GABELLI EQUITY SERIES FUNDS INC, 497, 1998-02-09

GABELLI EQUITY SERIES FUNDS INC
497, 1998-02-09

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The Gabelli Small Cap Growth Fund

ONE CORPORATE CENTER
RYE, NEW YORK 10580-1434
TELEPHONE: 1-800-GABELLI (1-800-422-3554)
HTTP://WWW/GABELLI.COM
================================================================================
PROSPECTUS JANUARY 28, 1998

The Gabelli Small Cap Growth Fund (the "Fund") is a series of Gabelli
Equity Series Funds, Inc., a Maryland corporation (the "Corporation"). The Fund
is a no-load open-end, diversified, management investment company whose
investment objective is to seek a high level of capital appreciation on its
assets. The Fund seeks to achieve its investment objective by investing
primarily in the equity securities of smaller companies (those with market
values at the time of investment of less than $500 million) which the Fund's
investment adviser believes are likely to have rapid growth in revenue and/or
earnings and potential for above average capital appreciation.

Shares of the Fund may be purchased without a sales load at net asset
value. The minimum initial investment is $1,000. Additionally, accounts
establishing an Automatic Investment Plan do not require any minimum initial
investment (see "Purchase of Shares"). The Fund has a distribution plan which
permits it to pay up to .25% per year of its average daily net assets for
marketing and shareholder services and expenses. For further information,
contact Gabelli & Company, Inc. at the address or telephone number shown above.
------------------------------

This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
dated January 28, 1998 (the "Additional Statement") containing additional
information about the Fund has been filed with the Securities and Exchange
Commission (the "SEC") and is available for reference along with other materials
on the SEC Internet website (http://www.sec.gov) and is incorporated by
reference into this Prospectus. For a free copy, write or call the Fund at the
telephone number or address set forth above.

Shares of the Fund are not deposits or obligations of any bank, are not
endorsed or guaranteed by any bank and are not insured or guaranteed by the
Federal Deposit Insurance Corporation, The Federal Reserve Board or any other
government agency and involve risk, including the possible loss of principal.
------------------------------

This Prospectus should be retained
by investors for future reference.
------------------------------
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE> 2

TABLE OF FEES AND EXPENSES

<TABLE>
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases............................................ None
Maximum Sales Charge Imposed on Reinvested Dividends................................. None
Deferred Sales Charge................................................................ None
Redemption Fees...................................................................... None
Exchange Fees........................................................................ None
Annual Fund Operating Expenses (as a percentage of average net assets):
Management Fees.................................................................... 1.00%
12b-1 Expenses (a)................................................................. .25
Other Expenses (b)................................................................. .37%
-----
Total Fund Operating Expenses........................................................ 1.62%
=====
</TABLE>

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(a) See "Distribution Plan." Long term investors may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc.

(b) Such expenses include custodian and transfer agency fees and other
customary Fund expenses.

Example:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return at the end of each period...... $ 16 $51 $88 $192
</TABLE>

The amounts listed in this example should not be considered as
representative of future expenses since actual expenses may be greater or less
than those indicated. Moreover, while the example assumes a 5% annual return,
the Fund's actual performance will vary and may result in an actual return
greater or less than 5%.

The foregoing table is to assist you in understanding the various direct
and indirect costs and expenses that an investor in the Fund would bear.

Management's Discussion and Analysis of the Fund's performance during the
fiscal year ended September 30, 1997 is included in the Fund's Annual Report to
Shareholders dated September 30, 1997. The Fund's Annual Report to Shareholders
may be obtained upon request and without charge by writing or calling the Fund
at the address or telephone number listed on the Prospectus cover.

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FINANCIAL HIGHLIGHTS

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors, whose unqualified report thereon appears in the Statement
of Additional Information:

Selected data for a share of capital stock outstanding throughout each
period ended September 30:

