level due to systems limitations have received an extension to implement such systems. 18 THE GABELLI SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- Transactions in shares of capital stock were as follows: YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ---------------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------- ---------- ------------- CLASS AAA CLASS AAA ---------------------------- --------------------------- Shares sold .................... 5,199,909 $ 147,867,554 6,139,577 $ 153,305,617 Shares issued upon reinvestment of dividends ... 930,960 25,964,511 172,209 4,162,298 Shares redeemed ................(5,645,493) (159,750,907) (7,494,730) (186,949,478) ---------- ------------- ---------- ------------- Net increase / (decrease) .... 485,376 $ 14,081,158 (1,182,944) $ (29,481,563) ========== ============= ========== ============= CLASS A CLASS A ---------------------------- --------------------------- Shares sold .................... 49,475 $ 1,424,869 2,253 $ 57,859 Shares issued upon reinvestment of dividends ... 233 6,514 -- -- Shares redeemed ................ (1,399) (41,439) (11) (282) ---------- ------------- ---------- ------------- Net increase ................. 48,309 $ 1,389,944 2,242 $ 57,577 ========== ============= ========== ============= CLASS B CLASS B ---------------------------- --------------------------- Shares sold .................... 3,028 $ 85,010 2,268 $ 58,160 Shares issued upon reinvestment of dividends ... 214 5,930 -- -- Shares redeemed ................ (700) (20,978) (139) (3,527) ---------- ------------- ---------- ------------- Net increase ................. 2,542 $ 69,962 2,129 $ 54,633 ========== ============= ========== ============= CLASS C CLASS C ---------------------------- --------------------------- Shares sold .................... 50,553 $ 1,426,256 937 $ 24,010 Shares issued upon reinvestment of dividends ... 164 4,526 -- -- Shares redeemed ................ (989) (28,755) -- -- ---------- ------------- ---------- ------------- Net increase ................. 49,728 $ 1,402,027 937 $ 24,010 ========== ============= ========== ============= 9. TRANSACTIONS IN SECURITIES OF AFFILIATED ISSUERS. The 1940 Act defines affiliated issuers as those in which the Fund's holdings of an issuer represent 5% or more of the outstanding voting securities of the issuer. A summary of the Fund's transactions in the securities of these issuers during the fiscal year ended September 30, 2005 is set forth below: NET CHANGE PERCENT SHARES IN UNREALIZED VALUE AT OWNED BEGINNING PURCHASED ENDING DIVIDEND APPRECIATION/ SEPTEMBER 30, OF SHARES SHARES (SOLD) SHARES INCOME DEPRECIATION 2005 OUTSTANDING --------- --------- ------ ------ ------------ ------------- ------------ Trans-Lux Corp. ......... 100,000 0 100,000 $14,000 $(38,000) $605,000 10.27% ------- - ------- ------- -------- -------- ------ 10. OTHER MATTERS. The Adviser and/or affiliates have received subpoenas from the Attorney General of the State of New York and the SEC requesting information on mutual fund trading practices involving certain funds managed by the Adviser. GAMCO Investors, Inc., the Adviser's parent company, is responding to these requests for documents and testimony. On a separate matter, in September 2005, the Adviser was informed by the staff of the SEC that the staff may recommend to the Commission that an administrative remedy and a monetary penalty be sought from the Adviser in connection with the actions of two of seven closed-end funds managed by the Adviser relating to Section 19(a) and Rule 19a-1 of the 1940 Act. These provisions require registered investment companies to provide written statements to shareholders when a dividend is made from a source other than net investment income. While the two closed-end funds sent annual statements and provided other materials containing this information, the funds did not send written statements to shareholders with each distribution in 2002 and 2003. The Adviser believes that all of the funds are now in compliance. The Adviser believes that these matters would have no effect on the Fund nor any material adverse effect on the Adviser or its ability to manage the Fund. 11. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 19 THE GABELLI SMALL CAP GROWTH FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of capital stock outstanding throughout each period: INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS ------------------------------------------------ -------------------------------------- Net Net Asset Net Realized and Total Net Period Value, Investment Unrealized from Net Realized Ended Beginning Income/ Gain/(Loss) on Investment Investment Gain on Total September 30 of Period (Loss)(d) Investments Operations Income Investments Distributions - ------------ --------- --------- ------------- ---------- ---------- ----------- ------------- CLASS AAA 2005 $25.88 $(0.01) $ 5.25 $ 5.24 -- $(1.15) $(1.15) 2004 21.48 (0.04) 4.61 4.57 -- (0.17) (0.17) 2003 17.04 (0.05) 4.74 4.69 -- (0.25) (0.25) 2002 17.13 (0.04) 0.31 0.27 $(0.01) (0.35) (0.36) 2001 23.60 0.06 (1.75) (1.69) (0.05) (4.73) (4.78) CLASS A 2005 $25.89 $(0.01) $ 5.25 $ 5.24 -- $(1.15) $(1.15) 2004(a) 24.49 (0.06) 1.46 1.40 -- -- -- CLASS B 2005 $25.74 $(0.22) $ 5.21 $ 4.99 -- $(1.15) $(1.15) 2004(a) 24.49 (0.19) 1.44 1.25 -- -- -- CLASS C 2005 $25.74 $(0.23) $ 5.22 $ 4.99 -- $(1.15) $(1.15) 2004(a) 24.49 (0.20) 1.45 1.25 -- -- -- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA ------------------------------------------------ Net Asset Net Assets Net Period Value, End of Investment Portfolio Ended Redemption End of Total Period Income/ Operating Turnover September 30 Fees(d) Period Return+ (in 000's) (Loss) Expenses Rate - ------------ ---------- -------- ------- --------- --------- --------- --------- CLASS AAA 2005 $0.00(c) $29.97 20.58% $732,965 (0.03)% 1.44% 6% 2004 -- 25.88 21.34 620,334 (0.15) 1.42 10 2003 -- 21.48 27.84 540,397 (0.22) 1.45 4 2002 -- 17.04 1.39 428,416 (0.22) 1.45 10 2001 -- 17.13 (7.47) 372,865 0.30 1.45 17 CLASS A 2005 $0.00(c) $29.98 20.57% $ 1,515 (0.03)% 1.48% 6% 2004(a) -- 25.89 5.72 58 (0.32)(b) 1.42(b) 10 CLASS B 2005 $0.00(c) $29.58 19.69% $ 138 (0.79)% 2.20% 6% 2004(a) -- 25.74 5.10 55 (1.02)(b) 2.17(b) 10 CLASS C 2005 $0.00(c) $29.58 19.69% $ 1,499 (0.80)% 2.23% 6% 2004(a) -- 25.74 5.10 24 (1.07)(b) 2.17(b) 10 - ------------- + Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the period and sold at the end of the period including reinvestment of dividends and does not reflect applicable sales charges. Total return for the period of less than one year is not annualized. (a) From the commencement of offering Class A, Class B and Class C Shares on December 31, 2003. (b) Annualized. (c) Amount represents less than $0.005 per share. (d) Per share amounts have been calculated using the average shares outstanding method. See accompanying notes to financial statements. 20 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Shareholders and Board of Directors of The Gabelli Small Cap Growth Fund We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Gabelli Small Cap Growth Fund (the "Fund"), a series of Gabelli Equity Series Funds, Inc., as of September 30, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights 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 and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's 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 Fund'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 and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2005, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Gabelli Small Cap Growth Fund, a series of Gabelli Equity Series Funds, Inc., at September 30, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Philadelphia, Pennsylvania November 11, 2005 21 THE GABELLI SMALL CAP GROWTH FUND ADDITIONAL FUND INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- The business and affairs of the Fund are managed under the direction of the Fund's Board of Directors. Information pertaining to the Directors and officers of the Fund is set forth below. The Fund's Statement of Additional Information includes additional information about The Gabelli Small Cap Growth Fund's Directors and is available, without charge, upon request, by calling 800-GABELLI (800-422-3554) or by writing to The Gabelli Small Cap Growth Fund at One Corporate Center, Rye, NY 10580-1422. NUMBER OF NAME, POSITION(S) TERM OF OFFICE FUNDS IN FUND ADDRESS 1 AND LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3 - ---------------- ------------- ----------- ---------------------- ------------------ INTERESTED DIRECTORS 4: - ---------------------- MARIO J. GABELLI Since 1991 24 Chairman of the Board and Chief Executive Director of Morgan Director and Officer of GAMCO Investors, Inc. and Group Holdings, Inc. Chief Investment Officer Chief Investment Officer-Value Portfolios (holding company) Age: 63 of Gabelli Funds, LLC and GAMCO Asset Management Inc.; Chairman and Chief Executive Officer of Lynch Interactive Corporation (multimedia and services) JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Company, -- Director Inc.; Director of Gabelli Advisers, Inc. Age: 61 KARL OTTO POHL5 Since 1992 35 Member of the Shareholder Committee of Director of GAMCO Investors, Director Sal Oppenheim Jr. & Cie (private investment Inc. (investment management); Age: 75 bank); Former President of the Deutsche Chairman, InCentive Capital Bundesbank and Chairman of its Central and InCentive Asset Management Bank Council (1980-1991) (Zurich); Director at Sal Oppenheim Jr. & Cie, Zurich NON-INTERESTED DIRECTORS: - ------------------------ ANTHONY J. COLAVITA Since 1991 37 Partner in the law firm of -- Director Anthony J. Colavita, P.C. Age: 69 VINCENT D. ENRIGHT Since 1991 14 Former Senior Vice President and Chief Director of Aphton Corporation Director Financial Officer of KeySpan Energy (biopharmaceutical company) Age: 61 Corporation (utility holding company) ROBERT J. MORRISSEY Since 1991 10 Partner in the law firm of Morrissey, -- Director Hawkins & Lynch Age: 66 ANTHONY R. PUSTORINO Since 1991 17 Certified Public Accountant; Professor Director of Lynch Corporation Director Emeritus, Pace University (diversified manufacturing) Age: 80 ANTHONIE C. VAN EKRIS Since 1991 21 Chairman of BALMAC International, Inc. Director of Aurado Energy Inc. Director (commodities and futures trading) (oil and gas operations) Age: 71 SALVATORE J. ZIZZA Since 2001 25 Chairman, Hallmark Electrical Director of Hollis Eden Director Supplies Corp. Pharmaceuticals; Director of Age: 59 Earl Scheib, Inc. (automotive services) 22 THE GABELLI SMALL CAP GROWTH FUND ADDITIONAL FUND INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- NUMBER OF NAME, POSITION(S) TERM OF OFFICE FUNDS IN FUND ADDRESS 1 AND LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3 - ---------------- ------------- ----------- ---------------------- ------------------ OFFICERS: - -------- BRUCE N. ALPERT Since 1991 -- Executive Vice President and Chief -- President and Treasurer Operating Officer of Gabelli Funds, Age: 53 LLC since 1988; Director and President of Gabelli Advisers, Inc. since 1998; Officer of all the registered investment companies in the Gabelli Fund complex JAMES E. MCKEE Since 1995 -- Vice President, General Counsel -- Secretary and Secretary of GAMCO Investors, Age: 42 Inc. since 1999 and GAMCO Asset Management Inc. since 1993; Secretary of all of the registered investment companies advised by Gabelli Advisers, Inc. and Gabelli Funds, LLC PETER D. GOLDSTEIN Since 2004 -- Director of Regulatory Affairs for -- Chief Compliance Officer GAMCO Investors, Inc. since 2004; Age: 52 Chief Compliance Officer of all of the registered investment companies in the Gabelli Fund complex; Vice President of Goldman Sachs Asset Management from 2000-2004; Deputy General Counsel of GAMCO Investors, Inc. from 1998-2000 - ------------------- 1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. 2 Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders, if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Fund's By-Laws and Articles of Incorporation. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. 3 This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e. public companies) or other investment companies registered under the 1940 Act. 4 "Interested person" of the Fund as defined in the Investment Company Act of 1940. Messrs. Gabelli, Gabelli and Pohl are each considered an "interested person" because of their affiliation with Gabelli Funds, LLC which acts as each Fund's investment adviser. Mario J. Gabelli and John D. Gabelli are brothers. 5 Effective November 15, 2005, Mr. Pohl resigned from the Board of Directors and now serves as Director Emeritus. - -------------------------------------------------------------------------------- 2005 TAX NOTICE TO SHAREHOLDERS (Unaudited) For the fiscal year ended September 30, 2005, the Fund paid to shareholders, on December 20, 2004 long-term capital gains totaling $1.15, $1.15, $1.15, and $1.15 per share for Class AAA, Class A, Class B and Class C, respectively. An estimate of qualified dividend income of $8,967,117 was received by the Fund through September 30, 2005 that qualifies for a reduced tax rate pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003. - -------------------------------------------------------------------------------- 23 Gabelli Equity Series Funds, Inc. THE GABELLI SMALL CAP GROWTH FUND One Corporate Center Rye, New York 10580-1422 800-GABELLI 800-422-3554 FAX: 914-921-5118 WEBSITE: WWW.GABELLI.COM E-MAIL: INFO@GABELLI.COM Net Asset Value available daily by calling 800-GABELLI after 6:00 P.M. BOARD OF DIRECTORS Mario J. Gabelli, CFA Karl Otto Pohl CHAIRMAN AND CHIEF FORMER PRESIDENT EXECUTIVE OFFICER DEUTSCHE BUNDESBANK GAMCO INVESTORS, INC. Anthony J. Colavita Anthony R. Pustorino ATTORNEY-AT-LAW CERTIFIED PUBLIC ACCOUNTANT ANTHONY J. COLAVITA, P.C. PROFESSOR EMERITUS PACE UNIVERSITY Vincent D. Enright Anthonie C. van Ekris FORMER SENIOR VICE PRESIDENT CHAIRMAN AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC. KEYSPAN ENERGY CORP. John D. Gabelli Salvatore J. Zizza SENIOR VICE PRESIDENT CHAIRMAN GABELLI & COMPANY, INC. HALLMARK ELECTRICAL SUPPLIES CORP. Robert J. Morrissey ATTORNEY-AT-LAW MORRISSEY, HAWKINS & LYNCH OFFICERS Bruce N. Alpert James E. McKee PRESIDENT AND TREASURER SECRETARY Peter D. Goldstein CHIEF COMPLIANCE OFFICER DISTRIBUTOR Gabelli & Company, Inc. CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT State Street Bank and Trust Company LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP - -------------------------------------------------------------------------------- This report is submitted for the general information of the shareholders of The Gabelli Small Cap Growth Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. - -------------------------------------------------------------------------------- GAB443Q305SR [GRAPHIC OMITTED] PICTURE OF MARIO GABELLI THE GABELLI SMALL CAP GROWTH FUND ANNUAL REPORT SEPTEMBER 30, 2005 THE GABELLI EQUITY INCOME FUND ANNUAL REPORT (A) SEPTEMBER 30, 2005 TO OUR SHAREHOLDERS, Investors continued their appreciation for dividend paying stocks that outperformed broad stock market indices in the third quarter of 2005. The Gabelli Equity Income Fund (Fund) gained 4.51% during the quarter. Calendar year-to-date through September 30th, the Fund gained 6.52% while the Standard & Poor's (S&P) 500 Index rose 2.77% over the same period. Enclosed are the investment portfolio and financial statements as of September 30, 2005. COMPARATIVE RESULTS - ---------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2005 (A)(B) ------------------------------------------------------- Since Year to Inception Quarter Date 1 Year 3 Year 5 Year 10 Year (1/2/92) ----------------------------------------------------------------------- GABELLI EQUITY INCOME FUND CLASS AAA ....... 4.51% 6.52% 16.09% 19.21% 8.32% 12.04% 12.24% S&P 500 Index .............................. 3.60 2.77 12.25 16.71 (1.49) 9.49 10.31 Nasdaq Composite Index ..................... 4.61 (1.09) 13.44 22.45 (10.14) 7.00 9.92 Lipper Equity Income Fund Average .......... 3.41 4.46 13.69 16.69 4.10 9.23 10.50 Class A .................................... 4.46 6.36 15.99 19.16 8.29 12.03 12.23 (1.57)(c) 0.22(c) 9.32(c) 16.82(c) 7.00(c) 11.36(c) 11.75(c) Class B .................................... 4.33 5.88 15.28 18.67 8.03 11.89 12.13 (0.67)(d) 0.88(d) 10.28(d) 17.96(d) 7.73(d) 11.89(d) 12.13(d) Class C .................................... 4.33 5.88 15.24 18.71 8.05 11.90 12.14 3.33(d) 4.88(d) 14.24(d) 18.71(d) 8.05(d) 11.90(d) 12.14(d) (a) THE FUND'S FISCAL YEAR ENDS SEPTEMBER 30. (b) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS. TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND ARE NET OF EXPENSES. INVESTMENT RETURNS AND THE PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PRESENTED. VISIT WWW.GABELLI.COM FOR PERFORMANCE INFORMATION AS OF THE MOST RECENT MONTH END. INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS AND CHARGES AND EXPENSES OF THE FUND CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS MORE INFORMATION ABOUT THIS AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING. PERFORMANCE RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE CLASS AAA SHARES' NET ASSET VALUES ARE USED TO CALCULATE PERFORMANCE FOR THE PERIODS PRIOR TO THE ISSUANCE OF CLASS A SHARES, CLASS B SHARES AND CLASS C SHARES ON DECEMBER 31, 2003. THE ACTUAL PERFORMANCE FOR THE CLASS B SHARES AND CLASS C SHARES WOULD HAVE BEEN LOWER DUE TO THE ADDITIONAL EXPENSES ASSOCIATED WITH THESE CLASSES OF SHARES. THE S&P 500 INDEX OF THE LARGEST U.S. COMPANIES AND THE NASDAQ COMPOSITE INDEX ARE UNMANAGED INDICATORS OF STOCK MARKET PERFORMANCE, WHILE THE LIPPER AVERAGE REFLECTS THE AVERAGE PERFORMANCE OF MUTUAL FUNDS CLASSIFIED IN THIS PARTICULAR CATEGORY. DIVIDENDS ARE CONSIDERED REINVESTED (EXCEPT FOR THE NASDAQ COMPOSITE INDEX). (c) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF THE PERIOD. (d) INCLUDES THE EFFECT OF THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE AT THE END OF THE PERIOD SHOWN FOR CLASS B AND CLASS C SHARES, RESPECTIVELY. CLASS B SHARES ARE NOT AVAILABLE FOR NEW PURCHASES. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- We have separated the portfolio manager's commentary from the financial statements and investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that the content of the portfolio manager's commentary is unrestricted. The financial statements and investment portfolio are mailed separately from the commentary. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com/funds. - -------------------------------------------------------------------------------- PERFORMANCE DISCUSSION Higher yielding equities outperformed the broad based market indices during the twelve month period ended September 30, 2005. Utility stocks performed exceptionally well, with the Dow Jones Utilities Average surging sharply. In general, the Fund's utilities holdings contributed to returns, as did our energy, construction and construction equipment, and in the past three months, gold mining investments. Weakness in consumer oriented investments restrained returns. The Fund's return of 16.09% during the fiscal year ended September 30, 2005 significantly outperformed the Standard & Poor 500 gain of 12.25% over the same period. Energy companies dominated the first page of our performance rankings, with Burlington Resources, Devon Energy, Kerr-McGee, Suncor, Statoil ASA, ConocoPhillips, Anadarko Petroleum, Transocean, and Chevron Corp. posting the biggest gains. Stellar utilities performers included Constellation Energy, Allegheny Energy, and Scottish Power. Gold miners Freeport-McMoRan Copper & Gold and Newmont Mining also recovered in the last quarter of the fiscal year. Consumer oriented companies, which sold off as investors began worrying about a decline in consumer spending, were among our disappointments, with Avon Products, Wal-Mart, H J Heinz, Hilton Hotels and the Hershey Company declining. Insurer Allstate Company took a battering from Katrina and Rita. Health Care holdings Pfizer, Merck, Eli Lilly, and Abbott Labs restrained returns. [GRAPHIC OMITTED] PLOT POINTS FOLLOW: COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GABELLI EQUITY INCOME FUND CLASS AAA, THE LIPPER EQUITY INCOME FUND AVERAGE, AND THE S&P 500 INDEX Gabelli Equity Income Fund Lipper Equity (Class AAA) Income Fund Average S&P 500 Index 1/2/92 10,000 10,000 10,000 9/30/92 10,582 10,601 10,242 9/30/93 12,752 12,554 11,570 9/30/94 13,173 12,748 11,996 9/30/95 15,708 15,429 15,560 9/30/96 18,323 17,974 18,722 9/30/97 24,549 23,632 26,291 9/30/98 25,281 24,459 28,679 9/30/99 30,291 27,673 36,648 9/30/00 32,839 30,539 41,512 9/30/01 32,694 28,228 30,465 9/30/02 28,908 23,570 24,229 9/30/03 36,017 28,352 30,134 9/30/04 42,187 33,079 34,310 9/30/05 48,975 37,607 38,513 - -------------------------------------------------------------------------------- Average Annual Total Return* - -------------------------------------------------------------------------------- 1 Year 5 Year 10 Year Life of Fund - -------------------------------------------------------------------------------- Class AAA 16.09% 8.32% 12.04% 12.24% - -------------------------------------------------------------------------------- * Past performance is not predictive of future results. The performance tables and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 2 THE GABELLI EQUITY INCOME FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) For the Six Month Period from April 1, 2005 through September 30, 2005 EXPENSE TABLE - -------------------------------------------------------------------------------- We believe it is important for you to understand the impact of fees and expenses regarding your investment. All mutual funds have operating expenses. As a shareholder of a fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund's gross income, directly reduce the investment return of a fund. When a fund's expenses are expressed as a percentage of its average net assets, this figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period. The Expense Table below illustrates your Fund's costs in two ways: ACTUAL FUND RETURN: This section provides information about actual account values and actual expenses. You may use this section to help you to estimate the actual expenses that you paid over the period after any fee waivers and expense reimbursements. The "Ending Account Value" shown is derived from the Fund's ACTUAL return during the past six months, and the "Expenses Paid During Period" shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading "Expenses Paid During Period" to estimate the expenses you paid during this period. HYPOTHETICAL 5% RETURN: This section provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio. It assumes a hypothetical annualized return of 5% before expenses during the period shown. In this case -- because the hypothetical return used is NOT the Fund's actual return -- the results do not apply to your investment and you cannot use the hypothetical account value and expense to estimate the actual ending account balance or expenses you paid for the period. This example is useful in making comparisons of the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), redemption fees, or exchange fees, if any, which are described in the Prospectus. If these costs were applied to your account, your costs would be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The "Annualized Expense Ratio" represents the actual expenses for the last six months and may be different from the expense ratio in the Financial Highlights which is for the year ended September 30, 2005. Beginning Ending Annualized Expenses Account Value Account Value Expense Paid During 04/01/05 09/30/05 Ratio Period* - -------------------------------------------------------------------------------- GABELLI EQUITY INCOME FUND - -------------------------------------------------------------------------------- ACTUAL FUND RETURN Class AAA $1,000.00 $1,062.70 1.48% $ 7.65 Class A $1,000.00 $1,061.70 1.50% $ 7.75 Class B $1,000.00 $1,058.80 2.23% $11.51 Class C $1,000.00 $1,058.80 2.24% $11.56 HYPOTHETICAL 5% RETURN Class AAA $1,000.00 $1,017.65 1.48% $ 7.49 Class A $1,000.00 $1,017.55 1.50% $ 7.59 Class B $1,000.00 $1,013.89 2.23% $11.26 Class C $1,000.00 $1,013.84 2.24% $11.31 * Expenses are equal to the Fund's annualized expense ratio for the last six months multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. 3 SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED) The following table presents portfolio holdings as a percent of total net assets. THE GABELLI EQUITY INCOME FUND Financial Services ................................. 10.7% Energy and Utilities: Oil .......................... 10.1% Food and Beverage .................................. 8.7% Energy and Utilities: Integrated ................... 8.6% Health Care ........................................ 6.8% Consumer Products .................................. 6.5% U.S. Government Obligations ........................ 4.8% Telecommunications ................................. 4.8% Diversified Industrial ............................. 3.2% Energy and Utilities: Electric ..................... 3.1% Communications Equipment ........................... 2.8% Retail ............................................. 2.7% Automotive: Parts and Accessories .................. 2.7% Entertainment ...................................... 2.3% Hotels and Gaming .................................. 2.1% Specialty Chemicals ................................ 1.9% Computer Software and Services ..................... 1.8% Equipment and Supplies ............................. 1.7% Publishing ......................................... 1.6% Energy and Utilities: Natural Gas .................. 1.6% Metals and Mining .................................. 1.5% Computer Hardware .................................. 1.4% Aviation: Parts and Services ....................... 1.4% Electronics ........................................ 1.3% Cable and Satellite ................................ 1.0% Aerospace .......................................... 0.9% Broadcasting ....................................... 0.7% Environmental Services ............................. 0.5% Business Services .................................. 0.5% Energy and Utilities: Services ..................... 0.4% Machinery .......................................... 0.4% Manufactured Housing ............................... 0.4% Transportation ..................................... 0.2% Consumer Services .................................. 0.2% Energy and Utilities: Water ........................ 0.1% Other Assets and Liabilities -- Net ................ 0.6% ------ 100.0% ====== THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q, THE LAST OF WHICH WAS FILED FOR THE QUARTER ENDED JUNE 30, 2005. SHAREHOLDERS MAY OBTAIN THIS INFORMATION AT WWW.GABELLI.COM OR BY CALLING THE FUND AT 800-GABELLI (800-422-3554). THE FUND'S FORM N-Q IS AVAILABLE ON THE SEC'S WEBSITE AT WWW.SEC.GOV AND MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PROXY VOTING The Fund files Form N-PX with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. A description of the Fund's proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities are available without charge, upon request, (i) by calling 800-GABELLI (800-422-3554); (ii) by writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; and (iii) by visiting the Securities and Exchange Commission's website at www.sec.gov. 4 THE GABELLI EQUITY INCOME FUND SCHEDULE OF INVESTMENTS -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------- COMMON STOCKS -- 90.0% AEROSPACE -- 0.9% 32,000 Boeing Co. ...............$ 1,082,148 $ 2,174,400 3,000 Lockheed Martin Corp. .... 71,025 183,120 10,000 Northrop Grumman Corp. ... 307,750 543,500 10,000 Raytheon Co. ............. 279,250 380,200 2,000 Rockwell Automation Inc. . 25,686 105,800 2,000 Rockwell Collins Inc. .... 15,843 96,640 300,000 Rolls-Royce Group plc+ ... 1,736,923 1,976,329 ------------ ------------ 3,518,625 5,459,989 ------------ ------------ AGRICULTURE -- 0.0% 3,000 Mosaic Co.+ .............. 47,051 48,060 ------------ ------------ AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.1% 1,000 ArvinMeritor Inc. ........ 10,487 16,720 100,000 Dana Corp. ............... 1,459,536 941,000 195,000 Genuine Parts Co. ........ 6,567,473 8,365,500 4,000 Johnson Controls Inc. .... 101,475 248,200 50,000 Modine Manufacturing Co. . 837,216 1,834,000 40,000 Pep Boys - Manny, Moe & Jack ............. 530,982 553,600 14,140 Proliance International Inc.+ .... 47,310 77,487 ------------ ------------ 9,554,479 12,036,507 ------------ ------------ AVIATION: PARTS AND SERVICES -- 0.6% 5,000 Barnes Group Inc. ........ 94,945 179,300 23,096 Curtiss-Wright Corp. ..... 349,651 1,425,254 40,000 GenCorp Inc.+ ............ 342,710 746,000 16,000 United Technologies Corp. 281,946 829,440 ------------ ------------ 1,069,252 3,179,994 ------------ ------------ BROADCASTING -- 0.0% 26,000 Granite Broadcasting Corp.+ .... 10,806 10,140 ------------ ------------ BUSINESS SERVICES -- 0.1% 4,000 Automatic Data Processing Inc. ........ 126,808 172,160 4,000 Donnelley (R.H.) Corp.+ .. 45,250 253,040 500 Imation Corp. ............ 7,150 21,435 4,000 Landauer Inc. ............ 134,546 196,000 ------------ ------------ 313,754 642,635 ------------ ------------ CABLE AND SATELLITE -- 1.0% 120,002 Cablevision Systems Corp., Cl. A+ ................. 2,573,156 3,680,461 36,000 DIRECTV Group Inc.+ ...... 429,789 539,280 62,000 EchoStar Communications Corp., Cl. A ........... 1,892,953 1,833,340 ------------ ------------ 4,895,898 6,053,081 ------------ ------------ COMMUNICATIONS EQUIPMENT -- 1.5% 185,000 Corning Inc.+ ............ 2,111,216 3,576,050 115,000 Motorola Inc. ............ 1,077,984 2,540,350 72,600 Thomas & Betts Corp.+ .... 1,584,824 2,498,166 ------------ ------------ 4,774,024 8,614,566 ------------ ------------ MARKET SHARES COST VALUE ------ ---- ------- COMPUTER HARDWARE -- 1.4% 100,000 International Business Machines Corp. .........$ 7,865,559 $ 8,022,000 13,000 Xerox Corp.+ ............. 126,343 177,450 ------------ ------------ 7,991,902 8,199,450 ------------ ------------ COMPUTER SOFTWARE AND SERVICES -- 1.8% 2,000 EMC Corp.+ ............... 19,360 25,880 310,000 Microsoft Corp. .......... 7,917,271 7,976,300 154 Telecom Italia Media SpA+ ............. 205 101 82,000 Yahoo! Inc.+ ............. 2,880,114 2,774,880 ------------ ------------ 10,816,950 10,777,161 ------------ ------------ CONSUMER PRODUCTS -- 6.5% 35,000 Altria Group Inc. ........ 1,127,729 2,579,850 210,000 Avon Products Inc. ....... 7,001,433 5,670,000 12,000 Clorox Co. ............... 659,946 666,480 10,000 Colgate-Palmolive Co. .... 526,302 527,900 45,000 Eastman Kodak Co. ........ 1,078,017 1,094,850 35,000 Energizer Holdings Inc.+ . 880,148 1,984,500 94,700 Gallaher Group plc, ADR .. 2,711,252 5,879,923 23,000 National Presto Industries Inc. ........ 719,726 984,630 10,000 Pactiv Corp.+ ............ 161,895 175,200 38,000 Procter & Gamble Co. ..... 1,393,252 2,259,480 80,000 Reckitt Benckiser plc .... 2,496,753 2,436,855 26,000 Rothmans Inc. ............ 237,941 483,544 940,500 Swedish Match AB ......... 9,972,140 11,219,315 26,000 Unilever NV, ADR ......... 1,542,066 1,857,700 10,000 UST Inc. ................. 364,903 418,600 ------------ ------------ 30,873,503 38,238,827 ------------ ------------ CONSUMER SERVICES -- 0.2% 15,000 IAC/InterActiveCorp+ ..... 402,676 380,250 46,200 Rollins Inc. ............. 397,779 901,824 ------------ ------------ 800,455 1,282,074 ------------ ------------ DIVERSIFIED INDUSTRIAL -- 3.1% 5,000 3M Co. ................... 213,645 366,800 22,000 Acuity Brands Inc. ....... 342,225 652,740 35,000 Cooper Industries Ltd., Cl. A .................. 1,532,038 2,419,900 165,000 General Electric Co. ..... 4,696,066 5,555,550 5,000 Harbor Global Co. Ltd.+ .. 24,172 45,500 160,000 Honeywell International Inc. ..... 4,585,789 6,000,000 2,000 ITT Industries Inc. ...... 216,040 227,200 4,000 Trinity Industries Inc. .. 82,100 161,960 55,000 Tyco International Ltd. .. 1,433,388 1,531,750 30,001 WHX Corp.+ ............... 434,042 330,010 15,000 York International Corp. . 844,832 841,050 ------------ ------------ 14,404,337 18,132,460 ------------ ------------ See accompanying notes to financial statements. 5 THE GABELLI EQUITY INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------- COMMON STOCKS (CONTINUED) ELECTRONICS -- 1.3% 10,000 Freescale Semiconductor Inc., Cl. B+ .................$ 81,750 $ 235,800 33,000 Intel Corp. .............. 724,024 813,450 185,000 Texas Instruments Inc. ... 4,117,769 6,271,500 15,000 Thermo Electron Corp.+ ... 325,333 463,500 ------------ ------------ 5,248,876 7,784,250 ------------ ------------ ENERGY AND UTILITIES: ELECTRIC -- 2.9% 80,000 AES Corp.+ ............... 268,400 1,314,400 22,000 American Electric Power Co. Inc. ......... 653,980 873,400 100,000 Cinergy Corp. ............ 3,272,016 4,441,000 16,000 DTE Energy Co. ........... 695,800 733,760 95,000 El Paso Electric Co.+ .... 746,352 1,980,750 68,000 FPL Group Inc. ........... 2,305,300 3,236,800 40,000 Great Plains Energy Inc. . 905,160 1,196,400 30,000 Korea Electric Power Corp., ADR ............. 456,465 531,300 120,000 Northeast Utilities ...... 2,261,119 2,394,000 7,000 UIL Holdings Corp. ....... 245,744 366,170 ------------ ------------ 11,810,336 17,067,980 ------------ ------------ ENERGY AND UTILITIES: INTEGRATED -- 8.5% 42,000 Allegheny Energy Inc.+ ... 395,405 1,290,240 200,000 Aquila Inc.+ ............. 557,773 792,000 44,000 BP plc, ADR .............. 1,030,211 3,117,400 84,000 Burlington Resources Inc. 1,618,222 6,830,880 44,000 CH Energy Group Inc. ..... 1,809,289 2,089,120 70,000 Constellation Energy Group 1,664,815 4,312,000 1,000 Dominion Resources Inc. .. 48,852 86,140 80,000 Duke Energy Corp. ........ 1,421,650 2,333,600 150,000 Duquesne Light Holdings Inc. .......... 2,318,392 2,581,500 200,000 El Paso Corp. ............ 1,995,518 2,780,000 10,000 Electrabel SA ............ 5,045,088 5,011,718 38,000 Endesa SA ................ 984,188 1,017,079 150,000 Energy East Corp. ........ 3,071,332 3,778,500 29,000 Eni SpA .................. 304,221 861,234 80,000 NSTAR .................... 1,282,183 2,313,600 10,000 OGE Energy Corp. ......... 249,538 281,000 80,000 Progress Energy Inc. ..... 3,424,284 3,580,000 15,000 Progress Energy Inc., CVO+ ................... 7,800 1,350 6,000 Public Service Enterprise Group Inc. ............. 235,600 386,160 12,000 Scottish Power plc, ADR .. 314,381 482,880 10,000 Suncor Energy Inc. ....... 515,942 605,300 55,000 TECO Energy Inc. ......... 740,886 991,100 17,000 TXU Corp. ................ 377,063 1,918,960 100,000 Westar Energy Inc. ....... 1,504,640 2,413,000 ------------ ------------ 30,917,273 49,854,761 ------------ ------------ MARKET SHARES COST VALUE ------ ---- ------- ENERGY AND UTILITIES: NATURAL GAS -- 1.6% 20,000 AGL Resources Inc. .......$ 388,379 $ 742,200 30,000 Atmos Energy Corp. ....... 707,125 847,500 25,000 National Fuel Gas Co. .... 519,678 855,000 40,000 ONEOK Inc. ............... 713,017 1,360,800 5,000 Peoples Energy Corp. ..... 185,826 196,900 24,000 Piedmont Natural Gas Co. Inc. ........... 394,017 604,080 40,000 SEMCO Energy Inc.+ ....... 282,604 263,600 66,150 Southern Union Co.+ ...... 845,950 1,704,686 100,000 Southwest Gas Corp. ...... 1,777,547 2,739,000 ------------ ------------ 5,814,143 9,313,766 ------------ ------------ ENERGY AND UTILITIES: OIL -- 10.1% 5,000 Anadarko Petroleum Corp. . 340,506 478,750 189,873 Chevron Corp. ............ 8,674,862 12,290,479 116,000 ConocoPhillips ........... 3,187,718 8,109,560 14,000 Cooper Cameron Corp.+ .... 804,246 1,035,020 30,000 Devon Energy Corp. ....... 692,247 2,059,200 150,000 Exxon Mobil Corp. ........ 4,749,795 9,531,000 12,608 Kerr-McGee Corp. ......... 562,893 1,224,363 8,000 Murphy Oil Corp. ......... 363,913 398,960 50,000 Occidental Petroleum Corp. .................. 3,867,861 4,271,500 8,500 PetroChina Co. Ltd., ADR .................... 548,251 708,645 30,000 Repsol YPF SA, ADR ....... 631,290 969,300 118,000 Royal Dutch Shell plc, Cl. A, ADR ............. 5,402,372 7,745,520 70,000 Spinnaker Exploration Co.+ ................... 4,511,478 4,528,300 25,000 Statoil ASA, ADR ......... 327,939 617,250 8,759 Total SA, ADR ............ 299,550 1,189,648 65,000 Transocean Inc.+ ......... 3,660,082 3,985,150 ------------ ------------ 38,625,003 59,142,645 ------------ ------------ ENERGY AND UTILITIES: SERVICES -- 0.4% 14,000 Halliburton Co. .......... 158,327 959,280 16,000 Schlumberger Ltd. ........ 877,456 1,350,080 ------------ ------------ 1,035,783 2,309,360 ------------ ------------ ENERGY AND UTILITIES: WATER -- 0.1% 18,000 Aqua America Inc. ........ 221,672 684,360 ------------ ------------ ENTERTAINMENT -- 2.3% 500,000 Rank Group plc ........... 2,545,364 2,632,460 140,000 The Walt Disney Co. ...... 2,635,231 3,378,200 200,000 Time Warner Inc. ......... 3,280,052 3,622,000 45,000 Viacom Inc., Cl. A ....... 1,511,987 1,494,900 70,000 Vivendi Universal SA, ADR ................ 2,191,124 2,291,100 ------------ ------------ 12,163,758 13,418,660 ------------ ------------ ENVIRONMENTAL SERVICES -- 0.5% 110,000 Waste Management Inc. .... 2,910,484 3,147,100 ------------ ------------ See accompanying notes to financial statements. 6 THE GABELLI EQUITY INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------- COMMON STOCKS (CONTINUED) EQUIPMENT AND SUPPLIES -- 1.7% 76,000 Flowserve Corp.+ .........$ 1,983,884 $ 2,762,600 11,000 Imagistics International Inc.+ .................. 212,935 460,350 6,000 Ingersoll-Rand Co. Ltd., Cl. A ............ 125,173 229,380 1,500 Minerals Technologies Inc. ................... 37,938 85,815 30,000 Mueller Industries Inc. .. 1,320,222 833,100 4,000 Parker Hannifin Corp. .... 211,599 257,240 13,000 Smith (A.O.) Corp. ....... 275,717 370,500 1,000,000 Tomkins plc .............. 4,854,126 5,097,359 ------------ ------------ 9,021,594 10,096,344 ------------ ------------ FINANCIAL SERVICES -- 10.7% 6,400 Alleghany Corp.+ ......... 1,116,610 1,958,400 1,000 Allstate Corp. ........... 33,300 55,290 165,000 American Express Co. ..... 7,517,628 9,477,600 40,000 American International Group Inc. ............. 2,553,571 2,478,400 39,000 Argonaut Group Inc.+ ..... 789,154 1,053,390 25,000 Banco Popular Espanol SA ............. 185,939 304,669 18,000 Banco Santander Central Hispano SA, ADR ........ 64,963 237,060 2,000 Banco Santander Chile SA, ADR ................ 29,250 87,740 100,000 Bank of America Corp. .... 1,890,574 4,210,000 44,000 Bank of New York Co. Inc. ............... 1,423,658 1,294,040 30,000 Bankgesellschaft Berlin AG+ ............. 201,349 107,806 8,000 Banque Nationale de Paris SA ............ 296,835 608,137 3,000 Bear Stearns Companies Inc. ......... 227,630 329,250 170,000 Citigroup Inc. ........... 7,733,750 7,738,400 40,000 Commerzbank AG, ADR ...... 855,073 1,098,584 35,000 Deutsche Bank AG ......... 1,966,016 3,273,200 2,000 Dun and Bradstreet Corp.+ ...... 20,476 131,740 2,000 Fannie Mae ............... 110,475 89,640 16,000 Fidelity Southern Corp. ......... 153,870 278,400 30,000 H&R Block Inc. ........... 723,860 719,400 25,000 Huntington Bancshares Inc. ........ 407,250 561,750 82,080 JPMorgan Chase & Co. ..... 2,489,151 2,784,975 1,000 KeyCorp .................. 30,270 32,250 16,000 Leucadia National Corp. ......... 349,910 689,600 1,000 Manulife Financial Corp. ........ 24,694 53,320 110,000 MBNA Corp. ............... 2,870,698 2,710,400 55,000 Mellon Financial Corp. .................. 1,528,208 1,758,350 13,000 Merrill Lynch & Co. Inc. ............... 525,900 797,550 8,000 Moody's Corp. ............ 64,841 408,640 5,000 Morgan Stanley ........... 256,570 269,700 3,000 Municipal Mortgage & Equity, LLC ............ 60,488 74,910 6,000 Northern Trust Corp. ..... 60,300 303,300 50,000 Phoenix Companies Inc. ... 650,511 610,000 45,000 PNC Financial Services Group Inc. ............. 1,905,739 2,610,900 MARKET SHARES COST VALUE ------ ---- ------- 43,000 Popular Inc. .............$ 1,113,805 $ 1,041,460 500 Raiffeisen International Bank Holding AG+ ............ 28,874 33,381 5,000 Schwab (Charles) Corp. ... 77,500 72,150 36,000 St. Paul Travelers Companies Inc. ......... 1,429,504 1,615,320 108,000 Sterling Bancorp ......... 1,456,021 2,431,080 12,000 SunTrust Banks Inc. ...... 251,738 833,400 20,000 T. Rowe Price Group Inc. ............. 896,910 1,306,000 47,000 Unitrin Inc. ............. 1,403,702 2,230,620 10,000 Wachovia Corp. ........... 294,250 475,900 60,000 Waddell & Reed Financial Inc., Cl. A .................. 1,151,502 1,161,600 65,000 Wilmington Trust Corp. ... 2,027,583 2,369,250 ------------ ------------ 49,249,900 62,766,952 ------------ ------------ FOOD AND BEVERAGE -- 8.7% 20,000 Anheuser-Busch Companies Inc. ......... 891,708 860,800 25,000 Brown-Forman Corp., Cl. A .................. 1,452,221 1,543,750 60,000 Cadbury Schweppes plc, ADR ............... 1,763,992 2,443,800 35,000 Campbell Soup Co. ........ 794,372 1,041,250 40,000 Coca-Cola Amatil Ltd., ADR .............. 246,845 483,236 170,000 Coca-Cola Co. ............ 7,500,134 7,342,300 15,000 Coca-Cola Femsa SA de CV, ADR ............. 