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992+
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period..... $20.02 $19.34 $17.24 $16.90 $13.10 $10.00
------ ------ ------ ------ ------ ------
Net investment income (loss)............. (0.07) (0.09) (0.04) (0.05) 0.01 0.04
Net realized and unrealized gain on
investments............................ 7.70 2.11 3.17 0.81 3.98 3.14
------ ------ ------ ------ ------ ------
Total from investment operations......... 7.63 2.02 3.13 0.76 3.99 3.18
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income... -- -- -- -- (0.03) (0.01)
Distributions from net realized gain on
investments.......................... (2.23) (1.34) (1.03) (0.42) (0.16) (0.07)
------ ------ ------ ------ ------ ------
Total Distributions.................... (2.23) (1.34) (1.03) (0.42) (0.19) (0.08)
------ ------ ------ ------ ------ ------
Net asset value, end of period $25.42 $20.02 $19.34 $17.24 $16.90 $13.10
====== ====== ====== ====== ====== ======
Total Return(a).......................... 42.20% 11.01% 19.47% 4.48% 30.65% 31.86%
------ ------ ------ ------ ------ ------
Ratios to Average Net Assets and
Supplemental Data:
Net assets, end of period (in
thousands)........................... $296,519 $223,239 $231,156 $205,699 $204,617 $94,864
Ratio of operating expenses to average
net assets........................... 1.62%(c) 1.58% 1.54% 1.54% 1.64% 1.97%*
Ratio of net investment income (loss)
to average net assets................ (0.36%) (0.42%) (0.24%) (0.28%) 0.03% 0.32%*
Portfolio turnover rate................ 14% 11% 17% 19% 14% 16%
Average commission rate per share(b)... $ 0.0500 $ 0.0490 -- -- -- --
</TABLE>

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* Annualized

+ For the period October 22, 1991 (commencement of operations) through
September 30, 1992.

(a) 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.

(b) For fiscal years beginning after September 1, 1995, the SEC requires the
Fund to disclose the average commission rate paid per share for purchases
and sales of investment securities.

(c) The Fund incurred interest expense from temporary borrowings during the
year ended September 30, 1997. Excluding interest expense, the operating
expense ratio would have been 1.52%.

INVESTMENT OBJECTIVE AND POLICIES
AND RELATED RISK FACTORS

The Fund's investment objective is to seek a high level of capital
appreciation on its assets by investing primarily in the equity securities of
smaller companies (those with total market values at the time of investment of
less than $500 million) which the Adviser believes are likely to have rapid
growth in revenues and earnings and potential for above average capital
appreciation. Although the Fund may also invest in any type of fixed income
instrument and may use various hedging techniques, under normal market
conditions the Fund will invest at least 65% of its total assets in the equity
securities of smaller growth companies (as defined above). Equity securities
include common stock, preferred stock and securities convertible into or
exchangeable for common or preferred stock. Risks inherent in the Fund's
investment objective and policies are discussed below.

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<PAGE> 4

EQUITY SECURITIES

Common stocks represent the residual ownership interest in the issuer and
are entitled to the income and increase in the value of the assets and business
of the entity after all of its obligations and preferred stock are satisfied.
Common stocks generally have voting rights. Common stocks fluctuate in price in
response to many factors including historical and prospective earnings of the
issuer, the value of its assets, general economic conditions, interest rates,
investor perceptions and market liquidity.

Equity securities also include preferred stock (whether or not convertible
into common stock) and debt securities convertible into or exchangeable for
common or preferred stock. Preferred stock has a preference over common stock in
liquidation (and generally dividends as well) but is subordinated to the
liabilities of the issuer in all respects. As a general rule the market value of
preferred stock with a fixed dividend rate and no conversion element varies
inversely with interest rates and perceived credit risk, while the market price
of convertible preferred stock generally also reflects some element of
conversion value. Because preferred stock is junior to debt securities and other
obligations of the issuer, deterioration in the credit quality of the issuer
will cause greater changes in the value of a preferred stock than in a more
senior debt security with similarly stated yield characteristics. Debt
securities that are convertible into or exchangeable for preferred common stock
are liabilities of the issuer but are generally subordinated to more senior debt
included on the issuer's balance sheet. Although such securities also generally
reflect an element of conversion value, their market value also varies with
interest rates and perceived credit risk.

Smaller growth companies may offer greater potential for capital
appreciation than larger companies. Smaller growth companies usually have new
products or technologies, new distribution methods, rapid changes in industry
conditions due to regulatory or other developments, changes in management or
similar characteristics that may result not only in the expected growth in
revenues but in an accelerated or above average rate of earnings growth, which
would usually be reflected in capital appreciation. In addition, because they
are less actively followed by stock analysts and less information is available
on which to base stock price evaluations, the market may overlook favorable
trends in particular smaller growth companies, and then adjust its valuation
more quickly once investor interest is gained. Smaller growth companies may also
be more subject to a valuation catalyst (such as increased investor attention,
takeover efforts or a change in management) than larger companies.

On the other hand, higher market risks are often associated with smaller
growth companies. They may have limited product lines, markets, market share and
financial resources, or they may be dependent on a small or inexperienced
management team. In addition, their stocks may trade less frequently and in more
limited volume and be subject to greater and more abrupt price swings than
stocks of larger companies.

The Adviser believes that opportunities for capital appreciation may also
be found in the preferred stock and convertible securities of smaller growth
companies. This is particularly true in the case of companies that have
performed below expectations at the time the preferred stock or convertible
security was issued. If the company's performance has been poor enough, its
preferred stock and convertible debt securities will trade more like the common
stock than like a fixed income security and may result in above average
appreciation once it becomes apparent that performance is improving. Even if the
credit quality of the company is not in question, the market price of the
convertible security will often reflect little or no element of conversion value
if the price of its common stock has fallen substantially below the conversion
price. This leads to the possibility of capital appreciation if the price of the
common stock recovers. Although the Adviser believes that capital appreciation
opportunities may be found in these securities, it does not expect them to
constitute a major portion of the Fund's portfolio. Preferred stocks and
convertible securities have many of the same characteristics and risks as
nonconvertible debt securities described below. There is no minimum credit
rating for these securities in which the Fund may invest.

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<PAGE> 5

NONCONVERTIBLE DEBT SECURITIES

Under normal market conditions, the Fund may invest (up to 35% of its total
assets) in nonconvertible debt securities. These securities include bonds,
debentures, notes, asset and mortgage backed securities and money market
instruments such as commercial paper and bankers acceptances. There is no
minimum credit rating for these securities in which the Fund may invest.
Accordingly, the Fund could invest in securities in default although the Fund
will not invest more than 5% of its assets in such securities. Fixed income
securities rated, at the time of investment, less than BBB by Standard & Poor's
Corporation ("S&P") or Baa by Moody's Investor Service ("Moody's") or which are
unrated but of comparable quality in the judgment of the Adviser, are not
investment grade and are viewed by the rating agencies as being predominantly
speculative in character and are characterized by substantial risk concerning
payments of interest and principal, sensitivity to economic conditions and
changes in interest rates, as well as by market price volatility and/or relative
lack of secondary market trading, among other risks. For further information
regarding lower rated securities, which are often known as "junk bonds", and the
risks associated therewith, see "Other Investment Techniques" and the
Description of Corporate Bond, Corporate Debt and Preferred Stock Ratings
attached in the Additional Statement as an Appendix.

ASSET-BACKED AND MORTGAGE-BACKED SECURITIES

Prepayments of principal may be made at any time on the obligations
underlying asset and mortgage backed securities and are passed on to the holders
of the asset and mortgage backed securities. As a result, if the Fund purchases
such a security at a premium, faster than expected prepayments will reduce and
slower than expected prepayments will increase yield to maturity. Conversely, if
the Fund purchases these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity.

For temporary defensive purposes the Fund may invest up to 100% of its
assets in fixed income securities of high quality money market instruments.

OTHER INVESTMENT TECHNIQUES
AND RELATED RISK FACTORS

FOREIGN SECURITIES

The Fund may invest up to 35% of its total assets in the securities of
non-U.S. issuers. These investments involve certain risks not ordinarily
associated with investments in securities of domestic issuers. These risks
include fluctuations in foreign exchange rates, future political and economic
developments, and the possible imposition of exchange controls or other foreign
governmental laws or restrictions. In addition, with respect to certain
countries, there is the possibility of expropriation of assets, confiscatory
taxation, political or social instability or diplomatic developments which could
adversely affect investments in those countries.

There may be less publicly available information about a foreign company
than about a U.S. company, and foreign companies may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to or as uniform as those of U.S. companies. Non-U.S. securities
markets, while growing in volume, have, for the most part, substantially less
volume than U.S. markets, and securities of many foreign companies are less
liquid and their prices more volatile than securities of comparable U.S.
companies. Transaction costs of investing in non-U.S. securities markets are
generally higher than in the U.S. There is generally less government supervision
and regulation of exchanges, brokers and issuers than there is in the U.S. The
Fund might have greater difficulty taking appropriate legal action in non-U.S.
courts. Non-U.S. markets also have different clearance and settlement procedures
which in some markets have at times failed to

5
<PAGE> 6

keep pace with the volume of transactions, thereby creating substantial delays
and settlement failures that could adversely affect the Fund's performance.

CORPORATE REORGANIZATIONS

Subject to the Fund's policy of investing at least 65% of its total assets
in equity securities of smaller companies, the Fund may invest without limit in
securities for which a tender or exchange offer has been made or announced and
in securities of companies for which a merger, consolidation, liquidation or
similar reorganization proposal has been announced if, in the judgment of the
Adviser, there is a reasonable prospect of capital appreciation significantly
greater than the added portfolio turnover expenses inherent in the short term
nature of such transactions. The principal risk is that such offers or proposals
may not be consummated within the time and under the terms contemplated at the
time of the investment, in which case, unless such offers or proposals are
replaced by equivalent or increased offers or proposals which are consummated,
the Fund may sustain a loss. For further information on such investments, see
"Other Investment Techniques" in the Additional Statement.