388,903 400,650 20,000 Corn Products International Inc. ..... 260,071 403,400 60,000 Del Monte Foods Co.+ ..... 555,763 643,800 56,000 Diageo plc, ADR .......... 2,330,906 3,248,560 150,000 Dreyer's Grand Ice Cream Holdings Inc., Cl. A .................. 12,097,736 12,313,500 35,000 Fomento Economico Mexicano SA de CV, ADR ............. 1,594,434 2,447,200 135,000 General Mills Inc. ....... 6,554,577 6,507,000 20,000 Groupe Danone, ADR ....... 382,144 436,000 600,000 Grupo Bimbo SA de CV, Cl. A .................. 1,781,670 1,952,775 1,000 Heineken NV .............. 32,967 32,101 110,000 Heinz (H.J.) Co. ......... 3,888,933 4,019,400 4,000 Hershey Co. .............. 120,014 225,240 5,000 Kellogg Co. .............. 149,740 230,650 10,000 Nestle SA ................ 2,083,075 2,927,658 24,016 Pernod Ricard SA, ADR .... 1,018,278 1,063,366 12,889 Tootsie Roll Industries Inc. ........ 339,619 409,226 ------------ ------------ 46,228,102 50,975,662 ------------ ------------ HEALTH CARE -- 6.8% 8,000 Abbott Laboratories ...... 298,164 339,200 50,000 Baxter International Inc. ..... 1,430,911 1,993,500 16,000 Becton, Dickinson & Co. ........ 491,573 838,880 500 Bio-Rad Laboratories Inc., Cl. B+ ................. 20,960 27,418 100,000 Bristol-Myers Squibb Co. ............. 2,590,402 2,406,000 See accompanying notes to financial statements. 7 THE GABELLI EQUITY INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------- COMMON STOCKS (CONTINUED) HEALTH CARE (CONTINUED) 120,000 Eli Lilly & Co. ..........$ 6,927,320 $ 6,422,400 11,276 GlaxoSmithKline plc, ADR ............... 515,984 578,233 25,000 Henry Schein Inc.+ ....... 631,852 1,065,500 55,000 Hospira Inc.+ ............ 1,916,319 2,253,350 20,000 Johnson & Johnson ........ 1,034,361 1,265,600 24,851 Medco Health Solutions Inc.+ ........ 954,446 1,362,580 93,000 Merck & Co. Inc. ......... 3,338,476 2,530,530 1,000 Nobel Biocare Holding AG ............. 139,480 235,603 5,000 Orthofix International NV+ ...... 162,394 218,000 390,000 Pfizer Inc. .............. 11,730,894 9,738,300 36,400 Priority Healthcare Corp., Cl. B+ ................. 1,010,182 1,014,104 50,000 Renal Care Group Inc.+ ... 2,316,397 2,366,000 150,000 Schering-Plough Corp. .... 2,779,186 3,157,500 90,000 Tenet Healthcare Corp.+ .. 1,047,155 1,010,700 20,000 William Demant Holding A/S+ ........... 983,839 937,311 4,000 Zimmer Holdings Inc.+ .... 257,651 275,560 ------------ ------------ 40,577,946 40,036,269 ------------ ------------ HOTELS AND GAMING -- 2.1% 20,000 Argosy Gaming Co.+ ....... 937,678 939,800 1,500,000 Hilton Group plc ......... 7,677,943 8,320,689 50,000 Hilton Hotels Corp. ...... 867,453 1,116,000 30,000 Starwood Hotels & Resorts Worldwide Inc. ......... 755,965 1,715,100 ------------ ------------ 10,239,039 12,091,589 ------------ ------------ MACHINERY -- 0.4% 6,000 Caterpillar Inc. ......... 35,181 352,500 31,000 Deere & Co. .............. 752,487 1,897,200 ------------ ------------ 787,668 2,249,700 ------------ ------------ MANUFACTURED HOUSING -- 0.4% 140,000 Champion Enterprises Inc.+ ...... 1,407,727 2,069,200 ------------ ------------ METALS AND MINING -- 1.3% 27,000 Fording Canadian Coal Trust (Toronto) .............. 179,580 1,151,303 55,875 Freeport-McMoRan Copper & Gold Inc., Cl. B ..... 1,202,109 2,714,966 25,000 Inco Ltd. ................ 940,875 1,183,750 55,000 Newmont Mining Corp. ..... 1,888,650 2,594,350 ------------ ------------ 4,211,214 7,644,369 ------------ ------------ PUBLISHING -- 1.6% 28,000 Dow Jones & Co. Inc. ..... 1,208,829 1,069,320 11,000 Knight-Ridder Inc. ....... 725,310 645,480 8,000 McClatchy Co., Cl. A ..... 535,089 521,840 20,000 McGraw-Hill Companies Inc. ......... 502,221 960,800 10,000 New York Times Co., Cl. A .................. 316,599 297,500 45,000 News Corp., Cl. A ........ 532,836 701,550 6,016 News Corp., Cl. B ........ 70,880 99,264 MARKET SHARES COST VALUE ------ ---- ------- 100,000 Reader's Digest Association Inc. .......$ 1,360,932 $ 1,597,000 4,000 Scripps (E.W.) Co., Cl. A .................. 190,285 199,880 406 Seat Pagine Gialle SpA+ .. 1,350 200 75,000 Tribune Co. .............. 3,267,986 2,541,750 1,200 Washington Post Co., Cl. B .................. 700,030 963,000 ------------ ------------ 9,412,347 9,597,584 ------------ ------------ REAL ESTATE -- 0.0% 5,000 Griffin Land & Nurseries Inc.+ ........ 71,716 122,500 ------------ ------------ RETAIL -- 2.7% 200,000 Albertson's Inc. ......... 4,486,885 5,130,000 25,000 Costco Wholesale Corp. ... 1,129,071 1,077,250 5,000 Ingles Markets Inc., Cl. A .................. 64,548 79,000 20,000 Neiman Marcus Group Inc., Cl. A .................. 1,986,580 1,999,000 10,000 Neiman Marcus Group Inc., Cl. B .................. 871,268 998,300 150,000 Safeway Inc. ............. 3,114,997 3,840,000 500 Sears Holdings Corp.+ .... 40,732 62,210 6,000 The Home Depot Inc. ...... 127,998 228,840 50,000 Wal-Mart Stores Inc. ..... 2,448,976 2,191,000 10,000 Weis Markets Inc. ........ 300,480 400,100 ------------ ------------ 14,571,535 16,005,700 ------------ ------------ SPECIALTY CHEMICALS -- 1.9% 20,000 Albemarle Corp. .......... 434,626 754,000 15,000 Chemtura Corp. ........... 153,100 186,300 10,000 Dow Chemical Co. ......... 360,656 416,700 70,000 E.I. du Pont de Nemours and Co. ................ 3,223,868 2,741,900 80,000 Ferro Corp. .............. 1,621,567 1,465,600 13,900 Hercules Inc.+ ........... 201,293 169,858 65,000 Monsanto Co. ............. 1,101,588 4,078,750 6,000 NewMarket Corp.+ ......... 23,156 104,040 22,700 Omnova Solutions Inc.+ ... 171,320 99,199 4,000 Quaker Chemical Corp. .... 79,615 69,520 63,000 Sensient Technologies Corp. ..... 1,308,801 1,193,850 ------------ ------------ 8,679,590 11,279,717 ------------ ------------ TELECOMMUNICATIONS -- 4.6% 6,000 ALLTEL Corp. ............. 307,225 390,660 300,000 AT&T Corp. ............... 6,009,842 5,940,000 70,000 BCE Inc. ................. 1,499,542 1,920,800 50,000 BellSouth Corp. .......... 1,334,747 1,315,000 200,000 BT Group plc ............. 825,179 784,005 30,000 BT Group plc, ADR ........ 1,006,938 1,189,200 50,000 Cable & Wireless plc, ADR ............... 292,432 376,000 250,000 Cincinnati Bell Inc.+ .... 1,473,055 1,102,500 70,000 Citizens Communications Co. ..... 974,745 948,500 60,000 Deutsche Telekom AG, ADR . 1,075,041 1,094,400 15,000 France Telecom SA, ADR ... 436,434 431,250 See accompanying notes to financial statements. 8 THE GABELLI EQUITY INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------- COMMON STOCKS (CONTINUED) TELECOMMUNICATIONS (CONTINUED) 500,000 O2 plc ...................$ 536,816 $ 1,391,191 400,000 Qwest Communications International Inc.+ .... 1,516,049 1,640,000 68,000 SBC Communications Inc. .. 1,982,002 1,629,960 90,000 Sprint Nextel Corp. ...... 1,562,061 2,140,200 3,300 Telecom Italia SpA, ADR .. 31,072 107,580 8,195 Telefonica SA, ADR ....... 80,699 404,177 18,000 TELUS Corp. .............. 293,047 751,123 100,000 Verizon Communications Inc. .... 3,769,983 3,269,000 ------------ ------------ 25,006,909 26,825,546 ------------ ------------ TRANSPORTATION -- 0.2% 35,000 GATX Corp. ............... 880,178 1,384,250 ------------ ------------ TOTAL COMMON STOCKS ...... 418,163,829 528,543,208 ------------ ------------ PREFERRED STOCKS -- 1.2% AUTOMOTIVE -- 0.0% 1,000 Ford Motor Co. Capital Trust II, 6.500% Cv. Pfd. ........ 45,215 36,450 ------------ ------------ AVIATION: PARTS AND SERVICES -- 0.5% 7,000 Coltec Capital Trust, 5.250% Cv. Pfd. ........ 281,500 348,250 25,200 Sequa Corp., $5.00 Cv. Pfd. ......... 2,148,377 2,457,000 ------------ ------------ 2,429,877 2,805,250 ------------ ------------ BROADCASTING -- 0.2% 1,000 Granite Broadcasting Corp., 12.750% Pfd.+ .......... 615,500 160,000 100 Gray Television Inc., 8.000% Cv. Pfd., Ser. C (b)(c)(d) ....... 1,000,000 1,010,000 ------------ ------------ 1,615,500 1,170,000 ------------ ------------ COMMUNICATIONS EQUIPMENT -- 0.2% 1,100 Lucent Technologies Capital Trust I, 7.750% Cv. Pfd. ........ 759,000 1,113,750 ------------ ------------ ENERGY AND UTILITIES: INTEGRATED -- 0.1% 300 El Paso Corp., 4.990% Cv. Pfd. (b) .... 293,192 368,689 ------------ ------------ ENTERTAINMENT -- 0.0% 3,000 Metromedia International Group Inc., 7.250% Cv. Pfd.+ ....... 5,310 118,500 ------------ ------------ TELECOMMUNICATIONS -- 0.2% 33,000 Cincinnati Bell Inc., 6.750% Cv. Pfd., Ser. B 918,893 1,442,100 ------------ ------------ TOTAL PREFERRED STOCKS ... 6,066,987 7,054,739 ------------ ------------ MARKET SHARES COST VALUE ------ ---- ------- WARRANTS -- 0.2% BUSINESS SERVICES -- 0.2% 250,000 GP Strategies Corp., expire 08/14/08+ (c)(d) $ 637,065 $ 929,126 ------------ ------------ DIVERSIFIED INDUSTRIAL -- 0.0% 379,703 National Patent Development Corp., expire 08/14/08+ (c)(d) ....... 0 146,241 3,625 WHX Corp., expire 02/28/08+ .............. 14,170 9,516 ------------ ------------ 14,170 155,757 ------------ ------------ TOTAL WARRANTS ........... 651,235 1,084,883 ------------ ------------ PRINCIPAL AMOUNT ------ CORPORATE BONDS -- 3.2% AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.6% $ 3,000,000 Pep Boys - Manny, Moe & Jack, Cv., 4.250%, 06/01/07 ....... 2,977,554 2,925,000 800,000 Standard Motor Products Inc., Sub. Deb. Cv., 6.750%, 07/15/09 ....... 680,593 712,000 ------------ ------------ 3,658,147 3,637,000 ------------ ------------ AVIATION: PARTS AND SERVICES -- 0.3% 1,400,000 GenCorp Inc., Sub. Deb. Cv., 5.750%, 04/15/07 ....... 1,360,776 1,538,250 ------------ ------------ BROADCASTING -- 0.5% 2,550,000 Sinclair Broadcast Group Inc., Sub. Deb. Cv., 6.000%, 09/15/12 ....... 2,078,534 2,244,000 500,000 Sinclair Broadcast Group Inc., Sub. Deb. Cv., 4.875%, 07/15/18 ....... 444,299 449,375 ------------ ------------ 2,522,833 2,693,375 ------------ ------------ BUSINESS SERVICES -- 0.2% 100,000 BBN Corp., Sub. Deb. Cv., 6.000%, 04/01/12+ (a)(c) 97,500 0 2,000,000 GP Strategies Corp., Sub. Deb., 6.000%, 08/14/08 (c)(d) 1,552,703 1,339,125 ------------ ------------ 1,650,203 1,339,125 ------------ ------------ COMMUNICATIONS EQUIPMENT -- 1.1% 3,000,000 Agere Systems Inc., Sub. Deb. Cv., 6.500%, 12/15/09 ....... 2,920,873 3,015,000 3,500,000 Nortel Networks Corp., Cv., 4.250%, 09/01/08 ....... 3,375,169 3,311,875 ------------ ------------ 6,296,042 6,326,875 ------------ ------------ DIVERSIFIED INDUSTRIAL -- 0.1% 500,000 EDO Corp., Sub. Deb. Cv., 5.250%, 04/15/07 ....... 514,745 514,375 ------------ ------------ See accompanying notes to financial statements. 9 THE GABELLI EQUITY INCOME FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COST VALUE -------- ---- ------- CORPORATE BONDS (CONTINUED) ENERGY AND UTILITIES: ELECTRIC -- 0.2% $ 1,200,000 Mirant Corp., Deb. Cv., 2.500%, 06/15/21+ (a) ..$ 886,921 $ 1,242,000 ------------ ------------ HEALTH CARE -- 0.0% 200,000 Twin Laboratories Inc., Sub. Deb., 10.250%, 05/15/06+ (a) . 77,159 12,000 ------------ ------------ METALS AND MINING -- 0.2% 1,000,000 Inco Ltd., Cv., Zero Coupon, 03/29/21 .. 997,560 1,262,500 ------------ ------------ TOTAL CORPORATE BONDS .... 17,964,386 18,565,500 ------------ ------------ U.S. GOVERNMENT OBLIGATIONS -- 4.8% 28,446,000 U.S. Treasury Bills, 3.018% to 3.825%++, 10/06/05 to 03/09/06 ... 28,306,758 28,309,358 ------------ ------------ TOTAL INVESTMENTS -- 99.4% ...$471,153,195 583,557,688 ============ OTHER ASSETS AND LIABILITIES (NET) -- 0.6% .......... 3,573,067 ------------ NET ASSETS -- 100.0% ................. $587,130,755 ============ - ---------------- (a) Security in default. (b) Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2005, the Rule 144A securities are considered liquid and the market value amounted to $1,378,689 or 0.23% of total net assets. (c) Securities fair valued under procedures established by the Board of Directors. The procedures may include reviewing available financial information about the company and reviewing valuation of comparable securities and other factors on a regular basis. At September 30, 2005, the market value of fair valued securities amounted to $3,424,492 or 0.58% of total net assets. (d) At September 30, 2005, the Fund held restricted and illiquid securities amounting to $3,424,492 or 0.58% of net assets, which were valued under methods approved by the Board, as follows: ACQUISITION 09/30/05 SHARES/ CARRYING PRINCIPAL ACQUISITION ACQUISITION VALUE AMOUNT ISSUER DATE COST PER UNIT ------ ------ ----------- ----------- -------- $2,000,000 GP Strategies Corp., Sub. Deb., 6.00%, 08/14/08 .............. 08/08/03 $1,362,935 $ 66.9563 250,000 GP Strategies Corp., Warrants, expire 08/14/08 ..................... 08/08/03 637,065 3.7165 100 Gray Television Inc., 8.000% Cv. Pfd., Ser. C ............ 04/22/02 1,000,000 10,100.0000 379,703 National Patent Development Corp., Warrants, expire 08/14/08 .............. 11/24/04 0.00 0.3851 + Non-income producing security. ++ Represents annualized yield at date of purchase. ADR American Depository Receipt CVO Contingent Value Obligation See accompanying notes to financial statements. 10 THE GABELLI EQUITY INCOME FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- ASSETS: Investments, at value (cost $471,153,195) ........$583,557,688 Foreign currency, at value (cost $25,873) ........ 25,398 Cash ............................................. 30,293 Receivable for Fund shares sold .................. 3,261,399 Dividends and interest receivable ................ 1,208,081 Receivable for investments sold .................. 897,798 Other assets ..................................... 2,658 ------------ TOTAL ASSETS ..................................... 588,983,315 ------------ LIABILITIES: Payable for Fund shares redeemed ................. 843,008 Payable for investment advisory fees ............. 471,862 Payable for investments purchased ................ 187,625 Payable for distribution fees .................... 119,886 Payable for shareholder services fees ............ 70,287 Payable for shareholder communications fees ...... 65,362 Other accrued expenses ........................... 94,530 ------------ TOTAL LIABILITIES ................................ 1,852,560 ------------ NET ASSETS applicable to 31,364,678 shares outstanding .............................$587,130,755 ============ NET ASSETS CONSIST OF: Capital stock, each class at $0.001 par value ....$ 31,365 Additional paid-in capital ....................... 469,747,431 Accumulated (distributions in excess of) net investment income .......................... (61,155) Accumulated net realized gain on investments and foreign currency transactions .............. 5,014,895 Net unrealized appreciation on investments ....... 112,404,493 Net unrealized depreciation on foreign currency translations .......................... (6,274) ------------ NET ASSETS .......................................$587,130,755 ============ SHARES OF CAPITAL STOCK: CLASS AAA: Net Asset Value, offering and redemption price per share ($580,080,886 / 30,985,073 shares outstanding; 150,000,000 shares authorized) .... $18.72 ====== CLASS A: Net Asset Value and redemption price per share ($3,644,563 / 195,263 shares outstanding; 50,000,000 shares authorized) .................. $18.66 ====== Maximum offering price per share (NAV / 0.9425, based on maximum sales charge of 5.75% of the offering price) ............................ $19.80 ====== CLASS B: Net Asset Value and offering price per share ($31,574 / 1,709 shares outstanding; 50,000,000 shares authorized) ............................. $18.48(a) ====== CLASS C: Net Asset Value and offering price per share ($3,373,732 / 182,633 shares outstanding; 50,000,000 shares authorized) .................. $18.47(a) ====== - ------------- (a) Redemption price varies based on length of time held. STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of foreign taxes of $195,150) $ 11,158,655 Interest ................................... 1,543,209 ------------ TOTAL INVESTMENT INCOME .................... 12,701,864 ------------ EXPENSES: Investment advisory fees ................... 4,550,011 Distribution fees -- Class AAA ............. 1,132,038 Distribution fees -- Class A ............... 2,618 Distribution fees -- Class B ............... 108 Distribution fees -- Class C ............... 11,282 Shareholder services fees .................. 461,650 Shareholder communications expenses ........ 176,507 Custodian fees ............................. 109,322 Registration fees .......................... 66,659 Legal and audit fees ....................... 56,287 Directors' fees ............................ 23,785 Miscellaneous expenses ..................... 75,143 ------------ TOTAL EXPENSES ............................. 6,665,410 Less: Custodian fee credits ................ (4,876) ------------ NET EXPENSES ............................... 6,660,534 ------------ NET INVESTMENT INCOME ...................... 6,041,330 ------------ NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain on investments ........... 10,263,918 Net realized gain on foreign currency transactions .................... 20,357 Net change in unrealized appreciation/ depreciation on investments and foreign currency translations .................... 48,815,905 ------------ NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY ......... 59,100,180 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......................... $ 65,141,510 ============ See accompanying notes to financial statements. 11 THE GABELLI EQUITY INCOME FUND STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ OPERATIONS: Net investment income ............................................ $ 6,041,330 $ 4,536,567 Net realized gain on investments and foreign currency transactions 10,284,275 8,029,283 Net change in unrealized appreciation/depreciation on investments and foreign currency translations .............................. 48,815,905 33,027,899 ------------- ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. 65,141,510 45,593,749 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class AAA ...................................................... (6,076,053) (5,229,584) Class A ........................................................ (14,675) (389) Class B ........................................................ (137) (13) Class C ........................................................ (15,344) (259) ------------- ------------- (6,106,209) (5,230,245) ------------- ------------- Net realized gains on investments Class AAA ...................................................... (9,683,440) (1,806,422) Class A ........................................................ (13,842) (135) Class B ........................................................ (107) (4) Class C ........................................................ (14,192) (89) ------------- ------------- (9,711,581) (1,806,650) ------------- ------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS .............................. (15,817,790) (7,036,895) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Class AAA ...................................................... 175,602,480 54,989,849 Class A ........................................................ 3,406,570 123,156 Class B ........................................................ 29,210 1,017 Class C ........................................................ 3,196,846 77,434 ------------- ------------- NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ....... 182,235,106 55,191,456 ------------- ------------- REDEMPTION FEES .................................................. 46,462 -- ------------- ------------- NET INCREASE IN NET ASSETS ....................................... 231,605,288 93,748,310 NET ASSETS: Beginning of period .............................................. 355,525,467 261,777,157 ------------- ------------- End of period .................................................... $ 587,130,755 $ 355,525,467 ============= ============= See accompanying notes to financial statements. 12 THE GABELLI EQUITY INCOME FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. ORGANIZATION. The Gabelli Equity Income Fund (the "Fund") is a series of Gabelli Equity Series Funds, Inc. (the "Corporation"), which was organized on July 25, 1991 as a Maryland corporation. The Fund is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), and one of three separately managed portfolios (collectively, the "Portfolios") of the Corporation, each with four separate classes of shares outstanding known as Class AAA, Class A, Class B and Class C. The Fund's primary objective is to seek a high level of total return with an emphasis on income. The Fund commenced investment operations on January 2, 1992. 2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. SECURITY VALUATION. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market's official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the "Board") so determines, by such other method as the Board shall determine in good faith, to reflect its fair market value. Portfolio securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market, as determined by Gabelli Funds, LLC (the "Adviser"). Portfolio securities primarily traded on foreign markets are generally valued at the preceding closing values of such securities on their respective exchanges or if after the close of the foreign markets, but prior to the close of business on the day the securities are being valued, market conditions change significantly, certain foreign securities may be fair valued pursuant to procedures established by the Board. Debt instruments with remaining maturities of 60 days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities' fair value, in which case these securities will be valued at their fair value as determined by the Board. Debt instruments having a maturity greater than 60 days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded. Securities and assets for which market quotations are not readily available are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons to the valuation and changes in valuation of similar securities, including a comparison of foreign securities to the equivalent U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security. REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with primary government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System or with other brokers or dealers that meet credit guidelines established by the Adviser and reviewed by the Board. Under the terms of a typical repurchase agreement, the Fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the Fund's holding period. The Fund will always receive 13 THE GABELLI EQUITY INCOME FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- and maintain securities as collateral whose market value, including accrued interest, will be at least equal to 102% of the dollar amount invested by the Fund in each agreement. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. FUTURES CONTRACTS. The Fund may engage in futures contracts for the purpose of hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase. Upon entering into a futures contract, the Fund is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the "initial margin". Subsequent payments ("variation margin") are made or received by the Fund each day, depending on the daily fluctuation of the value of the contract. The daily changes in the contract are included in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed. At September 30, 2005, there were no open futures contracts. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments, which may not correlate with the change in value of the hedged investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign exchange contracts for hedging a specific transaction with respect to either the currency in which the transaction is denominated or another currency as deemed appropriate by the Adviser. Forward foreign exchange contracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealized appreciation/depreciation on investments and foreign currency translations. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of forward foreign exchange contracts does not eliminate fluctuations in the underlying prices of the Fund's portfolio securities, but it does establish a rate of exchange that can be achieved in the future. Although forward foreign exchange contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. At September 30, 2005, there were no open forward foreign exchange contracts. FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained in United States (U.S.) dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period, and purchases and sales of investment securities, income and expenses are translated at the exchange rate prevailing on the respective dates of such transactions. Unrealized gains and losses that result from changes in foreign exchange rates and/or changes in market prices of securities have been included in unrealized appreciation/depreciation on investments and foreign currency translations. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities transactions, foreign currency transactions and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial trade date and subsequent sale trade date is included in realized gain/(loss) on investments. 14 THE GABELLI EQUITY INCOME FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- FOREIGN SECURITIES. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the ability to repatriate funds, less complete financial information about companies and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers. RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in securities for which the markets are illiquid. Illiquid securities include securities the disposition of which is subject to substantial legal or contractual restrictions. The sale of illiquid securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale. Securities freely salable among qualified institutional investors under special rules adopted by the Securities and Exchange Commission ("SEC") may be treated as liquid if they satisfy liquidity standards established by the Board of Directors. The continued liquidity of such securities is not as well assured as that of publicly traded securities, and accordingly the Board of Directors will monitor their liquidity. FOREIGN TAXES. The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which they invest. SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are accounted for on the trade date with realized gain or loss on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded as earned. Dividend income is recorded on the ex-dividend date. DETERMINATION OF NET ASSET VALUE AND CALCULATION OF EXPENSES. Certain administrative expenses are common to, and allocated among, various affiliated funds. Such allocations are made on the basis of each Fund's average net assets or other criteria directly affecting the expenses as determined by the Adviser pursuant to procedures established by the Board. In calculating net asset value per share of each class, investment income, realized and unrealized gains and losses, redemption fees and expenses other than class specific expenses, are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. Distribution expenses are borne solely by the class incurring the expense. CUSTODIAN FEE CREDITS. When cash balances are maintained in the custody account, the Fund receives credits which are used to offset custodian fees. The gross expenses paid under the custody arrangement are included in custodian fees in the Statement of Operations with the corresponding expense offset shown as "custodian fee credits". DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are recorded on the ex-dividend date. Distributions to shareholders are based on income and capital gains as determined in accordance with Federal income tax regulations, which may differ from income and capital gains as determined under U.S. generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterizations of distributions made by the Fund. 15 THE GABELLI EQUITY INCOME FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, adjustments are made to the appropriate equity accounts in the fiscal year that the differences arise. For the fiscal year ended September 30, 2005 reclassifications were made to increase accumulated net investment income by $20,356 and decrease accumulated net realized gain on investments by $20,356. The tax character of distributions paid during the fiscal years ended September 30, 2005 and September 30, 2004 were as follows: FISCAL YEAR ENDED FISCAL YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ DISTRIBUTIONS PAID FROM: Ordinary income (inclusive of short-term capital gains) ..................... $ 9,358,636 $7,036,895 Net long-term capital gains .......... 6,459,154 -- ----------- ---------- Total distributions paid ............. $15,817,790 $7,036,895 =========== ========== The Fund has a fixed distribution policy. Under the policy, the Fund declares and pays monthly distributions from net investment income and capital gains. The actual source of the distributions are determined after the end of the year. The Fund continues to evaluate its distribution policy in light of ongoing economic and market conditions and may change the amount of the monthly distributions in the future. The Fund currently intends to pay $0.03 per share on a monthly basis. PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains. Therefore, no provision for Federal income taxes is required. Dividends and interest from non-U.S. sources received by the Fund are generally subject to non-U.S. withholding taxes at rates ranging up to 30%. Such withholding taxes may be reduced or eliminated under the terms of applicable U.S. income tax treaties, and the Fund intends to undertake any procedural steps required to claim the benefits of such treaties. As of September 30, 2005, the components of accumulated earnings/(losses) on a tax basis were as follows: Undistributed long-term capital gains ............. $ 6,073,274 Net unrealized appreciation ....................... 111,341,422 Other temporary differences ....................... (62,737) ------------ Total accumulated earnings ...................... $117,351,959 ============ Under the current tax law, capital losses related to securities and foreign currency realized after October 31 and prior to the Fund's fiscal year end may be treated as occurring on the first day of the following year. For the fiscal year ended September 30, 2005, the Fund had no capital losses to defer. The difference between book and tax basis unrealized appreciation is primarily due to deferral of losses from wash sales for tax purposes. The following summarizes the tax cost of investments and related unrealized appreciation/depreciation at September 30, 2005: GROSS GROSS NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION/ COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ ------------ ------------ Investments ...... $472,216,266 $124,087,963 $(12,746,541) $111,341,422 16 THE GABELLI EQUITY INCOME FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment advisory agreement (the "Advisory Agreement") with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of its average daily net assets. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Fund's portfolio, oversees the administration of all aspects of the Fund's business and affairs and pays the compensation of all Officers and Directors of the Fund who are affiliated persons of the Adviser. 4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the "Plan") for each class of shares pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. ("Gabelli & Company"), an affiliate of the Adviser, serves as distributor of the Fund. Under the Class AAA, Class A, Class B and Class C Share Plans, payments are authorized to Gabelli & Company at annual rates of 0.25%, 0.25%, 1.00% and 1.00%, respectively, of the average daily net assets of those classes, the annual limitations under each Plan. Such payments are accrued daily and paid monthly. 5. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for the fiscal year ended September 30, 2005, other than short-term securities, aggregated $262,952,110 and $48,930,603, respectively. 6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30, 2005, the Fund paid brokerage commissions of $275,787 to Gabelli & Company. Additionally, Gabelli & Company informed the Fund that it received $18,493 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares. The cost of calculating the Fund's net asset value per share is a Fund expense pursuant to the Advisory Agreement between the Fund and the Adviser. During the fiscal year ended September 30, 2005, the Fund reimbursed the Adviser $42,450 in connection with the cost of computing the Fund's net asset value, which is included in miscellaneous expenses in the Statement of Operations. 7. LINE OF CREDIT. The Fund has access to an unsecured line of credit of up to $25,000,000 from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at 0.75% above the Federal Funds rate on outstanding balances. During the fiscal year ended September 30, 2005, there were no borrowings from the line of credit. 8. CAPITAL STOCK TRANSACTIONS. The Fund currently offers four classes of shares - -- Class AAA Shares, Class A Shares, Class B Shares and Class C Shares. Class AAA Shares are offered only to investors who acquire them directly from Gabelli & Company or through selected broker/dealers without a sales charge. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class B Shares are subject to a contingent deferred sales charge ("CDSC") upon redemption within six years of purchase and automatically convert to Class A Shares after eight years from the original purchase. The applicable CDSC is equal to a declining percentage of the lesser of the net asset value per share at the date of the original purchase or at the date of redemption, based on the length of time held. Class C Shares are subject to a 1% CDSC for one year after purchase. As of July 27, 2004, Class B Shares are available only through exchange of Class B Shares of other Funds distributed by Gabelli & Company. The Board has approved Class I Shares which have not been offered publicly. Effective June 15, 2005, the Fund imposed a redemption fee of 2.00% on Class AAA Shares, Class A Shares, Class B Shares and Class C Shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. (Prior to June 15, 2005, the Fund imposed a redemption fee on shares that were redeemed or exchanged within the sixtieth day after the date of a purchase.) The redemption fee is deducted from the proceeds otherwise payable to the redeeming shareholders and is retained by the Fund. The redemption fees retained by the Fund during the fiscal year ended September 30, 2005 amounted to $46,462. 17 THE GABELLI EQUITY INCOME FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- The redemption fee does not apply to shares purchased through programs that the Adviser determined to have appropriate short-term trading policies in place. Additionally, certain recordkeepers for qualified and non-qualified retirement plans that could not collect the redemption fee at the participant level due to systems limitations have received an extension to implement such systems. Transactions in shares of capital stock were as follows: YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ---------------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ CLASS AAA CLASS AAA ---------------------------- --------------------------- Shares sold ........................................ 14,143,848 $254,681,597 7,919,728 $130,184,333 Shares issued upon reinvestment of dividends ....... 812,370 14,527,787 393,424 6,453,128 Shares redeemed .................................... (5,214,853) (93,606,904) (4,998,860) (81,647,612) ---------- ------------ ---------- ------------ Net increase ..................................... 9,741,365 $175,602,480 3,314,292 $ 54,989,849 ========== ============ ========== ============ CLASS A CLASS A ---------------------------- --------------------------- Shares sold ........................................ 198,451 $ 3,597,003 7,383 $ 122,882 Shares issued upon reinvestment of dividends ....... 1,332 24,074 17 274 Shares redeemed .................................... (11,920) (214,507) -- -- ---------- ------------ ---------- ------------ Net increase ..................................... 187,863 $ 3,406,570 7,400 $ 123,156 ========== ============ ========== ============ CLASS B CLASS B ---------------------------- --------------------------- Shares sold ........................................ 1,633 $ 28,966 61 $ 1,000 Shares issued upon reinvestment of dividends ....... 14 244 1 17 Shares redeemed .................................... -- -- -- -- ---------- ------------ ---------- ------------ Net increase ..................................... 1,647 $ 29,210 62 $ 1,017 ========== ============ ========== ============ CLASS C CLASS C ---------------------------- --------------------------- Shares sold ........................................ 179,380 $ 3,223,463 4,732 $ 77,086 Shares issued upon reinvestment of dividends ....... 1,487 26,658 21 348 Shares redeemed .................................... (2,987) (53,275) -- -- ---------- ------------ ---------- ------------ Net increase ..................................... 177,880 $ 3,196,846 4,753 $ 77,434 ========== ============ ========== ============ 9. OTHER MATTERS. The Adviser and/or affiliates have received subpoenas from the Attorney General of the State of New York and the SEC requesting information on mutual fund trading practices involving certain funds managed by the Adviser. GAMCO Investors, Inc., the Adviser's parent company, is responding to these requests for documents and testimony. On a separate matter, in September 2005, the Adviser was informed by the staff of the SEC that the staff may recommend to the Commission that an administrative remedy and a monetary penalty be sought from the Adviser in connection with the actions of two of seven closed-end funds managed by the Adviser relating to Section 19(a) and Rule 19a-1 of the 1940 Act. These provisions require registered investment companies to provide written statements to shareholders when a dividend is made from a source other than net investment income. While the two closed-end funds sent annual statements and provided other materials containing this information, the funds did not send written statements to shareholders with each distribution in 2002 and 2003. The Adviser believes that all of the funds are now in compliance. The Adviser believes that these matters would have no effect on the Fund nor any material adverse effect on the Adviser or its ability to manage the Fund. 10. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 18 THE GABELLI EQUITY INCOME FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of capital stock outstanding throughout each period: INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS ------------------------------------------------ ------------------------------------- Net Net Asset Realized and Total Net Period Value, Net Unrealized from Net Realized Ended Beginning Investment Gain/(Loss) on Investment Investment Gain on Total September 30 of Period Income(d) Investments Operations Income Investments Distributions - ------------ --------- --------- -------------- ---------- ---------- ----------- ------------- CLASS AAA 2005 $16.73 $0.24 $2.41 $2.65 $(0.24) $(0.42) $(0.66) 2004 14.60 0.23 2.26 2.49 (0.27) (0.09) (0.36) 2003 11.93 0.28 2.64 2.92 (0.25) -- (0.25) 2002 13.88 0.23 (1.79) (1.56) (0.23) (0.16) (0.39) 2001 16.35 0.25 (0.28) (0.03) (0.36) (2.08) (2.44) CLASS A 2005 $16.72 $0.20 $2.43 $2.63 $(0.27) $(0.42) $(0.69) 2004(a) 16.40 0.16 0.43 0.59 (0.20) (0.07) (0.27) CLASS B 2005 $16.62 $0.04 $2.46 $2.50 $(0.22) $(0.42) $(0.64) 2004(a) 16.40 0.07 0.42 0.49 (0.20) (0.07) (0.27) CLASS C 2005 $16.64 $0.07 $2.43 $2.50 $(0.25) $(0.42) $(0.67) 2004(a) 16.40 0.08 0.43 0.51 (0.20) (0.07) (0.27) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA ------------------------------------------------- Net Asset Net Assets Period Value, End of Net Portfolio Ended Redemption End of Total Period Investment Operating Turnover September 30 Fees(d) Period Return+ (in 000's) Income Expenses Rate - ------------ ---------- ------ ------- ---------- ---------- --------- --------- CLASS AAA 2005 $0.00(c) $18.72 16.09% $580,081 1.33% 1.46% 11% 2004 -- 16.73 17.13 355,321 1.42 1.49 12 2003 -- 14.60 24.59 261,777 2.09 1.49 27 2002 -- 11.93 (11.58) 162,938 1.75 1.50 12 2001 -- 13.88 (0.43) 121,499 1.65 1.55 41 CLASS A 2005 $0.00(c) $18.66 15.99% $ 3,644 1.08% 1.50% 11% 2004(a) -- 16.72 3.62 124 1.33(b) 1.49(b) 12 CLASS B 2005 $0.00(c) $18.48 15.28% $ 32 0.20% 2.22% 11% 2004(a) -- 16.62 3.00 1 0.56(b) 2.24(b) 12 CLASS C 2005 $0.00(c) $18.47 15.24% $ 3,374 0.37% 2.24% 11% 2004(a) -- 16.64 3.13 79 0.62(b) 2.24(b) 12 - ----------- + Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the period and sold at the end of the period including reinvestment of dividends and does not reflect applicable sales charges. Total return for the period of less than one year is not annualized. (a) From the commencement of offering Class A, Class B and Class C Shares on December 31, 2003. (b) Annualized. (c) Amount represents less than $0.005 per share. (d) Per share amounts have been calculated using the average shares outstanding method. See accompanying notes to financial statements. 