OPTIONS AND FUTURES

The Fund may purchase or sell options on individual securities as well as
on indices of securities as a means of achieving additional return or of hedging
the value of the Fund's portfolio.

A call option is a contract that gives the holder of the option the right,
in return for a premium paid, to buy from the seller the security underlying the
option at a specified exercise price at any time during the term of the option
or, in some cases, only at the end of the term of the option. The seller of the
call option has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price. A put option is a
contract that gives the holder of the option the right, in return for a premium
paid, to sell to the seller the underlying security at a specified price. The
seller of the put, on the other hand, has the obligation to buy the underlying
security upon exercise at the exercise price.

If the Fund has sold an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing an
option of the same series as the option previously sold. There can be no
assurance that a closing purchase transaction can be effected when the Fund so
desires.

The purchaser of an option risks a total loss of the premium paid for the
option if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unexercized but
foregoes any capital appreciation in excess of the exercise price in the case of
a call option and may be required to pay a price in excess of current market
value in the case of a put option. Options purchased and sold other than on an
exchange in private transactions also impose on the Fund the credit risk that
the counterparty will fail to honor its obligations. The Fund will not purchase
options if, as a result, the aggregate cost of all outstanding options exceeds
10% of the Fund's assets. To the extent that puts, calls, straddles and similar
investment strategies involve instruments regulated by the Commodity Futures
Trading Commission, the Fund is limited to an investment not in excess of 5% of
its total assets.

OTHER INVESTMENT COMPANIES

The Fund may invest up to 10% of its total assets in other investment
companies (not more than 5% of the Fund's total assets may be invested in any
one investment company and the Fund may not invest in more than 3% of the voting
securities of any one investment company).

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<PAGE> 7

WARRANTS AND RIGHTS

The Fund may invest up to 5% of its total assets in warrants or rights
(other than those acquired in units or attached to other securities) which
entitle the holder to buy equity securities at a specific price during or at the
end of a specific period of time.

UNSEASONED COMPANIES

The Fund may invest in securities of unseasoned companies. In view of the
limited liquidity, more speculative prospects and more volatile pricing
attributes, the Fund will not invest more than 10% of the Fund's assets (at the
time of purchase) in equity securities of non-investment companies (including
predecessors) that have operated less than three years.

WHEN ISSUED, DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS

The Fund may enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis in excess
of customary settlement periods for the type of security involved. In some
cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring, i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the time of the
commitment, with payment and delivery taking place in the future, generally a
month or more after the date of the commitment. While the Fund will only enter
into a forward commitment with the intention of actually acquiring the security,
the Fund may sell the security before the settlement date if it is deemed
advisable.

Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to the Fund prior to the
settlement date. The Fund will segregate with its Custodian (as hereinafter
defined) cash or liquid securities in an aggregate amount at least equal to the
amount of its outstanding forward commitments.

SHORT SALES

The Fund may make short sales of securities. A short sale is a transaction
in which the Fund sells a security it does not own in anticipation that the
market price of that security will decline. The Fund expects to make short sales
both to obtain capital gains from anticipated declines in securities and as a
form of hedging to offset potential declines in long positions in the same or
similar securities. The short sale of a security is considered a speculative
investment technique.

When the Fund makes a short sale, it must borrow the security sold short
and deliver it to the broker-dealer through which it made the short sale in
order to satisfy its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.

The Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. government
securities or other highly liquid securities. The Fund will also be required to
deposit similar collateral with its Custodian to the extent, if any, necessary
so that the value of both collateral deposits in the aggregate is at all times
equal to the greater of the price at which the security is sold short or 100% of
the current market value of the security sold short. Depending on arrangements
made with the broker-dealer from which it borrowed the security regarding
payment over of any payments received by the Fund on such security, the Fund may
not receive any payments (including interest) on its collateral deposited with
such broker-dealer.

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<PAGE> 8

If the price of the security sold short increases between the time of the
short sale and the time the Fund replaces the borrowed security, the Fund will
incur a loss; conversely, if the price declines, the Fund will realize a capital
gain. Any gain will be decreased, and any loss increased, by the transaction
costs described above. Although the Fund's gain is limited to the price at which
it sold the security short, its potential loss is theoretically unlimited.

The market value of the securities sold short of any one issuer will not
exceed either 5% of the Fund's total assets or 5% of such issuer's voting
securities. The Fund will not make a short sale, if, after giving effect to such
sale, the market value of all securities sold short exceeds 25% of the value of
its assets or the Fund's aggregate short sales of a particular class of
securities exceeds 25% of the outstanding securities of that class. The Fund may
also make short sales "against the box" without respect to such limitations. In
this type of short sale, at the time of the sale, the Fund owns or has the
immediate and unconditional right to acquire at no additional cost the identical
security.

RESTRICTED AND ILLIQUID SECURITIES

The Fund may invest up to 15% of its net assets in securities the markets
for which are illiquid. Illiquid securities include most of the 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
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.

REPURCHASE AGREEMENTS

The Fund may invest in repurchase agreements, which are agreements pursuant
to which securities are acquired by the Fund from a third party with the
understanding that they will be repurchased by the seller at a fixed price on an
agreed date. These agreements may be made with respect to any of the portfolio
securities in which the Fund is authorized to invest. Repurchase agreements may
be characterized as loans secured by the underlying securities. The Fund may
enter into repurchase agreements with (i) member banks of the Federal Reserve
System having total assets in excess of $500 million and (ii) securities
dealers, provided that such banks or dealers meet the creditworthiness standards
established by the Fund's Board of Directors ("Qualified Institutions"). The
Adviser will monitor the continued creditworthiness of Qualified Institutions,
subject to the supervision of the Fund's Board of Directors. The resale price
reflects the purchase price plus an agreed upon market rate of interest which is
unrelated to the coupon rate or date of maturity of the purchased security. The
collateral is marked to market daily. Such agreements permit the Fund to keep
all its assets earning interest while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature.

The use of repurchase agreements involves certain risks. For example, if
the seller of securities under a repurchase agreement defaults on its obligation
to repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the repurchase agreement will be held by the Fund's Custodian at all
times in an amount at least equal to the repurchase price, including accrued
interest. If the seller fails to repurchase the

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<PAGE> 9

securities, the Fund may suffer a loss to the extent proceeds from the sale of
the underlying securities are less than the repurchase price. The Fund will not
enter into repurchase agreements of a duration of more than seven days if, taken
together with all other illiquid securities in the Fund's portfolio, more than
15% of its net assets would be so invested.

LOANS OF PORTFOLIO SECURITIES

To increase income, the Fund may lend its portfolio securities to
securities broker-dealers or financial institutions if (1) the loan is
collateralized in accordance with applicable regulatory requirements including
collateralization continuously at no less than 100% by marking to market daily,
(2) the loan is subject to termination by the Fund at any time, (3) the Fund
receives reasonable interest or fee payments on the loan, (4) the Fund is able
to exercise all voting rights with respect to the loaned securities and (5) the
loan will not cause the value of all loaned securities to exceed 33% of the
value of the Fund's assets.

If the borrower fails to maintain the requisite amount of collateral, the
loan automatically terminates and the Fund could use the collateral to replace
the securities while holding the borrower liable for any excess of replacement
cost over the value of the collateral. As with any extension of credit, there
are risks of delay in recovery and in some cases even loss of rights in
collateral should the borrower of the securities fail financially.

BORROWING

The Fund may not borrow money except for (1) short-term credits from banks
as may be necessary for the clearance of portfolio transactions, and (2)
borrowings from banks for temporary or emergency purposes, including the meeting
of redemption requests, which would otherwise require the untimely disposition
of its portfolio securities. Borrowing may not, in the aggregate, exceed 15% of
assets after giving effect to the borrowing and borrowing for purposes other
than meeting redemptions may not exceed 5% of the value of the Fund's assets
after giving effect to the borrowing. The Fund will not make additional
investments when borrowings exceed 5% of assets. The Fund may mortgage, pledge
or hypothecate assets to secure such borrowings.

PORTFOLIO TURNOVER

Portfolio turnover generally involves some expense to the Fund, including
brokerage commissions or dealer mark-ups and other transaction costs on the sale
of securities and reinvestment in other securities. The portfolio turnover rate
is computed by dividing the lesser of the amount of the securities purchased or
securities sold by the average monthly value of securities owned during the year
(excluding securities whose maturities at acquisition were one year or less).