19 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Shareholders and Board of Directors of The Gabelli Equity Income Fund We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Gabelli Equity Income Fund (the "Fund"), a series of Gabelli Equity Series Funds, Inc., as of September 30, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights 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 and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's 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 Fund'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 and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2005, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Gabelli Equity Income Fund, a series of Gabelli Equity Series Funds, Inc., at September 30, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ ERNST & YOUNG LLP Philadelphia, Pennsylvania November 11, 2005 20 THE GABELLI EQUITY INCOME FUND ADDITIONAL FUND INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- The business and affairs of the Fund are managed under the direction of the Fund's Board of Directors. Information pertaining to the Directors and officers of the Fund is set forth below. The Fund's Statement of Additional Information includes additional information about The Gabelli Equity Income Fund's Directors and is available, without charge, upon request, by calling 800-GABELLI (800-422-3554) or by writing to The Gabelli Equity Income Fund at One Corporate Center, Rye, NY 10580-1422. TERM OF NUMBER OF NAME, POSITION(S) OFFICE AND FUNDS IN FUND ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3 - ----------------- ------------- ---------------- ----------------------- ------------------- INTERESTED DIRECTORS 4: - ---------------------- MARIO J. GABELLI Since 1991 24 Chairman of the Board and Chief Executive Director of Morgan Director and Officer of GAMCO Investors, Inc. and Group Holdings, Inc. Chief Investment Officer Chief Investment Officer-Value Portfolios (holding company) Age: 63 of Gabelli Funds, LLC and GAMCO Asset Management Inc.; Chairman and Chief Executive Officer of Lynch Interactive Corporation (multimedia and services) JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Company, -- Director Inc.; Director of Gabelli Advisers, Inc. Age: 61 KARL OTTO POHL 5 Since 1992 35 Member of the Shareholder Committee of Director of GAMCO Director Sal Oppenheim Jr. & Cie (private investment Investors, Inc. (investment Age: 75 bank); Former President of the management); Chairman, Deutsche Bundesbank and Chairman of its InCentive Capital and InCentive Central Bank Council (1980-1991) Asset Management (Zurich); Director at Sal Oppenheim Jr. & Cie, Zurich NON-INTERESTED DIRECTORS: - ------------------------ ANTHONY J. COLAVITA Since 1991 37 Partner in the law firm of -- Director Anthony J. Colavita, P.C. Age: 69 VINCENT D. ENRIGHT Since 1991 14 Former Senior Vice President and Chief Director of Aphton Director Financial Officer of KeySpan Energy Corporation Age: 61 Corporation (utility holding company) (biopharmaceutical company) ROBERT J. MORRISSEY Since 1991 10 Partner in the law firm of -- Director Morrissey, Hawkins & Lynch Age: 66 ANTHONY R. PUSTORINO Since 1991 17 Certified Public Accountant; Professor Director of Lynch Corporation Director Emeritus, Pace University (diversified manufacturing) Age: 80 ANTHONIE C. VAN EKRIS Since 1991 21 Chairman of BALMAC International, Inc. Director of Aurado Energy Inc. Director (commodities and futures trading) (oil and gas operations) Age: 71 SALVATORE J. ZIZZA Since 2001 25 Chairman, Hallmark Electrical Director of Hollis Eden Director Supplies Corp. Pharmaceuticals; Director Age: 59 of Earl Scheib, Inc. (automotive services) 21 THE GABELLI EQUITY INCOME FUND ADDITIONAL FUND INFORMATION (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- TERM OF NUMBER OF NAME, POSITION(S) OFFICE AND FUNDS IN FUND ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3 - ----------------- ------------- ---------------- ----------------------- ------------------- OFFICERS: - -------- BRUCE N. ALPERT Since 1991 -- Executive Vice President and Chief Operating -- President and Treasurer Officer of Gabelli Funds, LLC since 1988; Age: 53 Director and President of Gabelli Advisers, Inc. since 1998; Officer of all the registered investment companies in the Gabelli Fund complex JAMES E. MCKEE Since 1995 -- Vice President, General Counsel and Secretary -- Secretary of GAMCO Investors, Inc. since 1999 Age: 42 and GAMCO Asset Management Inc. since 1993; Secretary of all of the registered investment companies advised by Gabelli Advisers, Inc. and Gabelli Funds, LLC PETER D. GOLDSTEIN Since 2004 -- Director of Regulatory Affairs for GAMCO -- Chief Compliance Officer Investors, Inc. since 2004; Chief Compliance Age: 52 Officer of all of the registered investment companies in the Gabelli Fund complex; Vice President of Goldman Sachs Asset Management from 2000-2004; Deputy General Counsel of GAMCO Investors, Inc. from 1998-2000 - ---------------------- 1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. 2 Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders, if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Fund's By-Laws and Articles of Incorporation. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. 3 This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e. public companies) or other investment companies registered under the 1940 Act. 4 "Interested person" of the Fund as defined in the Investment Company Act of 1940. Messrs. Gabelli, Gabelli and Pohl are each considered an "interested person" because of their affiliation with Gabelli Funds, LLC which acts as the Fund's investment adviser. Mario J. Gabelli and John D. Gabelli are brothers. 5 Effective November 15, 2005, Mr. Pohl resigned from the Board of Directors and now serves as Director Emeritus. - -------------------------------------------------------------------------------- 2005 TAX NOTICE TO SHAREHOLDERS (Unaudited) For the fiscal year ended September 30, 2005, the Fund paid to shareholders ordinary income dividends (comprised of net investment income and short-term capital gains) totaling $0.3821, $0.4121, $0.3631 and $0.3891 and long-term capital gains totaling $0.2790, $0.2790, $0.2790 and $0.2790 per share for Class AAA, Class A, Class B and Class C, respectively. The distributions of long-term capital gains have been designated as Capital Gain Dividends by the Fund's Board of Directors. For the fiscal year ended September 30, 2005,100% of the ordinary income dividend qualifies for the dividend received deduction available to corporations and 100% of the ordinary income distribution was qualifying dividend income. An estimate of qualified dividend income of $10,626,294 was received by the Fund through September 30, 2005 that qualifies for a reduced tax rate pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003. U.S. GOVERNMENT INCOME: The percentage of the ordinary income dividend paid by the Fund during fiscal year 2005 which was derived from U.S. Treasury securities was 2.16%. Such income is exempt from state and local tax in all states. However, many states, including New York and California, allow a tax exemption for a portion of the income earned only if a mutual fund has invested at least 50% of its assets at the end of each quarter of the Fund's fiscal year in U.S. Government securities. The Gabelli Equity Income Fund did not meet this strict requirement in 2005. Due to the diversity in state and local tax law, it is recommended that you consult your personal tax advisor as to the applicability of the information provided to your specific situation. - -------------------------------------------------------------------------------- 22 GABELLI FAMILY OF FUNDS VALUE ________________________________________ GABELLI ASSET FUND Seeks to invest primarily in a diversified portfolio of common stocks selling at significant discounts to their private market value. The Fund's primary objective is growth of capital. (MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA GABELLI BLUE CHIP VALUE FUND Seeks long term growth of capital through investment primarily in the common stocks of established companies which are temporarily out of favor. The fund's objective is to identify a catalyst or sequence of events that will return the company to a higher value. (MULTICLASS) PORTFOLIO MANAGER: BARBARA MARCIN, CFA WESTWOOD EQUITY FUND Seeks to invest primarily in the common stock of well-seasoned companies that have recently reported positive earnings surprises and are trading below Westwood's proprietary growth rate estimates. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: SUSAN M. BYRNE FOCUSED VALUE ______________________________ GABELLI VALUE FUND Seeks to invest in securities of companies believed to be undervalued. The Fund's primary objective is long-term capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA SMALL CAP VALUE ____________________________ GABELLI SMALL CAP FUND Seeks to invest primarily in common stock of smaller companies (market capitalizations less than $1 billion) believed to have rapid revenue and earnings growth potential. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA WESTWOOD SMALLCAP EQUITY FUND Seeks to invest primarily in smaller capitalization equity securities - market caps of $2.5 billion or less. The Fund's primary objective is long-term capital appreciation. (MULTICLASS) TEAM MANAGED GABELLI WOODLAND SMALL CAP VALUE FUND Seeks to invest primarily in the common stocks of smaller companies (market capitalizations less than $1.5 billion) believed to be undervalued with shareholder oriented management teams that are employing strategies to grow the company's value. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: ELIZABETH M. LILLY, CFA GROWTH ______________________________________ GABELLI GROWTH FUND Seeks to invest primarily in large cap stocks believed to have favorable, yet undervalued, prospects for earnings growth. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: HOWARD F. WARD, CFA GABELLI INTERNATIONAL GROWTH FUND Seeks to invest in the equity securities of foreign issuers with long-term capital appreciation potential. The Fund offers investors global diversification. (MULTICLASS) PORTFOLIO MANAGER: CAESAR BRYAN AGGRESSIVE GROWTH _________________________ GABELLI GLOBAL GROWTH FUND Seeks capital appreciation through a disciplined investment program focusing on the globalization and interactivity of the world's marketplace. The Fund invests in companies at the forefront of accelerated growth. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED MICRO-CAP ___________________________________ WESTWOOD MIGHTY MITES(SM) FUND Seeks to invest in micro-cap companies that have market capitalizations of $300 million or less. The Fund's primary objective is long-term capital appreciation. (MULTICLASS) TEAM MANAGED EQUITY INCOME _______________________________ GABELLI EQUITY INCOME FUND Seeks to invest primarily in equity securities with above market average yields. The Fund pays monthly dividends and seeks a high level of total return with an emphasis on income. (MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA WESTWOOD BALANCED FUND Seeks to invest in a balanced and diversified portfolio of stocks and bonds. The Fund's primary objective is both capital appreciation and current income. (MULTICLASS) CO-PORTFOLIO MANAGERS: SUSAN M. BYRNE MARK FREEMAN, CFA WESTWOOD INCOME FUND Seeks to provide a high level of current income as well as long-term capital appreciation by investing in income producing equity and fixed income securities. (MULTICLASS) PORTFOLIO MANAGER: SUSAN M. BYRNE SPECIALTY EQUITY ____________________________ GABELLI GLOBAL CONVERTIBLE SECURITIES FUND Seeks to invest principally in bonds and preferred stocks which are convertible into common stock of foreign and domestic companies. The Fund's primary objective is total return through a combination of current income and capital appreciation. (MULTICLASS) TEAM MANAGED GABELLI GLOBAL OPPORTUNITY FUND Seeks to invest in common stock of companies which have rapid growth in revenues and earnings and potential for above average capital appreciation or are undervalued. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED SECTOR ______________________________________ GABELLI GLOBAL TELECOMMUNICATIONS FUND Seeks to invest in telecommunications companies throughout the world - targeting undervalued companies with strong earnings and cash flow dynamics. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED GABELLI GOLD FUND Seeks to invest in a global portfolio of equity securities of gold mining and related companies. The Fund's objective is long-term capital appreciation. Investment in gold stocks is considered speculative and is affected by a variety of world-wide economic, financial and political factors. (MULTICLASS) PORTFOLIO MANAGER: CAESAR BRYAN GABELLI UTILITIES FUND Seeks to provide a high level of total return through a combination of capital appreciation and current income. (MULTICLASS) TEAM MANAGED MERGER AND ARBITRAGE _____________________ GABELLI ABC FUND Seeks to invest in securities with attractive opportunities for appreciation or investment income. The Fund's primary objective is total return in various market conditions without excessive risk of capital loss. (NO-LOAD) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA CONTRARIAN_________________________________ GABELLI MATHERS FUND Seeks long-term capital appreciation in various market conditions without excessive risk of capital loss. (CLASS AAA-NO-LOAD) PORTFOLIO MANAGER: HENRY VAN DER EB, CFA COMSTOCK CAPITAL VALUE FUND Seeks capital appreciation and current income. The Fund may use either long or short positions to achieve its objective. (MULTICLASS) PORTFOLIO MANAGER: MARTIN WEINER, CFA COMSTOCK STRATEGY FUND The Fund emphasizes investments in debt securities, which maximize total return in light of credit risk, interest rate risk, and the risk associated with the length of maturity of the debt instrument. (MULTICLASS) PORTFOLIO MANAGER: MARTIN WEINER, CFA QUANTITATIVE_________________________________ NED DAVIS RESEARCH ASSET ALLOCATION FUND Seeks to achieve returns greater then the weighted composite benchmark consisting of 60% in the S&P 500 Index and 40% in the Lehman Long Term U.S. Government Bond Index through a flexible asset allocation strategy. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED FIXED INCOME ________________________________ WESTWOOD INTERMEDIATE BOND FUND Seeks to invest in a diversified portfolio of bonds with various maturities. The Fund's primary objective is total return. (MULTICLASS) PORTFOLIO MANAGER: MARK FREEMAN, CFA CASH MANAGEMENT-MONEY MARKET __________ GABELLI U.S. TREASURY MONEY MARKET FUND Seeks to invest exclusively in short-term U.S. Treasury securities. The Fund's primary objective is to provide high current income consistent with the preservation of principal and liquidity. (NO-LOAD) PORTFOLIO MANAGER: JUDITH A. RANERI AN INVESTMENT IN THE ABOVE MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. THE GLOBAL FUNDS INVEST IN FOREIGN SECURITIES WHICH INVOLVE RISKS NOT ORDINARILY ASSOCIATED WITH INVESTMENTS IN DOMESTIC ISSUES, INCLUDING CURRENCY FLUCTUATION, ECONOMIC AND POLITICAL RISKS. TO RECEIVE A PROSPECTUS, CALL 800-GABELLI (422-3554). INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS AND CHARGES AND EXPENSES OF THE FUND CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION ABOUT THIS AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING. Gabelli Equity Series Funds, Inc. THE GABELLI EQUITY INCOME FUND One Corporate Center Rye, New York 10580-1422 800-GABELLI 800-422-3554 FAX: 914-921-5118 WEBSITE: WWW.GABELLI.COM E-MAIL: INFO@GABELLI.COM Net Asset Value available daily by calling 800-GABELLI after 6:00 P.M. BOARD OF DIRECTORS Mario J. Gabelli, CFA Karl Otto Pohl CHAIRMAN AND CHIEF FORMER PRESIDENT EXECUTIVE OFFICER DEUTSCHE BUNDESBANK GAMCO INVESTORS, INC. Anthony J. Colavita Anthony R. Pustorino ATTORNEY-AT-LAW CERTIFIED PUBLIC ACCOUNTANT ANTHONY J. COLAVITA, P.C. PROFESSOR EMERITUS PACE UNIVERSITY Vincent D. Enright Anthonie C. van Ekris FORMER SENIOR VICE PRESIDENT CHAIRMAN AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC. KEYSPAN ENERGY CORP. John D. Gabelli Salvatore J. Zizza SENIOR VICE PRESIDENT CHAIRMAN GABELLI & COMPANY, INC. HALLMARK ELECTRICAL SUPPLIES CORP. Robert J. Morrissey ATTORNEY-AT-LAW MORRISSEY, HAWKINS & LYNCH OFFICERS Bruce N. Alpert James E. McKee PRESIDENT AND TREASURER SECRETARY Peter D. Goldstein CHIEF COMPLIANCE OFFICER DISTRIBUTOR Gabelli & Company, Inc. CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT State Street Bank and Trust Company LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP - -------------------------------------------------------------------------------- This report is submitted for the general information of the shareholders of The Gabelli Equity Income Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. - -------------------------------------------------------------------------------- GAB444Q305SR [GRAPHIC OMITTED] PICTURE OF MARIO GABELLI THE GABELLI EQUITY INCOME FUND ANNUAL REPORT SEPTEMBER 30, 2005 THE GABELLI WOODLAND SMALL CAP VALUE FUND ANNUAL REPORT (A) SEPTEMBER 30, 2005 TO OUR SHAREHOLDERS, The Gabelli Woodland Small Cap Value Fund (the "Fund") outperformed its small cap benchmark, the Russell 2000 Index, as well as other broad based market indices for the twelve month period ended September 30, 2005. During this period, the Fund rose 20.67% versus gains of 17.95% for the Russell 2000, 12.25% for the Standard & Poor's 500 Index and 19.24% for the Value Line Composite Index. COMPARATIVE RESULTS - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2005 (A)(B) -------------------------------------------------------- Since Inception Quarter 1 Year (12/31/02) ------- ------ --------------- GABELLI WOODLAND SMALL CAP VALUE FUND CLASS AAA ........... 4.13% 20.67% 17.19% Russell 2000 Index ................ 4.69 17.95 23.86 S&P 500 Index ..................... 3.60 12.25 14.93 Value Line Composite Index ........ 4.88 19.24 24.28 Class A ........................... 4.12 20.76 17.22 (1.88)(c) 13.82(c) 14.73(c) Class B ........................... 2.43 19.86 17.53 (2.57)(d) 14.86(d) 16.74(d) Class C ........................... 3.97 19.91 16.49 2.97(d) 18.91(d) 16.49(d) (a) THE FUND'S FISCAL YEAR ENDS SEPTEMBER 30. (b) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS. TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND ARE NET OF EXPENSES. INVESTMENT RETURNS AND THE PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PERFORMANCE RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PRESENTED. VISIT WWW.GABELLI.COM FOR PERFORMANCE INFORMATION AS OF THE MOST RECENT MONTH END. INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS AND CHARGES AND EXPENSES OF THE FUND CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS MORE INFORMATION ABOUT THIS AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING. INVESTING IN SMALL CAPITALIZATION SECURITIES INVOLVES SPECIAL CHALLENGES BECAUSE THESE SECURITIES MAY TRADE LESS FREQUENTLY AND EXPERIENCE MORE ABRUPT PRICE MOVEMENTS THAN LARGE CAPITALIZATION SECURITIES. THE RUSSELL 2000 INDEX OF SMALL U.S. COMPANIES, THE S&P 500 INDEX OF THE LARGEST U.S. COMPANIES, AND THE VALUE LINE COMPOSITE INDEX ARE UNMANAGED INDICATORS OF STOCK MARKET PERFORMANCE. (c) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF THE PERIOD. (d) INCLUDES THE EFFECT OF THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE AT THE END OF THE PERIOD SHOWN FOR CLASS B AND CLASS C SHARES, RESPECTIVELY. CLASS B SHARES ARE NOT AVAILABLE FOR NEW PURCHASES. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- We have separated the portfolio manager's commentary from the financial statements and investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that the content of the portfolio manager's commentary is unrestricted. The financial statements and investment portfolio are mailed separately from the commentary. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com/funds. - -------------------------------------------------------------------------------- PERFORMANCE DISCUSSION For the fiscal year ended September 30, 2005, the Fund outperformed the Russell 2000. The Fund gained 20.7% versus a gain of 18.0% for the Russell 2000 Index. Calendar year-to-date the Fund is up 6.3% versus a gain of 3.4% for the Russell 2000. Last year when we wrote to you, the ongoing conflict in Iraq, the Presidential election, and rising raw material costs were clearly the major issues confronting the market. Over the past year, we have seen the "civil war" in Iraq continue, raw material costs continue to increase, a dramatic rise in fuel costs, the Federal Funds Rate increase by 175 bps, and two natural disasters in the coast region. The dramatic rise in fuel costs has imposed a "tax" that is putting a drag on overall consumer discretionary spending. It always seems that the moment we solve/settle one problem another rises to take its place. That is the long-term history of the market. We have and will continue to deal with that reality. During the past year we had several investments add to our overall performance. The three biggest contributors were CNS, Inc., Office Depot, and Texas Industries. CNS, Inc. rose 137% over the last twelve months. CNS, Inc. benefited over the last year from a re-launch of the Clear Nasal Strip and strong growth in Fiber Choice sales due to the introduction of two new Fiber Choice products. Office Depot rose 98% over the last twelve months. Office Depot had been going through a significant restructuring effort, which included bringing in a new CEO, Steve Odland. The new management team redirected the focus of the company toward margin expansion, free cash flow, and return on invested capital. Texas Industries rose 73% over the last twelve months. As a leading supplier of steel and cement, the management team realized the value of the two businesses was more valuable operating as stand-alone companies and therefore completed the spin-off of the steel business in July 2005. We were not without our share of disappointments during the past year. The biggest disappointment was Alloy Incorporated. Alloy is a media/marketing services and direct marketing company that targets Generation Y. Alloy is in the process of separating their two divisions and once completed we believe this should create additional shareholder value. [GRAPHIC OMITTED] PLOT POINTS FOLLOW: COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GABELLI WOODLAND SMALL CAP VALUE FUND CLASS AAA AND THE RUSSELL 2000 INDEX Gabelli Woodland Small Cap Value Fund (Class AAA) Russell 2000 Index 12/31/02 10,000 10,000 9/30/03 10,580 12,858 9/30/04 12,825 15,271 9/30/05 15,476 18,022 - -------------------------------------------------------------------------------- Average Annual Total Return* - -------------------------------------------------------------------------------- Year Life of Fund - -------------------------------------------------------------------------------- Class AAA 20.67% 17.19% Russell 2000 17.95 23.86 - -------------------------------------------------------------------------------- *Past performance is not predictive of future results. The performance tables and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 2 THE GABELLI WOODLAND SMALL CAP VALUE FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) For the Six Month Period from April 1, 2005 through September 30, 2005 EXPENSE TABLE - -------------------------------------------------------------------------------- We believe it is important for you to understand the impact of fees and expenses regarding your investment. All mutual funds have operating expenses. As a shareholder of a fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund's gross income, directly reduce the investment return of a fund. When a fund's expenses are expressed as a percentage of its average net assets, this figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period. The Expense Table below illustrates your Fund's costs in two ways: ACTUAL FUND RETURN: This section provides information about actual account values and actual expenses. You may use this section to help you to estimate the actual expenses that you paid over the period after any fee waivers and expense reimbursements. The "Ending Account Value" shown is derived from the Fund's ACTUAL return during the past six months, and the "Expenses Paid During Period" shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading "Expenses Paid During Period" to estimate the expenses you paid during this period. HYPOTHETICAL 5% RETURN: This section provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio. It assumes a hypothetical annualized return of 5% before expenses during the period shown. In this case -- because the hypothetical return used is NOT the Fund's actual return -- the results do not apply to your investment and you cannot use the hypothetical account value and expense to estimate the actual ending account balance or expenses you paid for the period. This example is useful in making comparisons of the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), redemption fees, or exchange fees, if any, which are described in the Prospectus. If these costs were applied to your account, your costs would be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The "Annualized Expense Ratio" represents the actual expenses for the last six months and may be different from the expense ratio in the Financial Highlights which is for the year ended September 30, 2005. Beginning Ending Annualized Expenses Account Value Account Value Expense Paid During 04/01/05 09/30/05 Ratio Period* - -------------------------------------------------------------------------------- GABELLI WOODLAND SMALL CAP VALUE FUND - -------------------------------------------------------------------------------- ACTUAL FUND RETURN Class AAA $1,000.00 $1,079.60 2.00% $10.43 Class A $1,000.00 $1,081.20 2.00% $10.43 Class B $1,000.00 $1,067.20 2.75% $14.25 Class C $1,000.00 $1,077.10 2.75% $14.32 HYPOTHETICAL 5% RETURN Class AAA $1,000.00 $1,015.04 2.00% $10.10 Class A $1,000.00 $1,015.04 2.00% $10.10 Class B $1,000.00 $1,011.28 2.75% $13.87 Class C $1,000.00 $1,011.28 2.75% $13.87 * Expenses are equal to the Fund's annualized expense ratio for the last six months multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. 3 - -------------------------------------------------------------------------------- SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED) The following table presents portfolio holdings as a percent of total net assets. THE GABELLI WOODLAND SMALL CAP VALUE FUND Diversified Industrial ............................. 16.1% Health Care ........................................ 12.5% U.S. Government Obligations ........................ 11.7% Business Services .................................. 9.1% Consumer Products .................................. 8.1% Financial Services ................................. 7.2% Food and Beverage .................................. 6.6% Computer Software and Services ..................... 6.2% Equipment and Supplies ............................. 4.2% Hotels and Gaming .................................. 3.9% Automotive: Parts and Accessories .................. 3.3% Retail ............................................. 2.7% Aerospace .......................................... 2.0% Manufactured Housing and Recreational Vehicles ........................... 1.8% Entertainment ...................................... 1.8% Transportation ..................................... 1.5% Publishing ......................................... 1.2% Energy and Utilities ............................... 1.2% Specialty Chemicals ................................ 1.1% Other Assets and Liabilities - Net ................. (2.2)% ------ 100.0% ====== THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q, THE LAST OF WHICH WAS FILED FOR THE QUARTER ENDED JUNE 30, 2005. SHAREHOLDERS MAY OBTAIN THIS INFORMATION AT WWW.GABELLI.COM OR BY CALLING THE FUND AT 800-GABELLI (800-422-3554). THE FUND'S FORM N-Q IS AVAILABLE ON THE SEC'S WEBSITE AT WWW.SEC.GOV AND MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PROXY VOTING The Fund files Form N-PX with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. A description of the Fund's proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities are available without charge, upon request, (i) by calling 800-GABELLI (800-422-3554); (ii) by writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; and (iii) by visiting the Securities and Exchange Commission's website at www.sec.gov. 4 THE GABELLI WOODLAND SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------- COMMON STOCKS -- 90.5% AEROSPACE -- 2.0% 3,305 Alliant Techsystems Inc.+ .........$ 98,271 $ 246,718 ----------- ----------- AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.3% 6,440 CLARCOR Inc. ...................... 166,188 184,957 5,550 Modine Manufacturing Co. .......... 156,803 203,574 1,279 Proliance International Inc.+ ..... 6,475 7,009 ----------- ----------- 329,466 395,540 ----------- ----------- BUSINESS SERVICES -- 9.1% 9,890 Adesa Inc. ........................ 142,360 218,569 11,690 Bowne & Co. Inc. .................. 140,939 167,050 5,100 Fair Isaac Corp. .................. 155,799 228,480 4,410 HNI Corp. ......................... 126,418 265,570 5,540 The Brink's Co. ................... 97,220 227,473 ----------- ----------- 662,736 1,107,142 ----------- ----------- COMPUTER SOFTWARE AND SERVICES -- 6.2% 3,510 Harland Co., John H. .............. 106,307 155,844 8,886 Intergraph Corp.+ ................. 177,657 397,293 23,500 Stellent Inc.+ .................... 185,136 201,395 ----------- ----------- 469,100 754,532 ----------- ----------- CONSUMER PRODUCTS -- 8.1% 5,750 Alberto-Culver Co. ................ 161,906 257,312 4,050 Brunswick Corp. ................... 103,185 152,807 4,825 Church & Dwight Co. Inc. .......... 103,988 178,236 4,030 CNS Inc. .......................... 44,642 105,062 7,115 Jarden Corp.+ ..................... 125,234 292,213 ----------- ----------- 538,955 985,630 ----------- ----------- DIVERSIFIED INDUSTRIAL -- 16.1% 4,730 Albany International Corp., Cl. A .......................... 93,596 174,395 13,600 Apogee Enterprises Inc. ........... 144,047 232,560 3,380 Carlisle Companies Inc. ........... 166,843 214,866 7,680 EnPro Industries Inc.+ ............ 211,911 258,739 1,580 ESCO Technologies Inc.+ ........... 44,154 79,111 11,530 Griffon Corp.+ .................... 195,005 283,638 11,995 Material Sciences Corp.+ .......... 126,193 180,765 9,820 Pentair Inc. ...................... 189,152 358,430 3,140 Texas Industries Inc. ............. 61,829 170,816 ----------- ----------- 1,232,730 1,953,320 ----------- ----------- ENERGY AND UTILITIES -- 1.2% 3,129 ALLETE Inc. ....................... 89,274 143,340 ----------- ----------- ENTERTAINMENT -- 1.8% 44,130 Alloy Inc.+ ....................... 279,961 213,589 ----------- ----------- EQUIPMENT AND SUPPLIES -- 4.2% 6,190 Tennant Co. ....................... 229,508 253,666 6,950 Toro Co. .......................... 177,221 255,482 ----------- ----------- 406,729 509,148 ----------- ----------- FINANCIAL SERVICES -- 7.2% 13,910 BISYS Group Inc.+ ................. 207,147 186,811 13,340 NewAlliance Bancshares Inc. ....... 198,785 195,298 11,200 TCF Financial Corp. ............... 170,837 299,600 14,570 USI Holdings Corp.+ ............... 183,063 189,264 ----------- ----------- 759,832 870,973 ----------- ----------- MARKET SHARES COST VALUE ------ ---- ------- FOOD AND BEVERAGE -- 6.6% 19,080 Del Monte Foods Co.+ ..............$ 167,172 $ 204,728 5,030 PepsiAmericas Inc. ................ 78,366 114,332 9,940 Triarc Companies Inc., Cl. A ...... 84,076 166,992 20,200 Triarc Companies Inc., Cl. B ...... 188,230 308,454 ----------- ----------- 517,844 794,506 ----------- ----------- HEALTH CARE -- 12.5% 2,013 Fisher Scientific International Inc.+ ............. 74,583 124,907 6,010 Immucor Inc.+ ..................... 154,878 164,914 5,380 Laboratory Corporation of America Holdings+ ............... 168,056 262,060 13,782 Lifecore Biomedical Inc.+ ......... 121,662 166,624 6,100 PolyMedica Corp. .................. 185,223 213,134 11,330 Possis Medical Inc.+ .............. 134,469 124,177 6,700 SurModics Inc.+ ................... 149,451 259,223 6,990 West Pharmaceutical Services Inc. ................... 185,692 207,393 ----------- ----------- 1,174,014 1,522,432 ----------- ----------- HOTELS AND GAMING -- 3.9% 6,600 Gaylord Entertainment Co.+ ........ 163,507 314,490 5,550 Vail Resorts Inc.+ ................ 94,663 159,563 ----------- ----------- 258,170 474,053 ----------- ----------- MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 1.8% 15,050 Champion Enterprises Inc.+ ........ 159,848 222,439 ----------- ----------- PUBLISHING -- 1.2% 10,050 Journal Communications Inc., Cl. A ........................... 174,888 149,745 ----------- ----------- RETAIL -- 2.7% 14,920 Gander Mountain Co.+ .............. 178,135 134,131 6,690 Office Depot Inc.+ ................ 82,421 198,693 ----------- ----------- 260,556 332,824 ----------- ----------- SPECIALTY CHEMICALS -- 1.1% 2,990 Cytec Industries Inc. ............. 90,329 129,706 ----------- ----------- TRANSPORTATION -- 1.5% 7,260 Laidlaw International Inc. ........ 121,759 175,474 ----------- ----------- TOTAL COMMON STOCKS ............... 7,624,462 10,981,111 ----------- ----------- PRINCIPAL AMOUNT -------- U.S. GOVERNMENT OBLIGATIONS -- 11.7% $1,436,000 U.S. Treasury Bills, 3.018% to 3.825%++, 10/20/05 to 03/09/06 ............ 1,426,611 1,426,995 ----------- ----------- TOTAL INVESTMENTS -- 102.2% ...........$ 9,051,073 12,408,106 =========== OTHER ASSETS AND LIABILITIES (NET) -- (2.2)% ... (272,269) ----------- NET ASSETS -- 100.0% ...........................$12,135,837 =========== - ---------------- + Non-income producing security. ++ Represents annualized yield at date of purchase. See accompanying notes to financial statements. 5 THE GABELLI WOODLAND SMALL CAP VALUE FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- ASSETS: Investments, at value (cost $9,051,073) .................... $12,408,106 Receivable for Fund shares sold ............................ 21,701 Dividends receivable ....................................... 1,258 Other assets ............................................... 276 ----------- TOTAL ASSETS ............................................... 12,431,341 ----------- LIABILITIES: Payable for investments purchased .......................... 242,839 Payable for legal and audit fees ........................... 32,556 Payable for investment advisory fees ....................... 4,012 Payable for distribution fees .............................. 2,495 Payable for Fund shares redeemed ........................... 1,171 Payable to custodian ....................................... 168 Other accrued expenses ..................................... 12,263 ----------- TOTAL LIABILITIES .......................................... 295,504 ----------- NET ASSETS applicable to 829,292 shares outstanding ....................................... $12,135,837 =========== NET ASSETS CONSIST OF: Capital stock, each class at $0.001 par value .............. $ 829 Additional paid-in capital ................................. 8,000,445 Accumulated net realized gain on investments ............... 777,530 Net unrealized appreciation on investments ................. 3,357,033 ----------- NET ASSETS ................................................. $12,135,837 =========== SHARES OF CAPITAL STOCK: CLASS AAA: Net Asset Value, offering and redemption price per share ($11,839,123 / 808,807 shares outstanding; 100,000,000 shares authorized) .............. $14.64 ====== CLASS A: Net Asset Value and redemption price per share ($107,668 / 7,348 shares outstanding; 50,000,000 shares authorized) ............................ $14.65 ====== Maximum offering price per share (NAV / .9425, based on maximum sales charge of 5.75% of the offering price) ...................................... $15.54 ====== CLASS B: Net Asset Value and offering price per share ($156 / 10.56 shares outstanding; 50,000,000 shares authorized) ....................................... $14.77(a) ====== CLASS C: Net Asset Value and offering price per share ($188,890 / 13,126 shares outstanding; 50,000,000 shares authorized) ............................ $14.39(a) ====== - ------------------- (a) Redemption price varies based on length of time held. STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2005 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends ................................................. $ 66,412 Interest .................................................. 9,629 ----------- TOTAL INVESTMENT INCOME ................................... 76,041 ----------- EXPENSES: Investment advisory fees .................................. 62,004 Distribution fees -- Class AAA ............................ 15,164 Distribution fees -- Class A .............................. 199 Distribution fees -- Class B .............................. 1 Distribution fees -- Class C .............................. 549 Legal and audit fees ...................................... 29,198 Registration fees ......................................... 27,755 Shareholder communications expenses ....................... 21,039 Shareholder services fees ................................. 14,560 Custodian fees ............................................ 10,570 Directors' fees ........................................... 367 Miscellaneous expenses .................................... 4,879 ----------- TOTAL EXPENSES BEFORE FEES WAIVED AND EXPENSES REIMBURSED BY ADVISER .......................... 186,285 ----------- Fees waived and expenses reimbursed by Adviser .............................................. (61,198) Less: Custodian fee credits ............................... (413) ----------- TOTAL EXPENSES -- NET ..................................... 124,674 ----------- NET INVESTMENT LOSS ....................................... (48,633) ----------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments .......................... 837,195 Net change in unrealized appreciation/ depreciation on investments ............................. 284,720 ----------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS .......................................... 1,121,915 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......................................... $ 1,073,282 =========== See accompanying notes to financial statements. 6 THE GABELLI WOODLAND SMALL CAP VALUE FUND STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ OPERATIONS: Net investment loss .................... $ (48,633) $ (33,845) Net realized gain on investments ....... 837,195 251,438 Net change in unrealized appreciation/ depreciation on investments ......... 284,720 302,913 ------------ ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ 1,073,282 520,506 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Net realized gain on investments Class AAA ............................ (216,521) (6,975) Class A .............................. (3,450) (29) Class B .............................. (7) (1) Class C .............................. (2,367) (362) ------------ ------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS .... (222,345) (7,367) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Class AAA ............................ 7,618,024 573,650 Class A .............................. 50,032 41,636 Class B .............................. 8 -- Class C .............................. 140,546 (97,250) ------------ ------------ NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS .......... 7,808,610 518,036 ------------ ------------ REDEMPTION FEES ........................ 60 -- ------------ ------------ NET INCREASE IN NET ASSETS ............. 8,659,607 1,031,175 NET ASSETS: Beginning of period .................... 3,476,230 2,445,055 ------------ ------------ End of period .......................... $ 12,135,837 $ 3,476,230 ============ ============ See accompanying notes to financial statements. 7 THE GABELLI WOODLAND SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. ORGANIZATION. The Gabelli Woodland Small Cap Value Fund (the "Fund") is a series of Gabelli Equity Series Funds, Inc. (the "Corporation"), which was organized on July 25, 1991 as a Maryland corporation. The Fund is a non-diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), and one of three separately managed portfolios (collectively, the "Portfolios") of the Corporation, each with four separate classes of shares outstanding known as Class AAA, Class A, Class B and Class C. The Fund's primary objective is capital appreciation. The Fund commenced investment operations on December 31, 2002. 2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. SECURITY VALUATION. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market's official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the "Board") so determines, by such other method as the Board shall determine in good faith, to reflect its fair market value. Portfolio securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market, as determined by Gabelli Funds, LLC (the "Adviser"). Portfolio securities primarily traded on foreign markets are generally valued at the preceding closing values of such securities on their respective exchanges or if after the close of the foreign markets, but prior to the close of business on the day the securities are being valued, market conditions change significantly, certain foreign securities may be fair valued pursuant to procedures established by the Board. Debt instruments with remaining maturities of 60 days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities' fair value, in which case these securities will be valued at their fair value as determined by the Board. Debt instruments having a maturity greater than 60 days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded. Securities and assets for which market quotations are not readily available are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons to the valuation and changes in valuation of similar securities, including a comparison of foreign securities to the equivalent U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security. 8 THE GABELLI WOODLAND SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with primary government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System or with other brokers or dealers that meet credit guidelines established by the Adviser and reviewed by the Board. Under the terms of a typical repurchase agreement, the Fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the Fund's holding period. The Fund will always receive and maintain securities as collateral whose market value, including accrued interest, will be at least equal to 102% of the dollar amount invested by the Fund in each agreement. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. FOREIGN SECURITIES. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the ability to repatriate funds, less complete financial information about companies and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers. FOREIGN TAXES. The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon their current interpretation of tax rules and regulations that exist in the markets in which they invest. SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are accounted for on the trade date with realized gain or loss on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded as earned. Dividend income is recorded on the ex-dividend date. DETERMINATION OF NET ASSET VALUE AND CALCULATION OF EXPENSES. Certain administrative expenses are common to, and allocated among, various affiliated funds. Such allocations are made on the basis of each Fund's average net assets or other criteria directly affecting the expenses as determined by the Adviser pursuant to procedures established by the Board. In calculating net asset value per share of each class, investment income, realized and unrealized gains and losses, redemption fees and expenses other than class specific expenses, are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. Distribution expenses are borne solely by the class incurring the expense. CUSTODIAN FEE CREDITS. When cash balances are maintained in the custody account, the Fund receives credits which are used to offset custodian fees. The gross expenses paid under the custodian arrangement are included in custodian fees in the Statement of Operations with the corresponding expense offset shown as "custodian fee credits". 9 THE GABELLI WOODLAND SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are recorded on the ex-dividend date. Distributions to shareholders are based on income and capital gains as determined in accordance with Federal income tax regulations, which may differ from income and capital gains as determined under U.S. generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterizations of distributions made by the Fund. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, adjustments are made to the appropriate equity accounts in the fiscal year that the differences arise. For the fiscal year ended September 30, 2005, reclassifications were made to decrease accumulated net investment loss by $48,633 and decrease accumulated net realized gain on investments by $38,448, with an offsetting adjustment to additional paid-in capital. The tax character of distributions paid during the fiscal years ended September 30, 2005 and September 30, 2004 were as follows: FISCAL YEAR ENDED FISCAL YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ DISTRIBUTIONS PAID FROM: Ordinary income (inclusive of short-term capital gains) .................. $188,894 $7,367 Net long-term capital gains ....... 33,451 -- -------- ------ Total distributions paid .......... $222,345 $7,367 ======== ====== PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains. Therefore, no provision for Federal income taxes is required. As of September 30, 2005, the components of accumulated earnings/(losses) on a tax basis were as follows: Undistributed long-term capital gains ......... $ 813,020 Net unrealized appreciation ................... 3,321,543 ---------- Total accumulated earnings .................. $4,134,563 ========== Under the current tax law, capital losses related to securities and foreign currency realized after October 31 and prior to the Fund's fiscal year end may be treated as occurring on the first day of the following year. For the fiscal year ended September 30, 2005, the Fund had no capital losses to defer. The difference between book and tax basis unrealized appreciation is primarily due to deferral of losses from wash sales for tax purposes. 10 THE GABELLI WOODLAND SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- The following summarizes the tax cost of investments and related unrealized appreciation/depreciation at September, 30, 2005: GROSS GROSS NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION/ COST APPRECIATION DEPRECIATION (DEPRECIATION) ---------- ---------- ---------- ---------- Investments .... $9,086,563 $3,526,665 $(205,122) $3,321,543 3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment advisory agreement (the "Advisory Agreement") with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of its average daily net assets. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Fund's portfolio, oversees the administration of all aspects of the Fund's business and affairs and pays the compensation of all Officers and Directors of the Fund who are affiliated persons of the Adviser. The Adviser has agreed to waive its fees and reimburse expenses of the Fund to the extent necessary to maintain the annualized total operating expenses at 2.00%, 2.00%, 2.75% and 2.75% of average daily net assets for Class AAA, Class A, Class B and Class C Shares, respectively. For the fiscal year ended September 30, 2005, the Adviser reimbursed the Fund in the amount of $61,198. The Fund is obliged to repay the Adviser for a period of two fiscal years following the fiscal year in which the Adviser reimbursed the Fund only to the extent that the operating expenses of the Fund fall below 2.00%, 2.00%, 2.75% and 2.75% on an annualized basis of average daily net assets for Class AAA, Class A, Class B and Class C, respectively. The cumulative amount for which the Fund may repay the adviser is $176,216. 4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the "Plan") for each class of shares pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. ("Gabelli & Company"), an affiliate of the Adviser, serves as distributor of the Fund. Under the Class AAA, Class A, Class B and Class C Share Plans, payments are authorized to Gabelli & Company at annual rates of 0.25%, 0.25%, 1.00% and 1.00%, respectively, of the average daily net assets of those classes, the annual limitations under each Plan. Such payments are accrued daily and paid monthly. 5. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for the fiscal year ended September 30, 2005, other than short-term securities, aggregated $2,195,520 and $2,470,369, respectively. 6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30, 2005, the Fund paid brokerage commissions of $216 to Gabelli & Company. Additionally, Gabelli & Company informed the Fund that it received $1,687 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares. 7. LINE OF CREDIT. The Fund has access to an unsecured line of credit of up to $25,000,000 from the custodian for temporary borrowing purposes. Borrowings under this agreement bear interest at 0.75% above the Federal Funds rate on outstanding balances. At September 30, 2005, there were no borrowings outstanding from the line of credit. The average daily amount of borrowings outstanding from the line of credit within the fiscal year ended September 30, 2005 was $5,589 with a weighted average interest rate of 4.02%. The maximum amount borrowed at any time during the fiscal year ended September 30, 2005 was $231,000. 11 THE GABELLI WOODLAND SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 8. REORGANIZATION. On June 30, 2005, the Fund acquired all of the net assets of the FMI Woodland Small Capitalization Value Fund pursuant to a Plan of Reorganization approved by the FMI Woodland Small Capitalization Value Fund on June 28, 2005. The acquisition was accomplished by a tax-free exchange of 507,152 Class AAA Shares of the Fund valued at $7,153,355 for the net assets of the FMI Woodland Small Capitalization Value Fund on June 29, 2005. FMI Woodland Small Capitalization Value Fund's net assets of $7,153,355, including $2,609,903 of unrealized appreciation, were combined with those of the Fund on June 30, 2005. The net assets of the Fund immediately before the acquisition were $4,888,669. 9. CAPITAL STOCK TRANSACTIONS. The Fund currently offers four classes of shares--Class AAA Shares, Class A Shares, Class B Shares and Class C Shares. Class AAA Shares are offered only to investors who acquire them directly from Gabelli & Company or through selected broker/dealers without a sales charge. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class B Shares are subject to a contingent deferred sales charge ("CDSC") upon redemption within six years of purchase and automatically convert to Class A Shares after eight years from the original purchase. The applicable CDSC is equal to a declining percentage of the lesser of the net asset value per share at the date of the original purchase or at the date of redemption, based on the length of time held. Class C Shares are subject to a 1% CDSC for one year after purchase. As of July 27, 2004, Class B Shares are available only through exchange of Class B Shares of other Funds distributed by Gabelli & Company. The Board has approved Class I Shares which have not been offered publicly. Effective June 15, 2005, the Fund imposed a redemption fee of 2.00% on Class AAA Shares, Class A Shares, Class B Shares and Class C Shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. (Prior to June 15, 2005, the Fund imposed a redemption fee on shares that were redeemed or exchanged within the sixtieth day after the date of a purchase.) The redemption fee is deducted from the proceeds otherwise payable to the redeeming shareholders and is retained by the Fund. The redemption fees retained by the Fund during the fiscal year ended September 30, 2005 amounted to $60. The redemption fee does not apply to shares purchased through programs that the Adviser determined to have appropriate short-term trading policies in place. Additionally, certain recordkeepers for qualified and non-qualified retirement plans that could not collect the redemption fee at the participant level due to systems limitations have received an extension to implement such systems. 12 THE GABELLI WOODLAND SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- Transactions in shares of capital stock were as follows: YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------------ ---------------------- SHARES AMOUNT SHARES AMOUNT -------- ----------- ------- ---------- CLASS AAA CLASS AAA ------------------------ ---------------------- Shares sold ............................................... 171,431 $ 2,401,287 125,294 $1,550,393 Shares issued in connection with reorganization of FMI Woodland Small Capitalization Value Fund ............ 507,152 7,153,355 Shares issued upon reinvestment of dividends .............. 15,770 212,423 579 6,880 Shares redeemed ........................................... (150,391) (2,149,041) (80,708) (983,623) -------- ----------- ------- ---------- Net increase ............................................ 543,962 $ 7,618,024 45,165 $ 573,650 ======== =========== ======= ========== CLASS A CLASS A ------------------------ ---------------------- Shares sold ............................................... 3,409 $ 46,582 3,366 $ 41,607 Shares issued upon reinvestment of dividends .............. 256 3,450 2 29 Shares redeemed ........................................... -- -- -- -- -------- ----------- ------- ---------- Net increase ............................................ 3,665 $ 50,032 3,368 $ 41,636 ======== =========== ======= ========== CLASS B CLASS B ------------------------ ---------------------- Shares sold ............................................... -- -- -- -- Shares issued upon reinvestment of dividends .............. 0* $ 8 -- -- Shares redeemed ........................................... -- -- -- -- -------- ----------- ------- ---------- Net increase ............................................ 0 $ 8 -- -- ======== =========== ======= ========== CLASS C CLASS C ------------------------ ---------------------- Shares sold ............................................... 9,708 $ 138,179 31 $ 362 Shares issued upon reinvestment of dividends .............. 178 2,367 -- -- Shares redeemed ........................................... -- -- (7,997) (97,612) -------- ----------- ------- ---------- Net increase / (decrease) ............................... 9,886 $ 140,546 (7,966) $ (97,250) ======== =========== ======= ========== - ---------------- * Share rounded to less than 1.0 shares. 10. OTHER MATTERS. The Adviser and/or affiliates have received subpoenas from the Attorney General of the State of New York and the SEC requesting information on mutual fund trading practices involving certain funds managed by the Adviser. GAMCO Investors, Inc., the Adviser's parent company, is responding to these requests for documents and testimony. On a separate matter, in September 2005, the Adviser was informed by the staff of the SEC that the staff may recommend to the Commission that an administrative remedy and a monetary penalty be sought from the Adviser in connection with the actions of two of seven closed-end funds managed by the Adviser relating to Section 19(a) and Rule 19a-1 of the 1940 Act. These provisions require registered investment companies to provide written statements to shareholders when a dividend is made from a source other than net investment income. While the two closed-end funds sent annual statements and provided other materials containing this information, the funds did not send written statements to shareholders with each distribution in 2002 and 2003. The Adviser believes that all of the funds are now in compliance. The Adviser believes that these matters would have no effect on the Fund nor any material adverse effect on the Adviser or its ability to manage the Fund. 11. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 13 THE GABELLI WOODLAND SMALL CAP VALUE FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of capital stock outstanding throughout each period: INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS --------------------------------------------------- -------------------------- Net Net Asset Net Realized and Total Net Period Value, Investment Unrealized from Realized Ended Beginning Income/ Gain/(Loss) on Investment Gain on Total September 30 of Period (Loss)(d) Investments Operations Investments Distributions - ------------ --------- --------- ----------- ---------- ----------- ------------- CLASS AAA 2005 $12.79 $(0.11) $2.69 $2.58 $(0.73) $(0.73) 2004 10.58 (0.14) 2.38 2.24 (0.03) (0.03) 2003(a) 10.00 (0.07) 0.65 0.58 -- -- CLASS A 2005 $12.79 $(0.09) $2.68 $2.59 $(0.73) $(0.73) 2004 10.57 (0.14) 2.39 2.25 (0.03) (0.03) 2003(a) 10.00 (0.07) 0.64 0.57 -- -- CLASS B 2005 $12.98 $(0.21) $2.73 $2.52 $(0.73) $(0.73) 2004 10.59 0.02 2.40 2.42 (0.03) (0.03) 2003(a) 10.00 (0.12) 0.71 0.59 -- -- CLASS C 2005 $12.66 $(0.20) $2.66 $2.46 $(0.73) $(0.73) 2004 10.55 (0.23) 2.37 2.14 (0.03) (0.03) 2003(a) 10.00 (0.11) 0.66 0.55 -- -- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA ------------------------------------------------------------- Expenses Expenses Net Asset Net Assets Net of Before Period Value, End of Net Waivers/ Waivers/ Portfolio Ended Redemption End of Total Period Investment Reimburse- Reimburse- Turnover September 30 Fees(d) Period Return+ (in 000's) Income/(Loss) ments ments(c) Rate - ------------ ---------- ------ ------- ---------- ------------- ---------- ---------- --------- CLASS AAA 2005 $0.00(e) $14.64 20.67% $11,839 (0.78)% 2.01%(f) 2.99% 35% 2004 -- 12.79 21.22 3,388 (1.14) 2.00 5.94 45 2003(a) -- 10.58 5.80 2,323 (0.97)(b) 2.00(b) 15.05(b) 39 CLASS A 2005 $0.00(e) $14.65 20.76% $ 108 (0.68)% 2.01%(f) 3.17% 35% 2004 -- 12.79 21.34 47 (1.16) 2.00 5.94 45 2003(a) -- 10.57 5.70 3 (0.97)(b) 2.00(b) 15.05(b) 39 CLASS B 2005 $0.00(e) $14.77 19.86% $ 0.1 (1.50)% 2.75%(f) 3.87% 35% 2004 -- 12.98 22.91 0.1 0.18 2.75 6.69 45 2003(a) -- 10.59 5.90 0.1 (1.72)(b) 2.75(b) 15.80(b) 39 CLASS C 2005 $0.00(e) $14.39 19.91% $ 189 (1.46)% 2.76%(f) 3.87% 35% 2004 -- 12.66 20.33 41 (1.88) 2.75 6.69 45 2003(a) -- 10.55 5.50 118 (1.72)(b) 2.75(b) 15.80(b) 39 - ------------------- + Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the period and sold at the end of the period including reinvestment of dividends and does not reflect applicable sales charges. Total return for the period of less than one year is not annualized. (a) From commencement of investment operations on December 31, 2002 through September 30, 2003. (b) Annualized. (c) During the period, expenses were voluntarily reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratio would have been as shown. (d) Per share amounts have been calculated using the average shares outstanding method. (e) Amount represents less than $0.005 per share. (f) The ratios do not include a reduction of expenses for custodian fee credits on cash balances maintained with the custodian. Including such custodian fee credits, the expense ratios for the fiscal year ended September 30, 2005 would have been 2.00%, 2.00%, 2.75% and 2.75% for Class AAA, Class A, Class B and Class C, respectively. See accompanying notes to financial statements. 