MANAGEMENT OF THE FUND

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<PAGE> 10

rights appertaining thereto; provides facilities and personnel required for the
Fund's administrative management; supervises the performance of administrative
and professional services provided by others, and pays the compensation of the
Sub-Administrator and all officers and directors of the Fund who are its
affiliates. Mr. Mario J. Gabelli -- Portfolio Manager, will be primarily
responsible for the day-to-day management of The Gabelli Small Cap Growth Fund.
Mr. Gabelli is Chairman, Chief Investment Officer and a Director of the Adviser.
As compensation for its services and the related expenses borne by the Adviser,
the Fund pays the Adviser a fee, computed daily and payable monthly, equal, on
an annual basis, to 1.00% of the Fund's average daily net assets, which is
higher than that paid by most mutual funds. For the fiscal years ended September
30, 1995, September 30, 1996 and September 30, 1997, the Adviser received fees
of $2,112,855, $2,276,908 and $2,269,141, respectively. The Adviser is located
at One Corporate Center, Rye, New York 10580-1434.

The Adviser was formed in 1980 and as of December 31, 1997 acts as
investment adviser to the following funds with aggregate assets in excess of
$5.3 billion:

<TABLE>
<CAPTION>
OPEN-END FUNDS:
- -------------------------------------------------------------------------------- NET ASSETS
12/31/97
-------------
(IN MILLIONS)
<S> <C>
Gabelli Asset Fund.............................................................. $ 1,334
Gabelli Growth Fund............................................................. 952
Gabelli Gold Fund, Inc.......................................................... 8
Gabelli Value Fund Inc.......................................................... 597
Gabelli Small Cap Growth Fund................................................... 293
Gabelli Equity Income Fund...................................................... 76
Gabelli U.S. Treasury Money Market Fund......................................... 283
Gabelli ABC Fund................................................................ 35
Gabelli Global Telecommunications Fund.......................................... 118
Gabelli Global Interactive Couch Potato(R) Fund................................. 41
Gabelli Global Convertible Securities Fund...................................... 9
Gabelli International Growth Fund, Inc.......................................... 18
Gabelli Capital Asset Fund...................................................... 104
CLOSED-END FUNDS:
- --------------------------------------------------------------------------------
Gabelli Convertible Securities Fund, Inc........................................ 122
Gabelli Equity Trust Inc........................................................ 1,201
Gabelli Global Multimedia Trust Inc............................................. 140
</TABLE>

Gabelli & Company, Inc., the Distributor of each open-end fund's respective
shares, is an indirect majority owned subsidiary of the Adviser. GAMCO
Investors, Inc. ("GAMCO"), a wholly owned subsidiary of the Adviser, acts as
investment adviser for individuals, pension trusts, profit sharing trusts and
endowments. As of December 31, 1997, GAMCO had aggregate assets in excess of
$6.0 billion under its management. Gabelli LLC is an affiliated Investment
Adviser to The Gabelli Westwood Funds with aggregate assets in excess of $266
million. Gabelli Fixed Income LLC is an affiliated Investment Adviser to The
Treasurer's Fund, Inc. and separate accounts with aggregate assets in excess of
$1.5 billion. Mr. Mario J.Gabelli may be deemed a "controlling person" of the
Adviser and the Distributor on the basis of his ownership of stock of the
Adviser.

10
<PAGE> 11

and other trading costs, taxes, expenses of qualifying the Fund for sale in
various jurisdictions, expense of the Fund's distribution plan adopted under
Rule 12b-1, expenses of personnel performing shareholder servicing functions,
litigation and other extraordinary or non-recurring expenses and other expenses
properly payable by the Fund.

SUB-ADMINISTRATOR

The Adviser has entered into a Sub-Administration Contract with BISYS Fund
Services, Inc. ("BISYS" or the "Sub-Administrator") pursuant to which the
Sub-Administrator provides certain administrative services necessary for the
Fund's operations. These services include the preparation and distribution of
materials for meetings of the Fund's Board of Directors, compliance testing of
Fund activities and assistance in the preparation of proxy statements, reports
to shareholders and other documentation. The Sub-Administrator's services do not
include the investment advisory and portfolio management services provided by
the Adviser. For the services and related expenses borne by BISYS, the Adviser
pays it a prorated monthly fee at the annual rate of .0625% of the average net
assets of all the funds advised by such Adviser, (with a minimum annual fee of
$30,000 per portfolio) on the first $350 million of funds advised by the Adviser
and administered by BISYS and .0425% of any net assets above $350 million, and
.0225% of any assets above $700 million, which, together with the services to be
rendered, are subject to negotiation between the parties and both parties retain
the right unilaterally to terminate the arrangement on not less than 60 days'
notice. BISYS has its office at 3435 Stelzer Road, Columbus, Ohio 43219.