14 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Shareholders and Board of Directors of The Gabelli Woodland Small Cap Value Fund We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Gabelli Woodland Small Cap Value Fund (the "Fund"), a series of Gabelli Equity Series Funds, Inc., as of September 30, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights 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 and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's 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 Fund'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 and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2005, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Gabelli Woodland Small Cap Value Fund, a series of Gabelli Equity Series Funds, Inc., at September 30, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ ERNST & YOUNG LLP Philadelphia, Pennsylvania November 11, 2005 15 THE GABELLI WOODLAND SMALL CAP VALUE FUND ADDITIONAL FUND INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- The business and affairs of the Fund are managed under the direction of the Fund's Board of Directors. Information pertaining to the Directors and officers of the Fund is set forth below. The Fund's Statement of Additional Information includes additional information about The Gabelli Woodland Small Cap Value Fund's Directors and is available, without charge, upon request, by calling 800-GABELLI (800-422-3554) or by writing to The Gabelli Woodland Small Cap Value Fund at One Corporate Center, Rye, NY 10580-1422. TERM OF NUMBER OF NAME, POSITION(S) OFFICE AND FUNDS IN FUND ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3 - ----------------- ------------- ---------------- ---------------------- ------------------ INTERESTED DIRECTORS 4: - ---------------------- MARIO J. GABELLI Since 1991 24 Chairman of the Board and Chief Executive Director of Morgan Group Director and Officer of GAMCO Investors, Inc. and Holdings, Inc. Chief Investment Officer Chief Investment Officer-Value Portfolios (holding company) Age: 63 of Gabelli Funds, LLC and GAMCO Asset Management Inc.; Chairman and Chief Executive Officer of Lynch Interactive Corporation (multimedia and services) JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Company, -- Director Inc.; Director of Gabelli Advisers, Inc. Age: 61 KARL OTTO POHL 5 Since 1992 35 Member of the Shareholder Committee of Sal Director of GAMCO Investors, Director Oppenheim Jr. & Cie (private investment Inc. (investment management); Age: 75 bank); Former President of the Chairman, InCentive Capital Deutsche Bundesbank and Chairman of its and InCentive Asset Management Central Bank Council (1980-1991) (Zurich); Director at Sal Oppenheim Jr. & Cie, Zurich NON-INTERESTED DIRECTORS: - ------------------------ ANTHONY J. COLAVITA Since 1991 37 Partner in the law firm of -- Director Anthony J. Colavita, P.C. Age: 69 VINCENT D. ENRIGHT Since 1991 14 Former Senior Vice President and Chief Director of Aphton Corporation Director Financial Officer of KeySpan Energy (biopharmaceutical company) Age: 61 Corporation (utility holding company) ROBERT J. MORRISSEY Since 1991 10 Partner in the law firm of Morrissey, -- Director Hawkins & Lynch Age: 66 ANTHONY R. PUSTORINO Since 1991 17 Certified Public Accountant; Professor Director of Lynch Corporation Director Emeritus, Pace University (diversified manufacturing) Age: 80 ANTHONIE C. VAN EKRIS Since 1991 21 Chairman of BALMAC International, Inc. Director of Aurado Director (commodities and futures trading) Energy Inc. (oil and Age: 71 gas operations) SALVATORE J. ZIZZA Since 2001 25 Chairman, Hallmark Electrical Director of Hollis Eden Director Supplies Corp. Pharmaceuticals; Director Age: 59 of Earl Scheib, Inc. (automotive services) 16 THE GABELLI WOODLAND SMALL CAP VALUE FUND ADDITIONAL FUND INFORMATION (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- TERM OF NUMBER OF NAME, POSITION(S) OFFICE AND FUNDS IN FUND ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3 - ----------------- ------------- ---------------- ---------------------- ------------------ OFFICERS: - -------- BRUCE N. ALPERT Since 1991 -- Executive Vice President and Chief Operating -- President and Treasurer Officer of Gabelli Funds, LLC since 1988; Age: 53 Director and President of Gabelli Advisers, Inc. since 1998; Officer of all the registered investment companies in the Gabelli Fund complex JAMES E. MCKEE Since 1995 -- Vice President, General Counsel and Secretary -- Secretary of GAMCO Investors, Inc. since 1999 Age: 42 and GAMCO Asset Management Inc. since 1993; Secretary of all of the registered investment companies advised by Gabelli Advisers, Inc. and Gabelli Funds, LLC PETER D. GOLDSTEIN Since 2004 -- Director of Regulatory Affairs for GAMCO -- Chief Compliance Officer Investors, Inc. since 2004; Chief Compliance Age: 52 Officer of all of the registered investment companies in the Gabelli Fund complex; Vice President of Goldman Sachs Asset Management from 2000-2004; Deputy General Counsel of GAMCO Investors, Inc. from 1998-2000 - ------------------ 1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. 2 Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders, if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Fund's By-Laws and Articles of Incorporation. The Gabelli Woodland Small Cap Value Fund is a series of Gabelli Equity Series Funds, Inc., which was organized on July 25, 1991.The Fund commenced investment operations on December 31, 2002. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. 3 This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e. public companies) or other investment companies registered under the 1940 Act. 4 "Interested person" of the Fund as defined in the Investment Company Act of 1940. Messrs. Gabelli, Gabelli and Pohl are each considered an "interested person" because of their affiliation with Gabelli Funds, LLC which acts as each Fund's investment adviser. Mario J. Gabelli and John D. Gabelli are brothers. 5 Effective November 15, 2005, Mr. Pohl resigned from the Board of Directors and now serves as Director Emeritus. - -------------------------------------------------------------------------------- 2005 TAX NOTICE TO SHAREHOLDERS (Unaudited) For the fiscal year ended September 30, 2005, the Fund paid to Class AAA, Class A, Class B and Class C shareholders, on December 20, 2004 an ordinary income dividend (comprised of short-term capital gains) totaling $0.6208 and long-term capital gains totaling $0.1099 per share. For the fiscal year ended September 30, 2005, 0.00% of the ordinary income dividend qualifies for the dividend received deduction available to corporations and 35.15% of the ordinary income distribution was qualifying dividend income. An estimate of qualified dividend income of $66,403 was received by the Fund through September 30, 2005 that qualifies for a reduced tax rate pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003. - -------------------------------------------------------------------------------- 17 - -------------------------------------------------------------------------------- GABELLI FUNDS AND YOUR PERSONAL PRIVACY - -------------------------------------------------------------------------------- WHO ARE WE? The Gabelli Funds are investment companies registered with the Securities and Exchange Commission under the Investment Company Act of 1940. We are managed by Gabelli Funds, LLC, and Gabelli Advisers, Inc. which are affiliated with GAMCO Investors, Inc. GAMCO Investors, Inc. is a publicly-held company that has subsidiaries that provide investment advisory or brokerage services for a variety of clients. WHAT KIND OF NON-PUBLIC INFORMATION DO WE COLLECT ABOUT YOU IF YOU BECOME A GABELLI CUSTOMER? If you apply to open an account directly with us, you will be giving us some non-public information about yourself. The non-public information we collect about you is: o INFORMATION YOU GIVE US ON YOUR APPLICATION FORM. This could include your name, address, telephone number, social security number, bank account number, and other information. o INFORMATION ABOUT YOUR TRANSACTIONS WITH US, ANY TRANSACTIONS WITH OUR AFFILIATES AND TRANSACTIONS WITH THE ENTITIES WE HIRE TO PROVIDE SERVICES TO YOU. This would include information about the shares that you buy or redeem, and the deposits and withdrawals that you make. If we hire someone else to provide services--like a transfer agent--we will also have information about the transactions that you conduct through them. WHAT INFORMATION DO WE DISCLOSE AND TO WHOM DO WE DISCLOSE IT? We do not disclose any non-public personal information about our customers or former customers to anyone, other than our affiliates, our service providers who need to know such information and as otherwise permitted by law. If you want to find out what the law permits, you can read the privacy rules adopted by the Securities and Exchange Commission. They are in volume 17 of the Code of Federal Regulations, Part 248. The Commission often posts information about its regulations on its web site, www.sec.gov. WHAT DO WE DO TO PROTECT YOUR PERSONAL INFORMATION? We restrict access to non-public personal information about you to the people who need to know that information in order to provide services to you or the Fund and to ensure that we are complying with the laws governing the securities business. We maintain physical, electronic, and procedural safeguards to keep your personal information confidential. - -------------------------------------------------------------------------------- GABELLI FAMILY OF FUNDS VALUE ________________________________________ GABELLI ASSET FUND Seeks to invest primarily in a diversified portfolio of common stocks selling at significant discounts to their private market value. The Fund's primary objective is growth of capital. (MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA GABELLI BLUE CHIP VALUE FUND Seeks long term growth of capital through investment primarily in the common stocks of established companies which are temporarily out of favor. The fund's objective is to identify a catalyst or sequence of events that will return the company to a higher value. (MULTICLASS) PORTFOLIO MANAGER: BARBARA MARCIN, CFA WESTWOOD EQUITY FUND Seeks to invest primarily in the common stock of well-seasoned companies that have recently reported positive earnings surprises and are trading below Westwood's proprietary growth rate estimates. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: SUSAN M. BYRNE FOCUSED VALUE ______________________________ GABELLI VALUE FUND Seeks to invest in securities of companies believed to be undervalued. The Fund's primary objective is long-term capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA SMALL CAP VALUE ____________________________ GABELLI SMALL CAP FUND Seeks to invest primarily in common stock of smaller companies (market capitalizations less than $1 billion) believed to have rapid revenue and earnings growth potential. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA WESTWOOD SMALLCAP EQUITY FUND Seeks to invest primarily in smaller capitalization equity securities - market caps of $2.5 billion or less. The Fund's primary objective is long-term capital appreciation. (MULTICLASS) TEAM MANAGED GABELLI WOODLAND SMALL CAP VALUE FUND Seeks to invest primarily in the common stocks of smaller companies (market capitalizations less than $1.5 billion) believed to be undervalued with shareholder oriented management teams that are employing strategies to grow the company's value. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: ELIZABETH M. LILLY, CFA GROWTH ______________________________________ GABELLI GROWTH FUND Seeks to invest primarily in large cap stocks believed to have favorable, yet undervalued, prospects for earnings growth. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: HOWARD F. WARD, CFA GABELLI INTERNATIONAL GROWTH FUND Seeks to invest in the equity securities of foreign issuers with long-term capital appreciation potential. The Fund offers investors global diversification. (MULTICLASS) PORTFOLIO MANAGER: CAESAR BRYAN AGGRESSIVE GROWTH _________________________ GABELLI GLOBAL GROWTH FUND Seeks capital appreciation through a disciplined investment program focusing on the globalization and interactivity of the world's marketplace. The Fund invests in companies at the forefront of accelerated growth. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED MICRO-CAP ___________________________________ WESTWOOD MIGHTY MITES(SM) FUND Seeks to invest in micro-cap companies that have market capitalizations of $300 million or less. The Fund's primary objective is long-term capital appreciation. (MULTICLASS) TEAM MANAGED EQUITY INCOME _______________________________ GABELLI EQUITY INCOME FUND Seeks to invest primarily in equity securities with above market average yields. The Fund pays monthly dividends and seeks a high level of total return with an emphasis on income. (MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA WESTWOOD BALANCED FUND Seeks to invest in a balanced and diversified portfolio of stocks and bonds. The Fund's primary objective is both capital appreciation and current income. (MULTICLASS) CO-PORTFOLIO MANAGERS: SUSAN M. BYRNE MARK FREEMAN, CFA WESTWOOD INCOME FUND Seeks to provide a high level of current income as well as long-term capital appreciation by investing in income producing equity and fixed income securities. (MULTICLASS) PORTFOLIO MANAGER: SUSAN M. BYRNE SPECIALTY EQUITY ____________________________ GABELLI GLOBAL CONVERTIBLE SECURITIES FUND Seeks to invest principally in bonds and preferred stocks which are convertible into common stock of foreign and domestic companies. The Fund's primary objective is total return through a combination of current income and capital appreciation. (MULTICLASS) TEAM MANAGED GABELLI GLOBAL OPPORTUNITY FUND Seeks to invest in common stock of companies which have rapid growth in revenues and earnings and potential for above average capital appreciation or are undervalued. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED SECTOR ______________________________________ GABELLI GLOBAL TELECOMMUNICATIONS FUND Seeks to invest in telecommunications companies throughout the world - targeting undervalued companies with strong earnings and cash flow dynamics. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED GABELLI GOLD FUND Seeks to invest in a global portfolio of equity securities of gold mining and related companies. The Fund's objective is long-term capital appreciation. Investment in gold stocks is considered speculative and is affected by a variety of world-wide economic, financial and political factors. (MULTICLASS) PORTFOLIO MANAGER: CAESAR BRYAN GABELLI UTILITIES FUND Seeks to provide a high level of total return through a combination of capital appreciation and current income. (MULTICLASS) TEAM MANAGED MERGER AND ARBITRAGE _____________________ GABELLI ABC FUND Seeks to invest in securities with attractive opportunities for appreciation or investment income. The Fund's primary objective is total return in various market conditions without excessive risk of capital loss. (NO-LOAD) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA CONTRARIAN_________________________________ GABELLI MATHERS FUND Seeks long-term capital appreciation in various market conditions without excessive risk of capital loss. (CLASS AAA-NO-LOAD) PORTFOLIO MANAGER: HENRY VAN DER EB, CFA COMSTOCK CAPITAL VALUE FUND Seeks capital appreciation and current income. The Fund may use either long or short positions to achieve its objective. (MULTICLASS) PORTFOLIO MANAGER: MARTIN WEINER, CFA COMSTOCK STRATEGY FUND The Fund emphasizes investments in debt securities, which maximize total return in light of credit risk, interest rate risk, and the risk associated with the length of maturity of the debt instrument. (MULTICLASS) PORTFOLIO MANAGER: MARTIN WEINER, CFA QUANTITATIVE_________________________________ NED DAVIS RESEARCH ASSET ALLOCATION FUND Seeks to achieve returns greater then the weighted composite benchmark consisting of 60% in the S&P 500 Index and 40% in the Lehman Long Term U.S. Government Bond Index through a flexible asset allocation strategy. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED FIXED INCOME ________________________________ WESTWOOD INTERMEDIATE BOND FUND Seeks to invest in a diversified portfolio of bonds with various maturities. The Fund's primary objective is total return. (MULTICLASS) PORTFOLIO MANAGER: MARK FREEMAN, CFA CASH MANAGEMENT-MONEY MARKET __________ GABELLI U.S. TREASURY MONEY MARKET FUND Seeks to invest exclusively in short-term U.S. Treasury securities. The Fund's primary objective is to provide high current income consistent with the preservation of principal and liquidity. (NO-LOAD) PORTFOLIO MANAGER: JUDITH A. RANERI AN INVESTMENT IN THE ABOVE MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. THE GLOBAL FUNDS INVEST IN FOREIGN SECURITIES WHICH INVOLVE RISKS NOT ORDINARILY ASSOCIATED WITH INVESTMENTS IN DOMESTIC ISSUES, INCLUDING CURRENCY FLUCTUATION, ECONOMIC AND POLITICAL RISKS. TO RECEIVE A PROSPECTUS, CALL 800-GABELLI (422-3554). INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS AND CHARGES AND EXPENSES OF THE FUND CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION ABOUT THIS AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING. Gabelli Equity Series Funds, Inc. THE GABELLI WOODLAND SMALL CAP VALUE FUND One Corporate Center Rye, New York 10580-1422 800-GABELLI 800-422-3554 FAX: 914-921-5118 WEBSITE: WWW.GABELLI.COM E-MAIL: INFO@GABELLI.COM Net Asset Value available daily by calling 800-GABELLI after 6:00 P.M. BOARD OF DIRECTORS Mario J. Gabelli, CFA Karl Otto Pohl CHAIRMAN AND CHIEF FORMER PRESIDENT EXECUTIVE OFFICER DEUTSCHE BUNDESBANK GAMCO INVESTORS, INC. Anthony J. Colavita Anthony R. Pustorino ATTORNEY-AT-LAW CERTIFIED PUBLIC ACCOUNTANT ANTHONY J. COLAVITA, P.C. PROFESSOR EMERITUS PACE UNIVERSITY Vincent D. Enright Anthonie C. van Ekris FORMER SENIOR VICE PRESIDENT CHAIRMAN AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC. KEYSPAN ENERGY CORP. John D. Gabelli Salvatore J. Zizza SENIOR VICE PRESIDENT CHAIRMAN GABELLI & COMPANY, INC. HALLMARK ELECTRICAL SUPPLIES CORP. Robert J. Morrissey ATTORNEY-AT-LAW MORRISSEY, HAWKINS & LYNCH OFFICERS AND PORTFOLIO MANAGER Elizabeth M. Lilly, CFA Bruce N. Alpert PORTFOLIO MANAGER PRESIDENT AND TREASURER James E. McKee Peter D.Goldstein SECRETARY CHIEF COMPLIANCE OFFICER DISTRIBUTOR Gabelli & Company, Inc. CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT State Street Bank and Trust Company LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP - -------------------------------------------------------------------------------- This report is submitted for the general information of the shareholders of The Gabelli Woodland Small Cap Value Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. - -------------------------------------------------------------------------------- GAB840Q305SR [GRAPHIC OMITTED] PICTURE OF MARIO GABELLI THE GABELLI WOODLAND SMALL CAP VALUE FUND ANNUAL REPORT SEPTEMBER 30, 2005 ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. (d) The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item's instructions. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. As of the end of the period covered by the report, the registrant's board of directors has determined that Anthony R. Pustorino is qualified to serve as an audit committee financial expert serving on its audit committee and that he is "independent." ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. AUDIT FEES (a) The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $97,800 in 2005 and $90,639 in 2004. AUDIT-RELATED FEES (b) The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item are $0 in 2005 and $0 in 2004. TAX FEES (c) The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $10,800 in 2005 and $10,200 in 2004. Tax fees represent tax compliance services provided in connection with the review of the Registrant's tax returns. ALL OTHER FEES (d) The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 in 2005 and $0 in 2004. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. Pre-Approval Policies and Procedures. The Audit Committee ("Committee") of the registrant is responsible for pre-approving (i) all audit and permissible non-audit services to be provided by the independent auditors to the registrant and (ii) all permissible non-audit services to be provided by the independent auditors to the Adviser, Gabelli Funds, LLC, and any affiliate of Gabelli Funds, LLC ("Gabelli") that provides services to the registrant (a "Covered Services Provider") if the independent auditors' engagement is related directly to the operations and financial reporting of the registrant. The Committee may delegate its responsibility to pre-approve any such audit and permissible non-audit services to the Chairperson of the Committee, and the Chairperson must report to the Committee, at its next regularly scheduled meeting after the Chairperson's pre-approval of such services, his or her decision(s). The Committee may also establish detailed pre-approval policies and procedures for pre-approval of such services in accordance with applicable laws, including the delegation of some or all of the Committee's pre-approval responsibilities to the other persons (other than Gabelli or the registrant's officers). Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the registrant, Gabelli and any Covered Services Provider constitutes not more than 5% of the total amount of revenues paid by the registrant to its independent auditors during the fiscal year in which the permissible non-audit services are provided; (ii) the permissible non-audit services were not recognized by the registrant at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee or Chairperson prior to the completion of the audit. (e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: (b) N/A (c) 100% (d) N/A (f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was zero percent (0%). (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $10,800 in 2005 and $10,200 in 2004. (h) The registrant's audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Gabelli Equity Series Funds, Inc. ------------------------------------------------------------------- By (Signature and Title)* /s/ Bruce N. Alpert ------------------------------------------------------- Bruce N. Alpert, Principal Executive Officer Date December 8, 2005 ---------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Bruce N. Alpert ------------------------------------------------------- Bruce N. Alpert, Principal Executive Officer and Principal Financial Officer Date December 8, 2005 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.