DISTRIBUTION PLAN

The Board of Directors of the Fund has approved as being in the best
interests of the Fund and its shareholders a Distribution Plan which authorizes
payments by the Fund in connection with the distribution of its shares at an
annual rate of up to .25% of the Fund's average daily net assets.

Payments may be made by the Fund under the Distribution Plan for the
purpose of financing any activity primarily intended to result in the sale of
shares of the Fund as determined by the Board of Directors. Such activities
typically include advertising; compensation for sales and sales marketing
activities of the Distributor and other banks, broker-dealers and service
providers; shareholder account servicing; production and dissemination of
prospectuses and sales and marketing materials; and capital or other expenses of
associated equipment, rent, salaries, bonuses, interest and other overhead. To
the extent any activity is one which the Fund may finance without a Distribution
Plan, the Fund may also make payments to finance such activity outside of the
Plan and not subject to its limitations.

The Plan has been implemented by written agreements between the Fund and/or
the Distributor and each person (including the Distributor) to which payments
may be made. Administration of the Plan is regulated by Rule 12b-1 under the
Investment Company Act of 1940, which includes requirements that the Board of
Directors receive and review, at least quarterly, reports concerning the nature
and qualification of expenses for which payments are made, that the Board of
Directors approve all agreements implementing the Plan and that the Plan may be
continued from year to year only if the Board of Directors concludes, at least
annually, that continuation of the Plan is likely to benefit shareholders. To
the extent any of these payments are based on allocations by the Distributor,
the Fund may be considered to be participating in joint distribution activities
with other funds distributed by the Distributor. Any such allocations would be
subject to approval by the Fund's non-interested Directors and would be based on
such factors as the net assets of each Fund, the number of shareholder inquiries
and similar pertinent criteria. For the fiscal year ended September 30, 1997,
the Fund incurred distribution costs payable to the Adviser, of $567,338 or
0.25% of average net assets, under the Plan.

12
<PAGE> 12

PURCHASE OF SHARES

Shares of the Fund are sold at the net asset value per share next
determined after receipt of an order by the Fund's Distributor or Transfer Agent
in proper form with accompanying check or bank wire payments arrangements
satisfactory to the Fund. The minimum initial investment is $1,000. There is no
minimum initial investment for accounts establishing an Automatic Investment
Plan. Custodial accounts for minor children require only $1,000. There is no
minimum for subsequent investments. Although most shareholders elect not to
receive stock certificates, certificates for whole shares only can be obtained
on specific written request to the Transfer Agent.

Shares of the Fund may be purchased through registered broker-dealers.
Certain broker-dealers may charge the investor a fee for their services. Such
fees may vary among broker-dealers, and such broker-dealers may impose higher
initial or subsequent investment requirements than those established by the
Fund. Services provided by broker-dealers may include allowing the investor to
establish a margin account and to borrow on the value of the Fund's shares in
that account.

Prospectuses, sales material and applications may be obtained from the
Distributor. The Fund and its Distributor reserve the right in their sole
discretion (1) to suspend the offerings of the Fund's shares and (2) to reject
purchase orders when, in the judgment of the Fund's management, such rejection
is in the best interest of the Fund. The net asset value per share of the Fund
is determined as of the close of the regular session of the New York Stock
Exchange, which is generally 4:00 p.m., Eastern time, on each day that trading
is conducted on the New York Stock Exchange by dividing the value of the Fund's
net assets (i.e., the value of its securities and other assets less its
liabilities, including expenses payable or accrued) by the number of shares
outstanding at the time the determination is made. Portfolio securities for
which market quotations are readily available are valued at market value as
determined by the last quoted sale price prior to the valuation time on the
valuation date in the case of securities traded on securities exchanges or other
markets for which such information is available. Other readily marketable
securities are valued at the average of the latest bid and asked quotations for
such securities prior to the valuation time. Debt securities with remaining
maturities of 60 days or less are valued at amortized cost. All other assets are
valued at fair value as determined by or under the supervision of the Board of
Directors of the Fund. See "Determination of Net Asset Value" in the Additional
Statement.

MAIL

To make an initial purchase by mail, send a completed subscription order
form with a check for the amount of the investment payable to "The Gabelli Small
Cap Growth Fund" to:

THE GABELLI FUNDS
P.O. BOX 8308
BOSTON, MA 02266-8308

Subsequent purchases do not require a completed application and can be made
by (1) mailing a check to the same address noted above or by (2) bank wire, as
indicated below. The exact name and number of the shareholder's account should
be clearly indicated.

Checks will be accepted if drawn in U.S. currency on a domestic bank for
less than $100,000. U.S. dollar checks drawn against a non-U.S. bank may be
subject to collection delays and will be accepted only upon actual receipt of
funds by the Transfer Agent. Bank collection fees may apply. Bank or certified
checks for investments of $100,000 or more will be required unless the investor
elects to invest by bank wire as described below. The Fund reserves the right to
reject purchases by check made payable to someone other than the Fund.

13
<PAGE> 13

BANK WIRE

To initially purchase shares of the Fund using the wire system for
transmittal of money among banks, an investor should first telephone the Fund at
1-800-422-3554 to obtain a new account number. The investor should then instruct
a Federal Reserve System member bank to wire funds to:

State Street Bank and Trust Company
ABA #011-0000-28 REF DDA #9904-6187
Attn: Shareholder Services
Re: The Gabelli Small Cap Growth Fund
A/C #

- -------------------------------------------------------------------------
Account of (Registered Owner)
225 Franklin Street, Boston, MA
02110

For initial purchases, the investor should promptly complete and mail the
subscription order form to the address shown above for mail purchases. There may
be a charge by your bank for transmitting the money by bank wire but State
Street Bank and Trust Company does not charge investors in the Fund for the
receipt of wire transfers. If you are planning to wire funds, it is suggested
that you instruct your bank early in the day so the wire transfer can be
accomplished the same day.

PERSONAL DELIVERY

Deliver a check made payable to "The Gabelli Small Cap Fund" along with a
completed subscription order form to:

THE GABELLI FUNDS
The BFDS Building, 6th Floor
Two Heritage Drive
North Quincy, MA 02171

TELEPHONE INVESTMENT PLAN

You may purchase additional shares of the Fund by telephone through the
Automated Clearing-house (ACH) system as long as your bank is a member of the
ACH system and you have a completed, approved investment plan application on
file with our Transfer Agent. The funding for your purchase will be
automatically deducted from the ACH eligible account you designate on the
application. Your investment will normally be credited to your mutual fund
account on the first business day following your telephone request. Your request
must be received no later than 4:00 p.m. eastern time. There is a minimum of
$100 for each telephone investment. Any subsequent changes in banking
information must be submitted in writing and accompanied by a sample voided
check. To initiate an ACH purchase, please call 1-800-GABELLI (422-3554) or
1-800-872-5365. Fund shares purchased through the Telephone or Automatic
Investment Plan will not be available for redemption for up to fifteen (15) days
following the purchase date.

AUTOMATIC INVESTMENT PLAN

The Fund offers an automatic monthly investment plan, details of which can
be obtained from the Distributor. There is no minimum initial investment for
accounts establishing an Automatic Investment Plan.

SYSTEMATIC WITHDRAWAL PLAN

The Fund offers a systematic withdrawal program for shareholders whereby
they can authorize an automatic redemption on a monthly, quarterly or annual
basis. Details can be obtained from the Distributor.

14
<PAGE> 14

OTHER INVESTORS

No minimum initial investment is required for officers, directors or
full-time employees of the Fund, other investment companies managed by the
Adviser, the Adviser, the Administrator, the Distributor or their affiliates,
including members of the "immediate family" of such individuals and retirement
plans and trusts for their benefit. The term "immediate family" refers to
spouses, children and grandchildren (adopted or natural), parents, grandparents,
siblings, a spouse's siblings, a sibling's spouse and a sibling's children.

REDEMPTION OF SHARES

Upon receipt by the Distributor or the Transfer Agent of a redemption
request in proper form, shares of the Fund will be redeemed at their next
determined net asset value. Redemption requests received after the time as of
which the Fund's net asset value is determined on a particular day will be
redeemed at the net asset value of the Fund determined on the next day that net
asset value is determined. Checks for redemption proceeds will normally be
mailed to the shareholder's address of record within seven days, but will not be
mailed until all checks in payment for the purchase of the shares to be redeemed
have been honored, which may take up to 15 days. Redemption requests may be made
by letter to the Transfer Agent, specifying the name of the Fund, the dollar
amount or number of shares to be redeemed, and the account number. The letter
must be signed in exactly the same way the account is registered (if there is
more than one owner of the shares, all must sign) and, if any certificates for
the shares to be redeemed are outstanding, presentation of such certificates
properly endorsed is also required. Signatures on a redemption request and/or
certificates must be guaranteed by an "eligible guarantor institution" as such
term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1933, which
includes certain banks, brokers, dealers, credit unions, securities exchanges
and associations, clearing agencies and savings associations (signature
guarantees by notaries public are not acceptable). Shareholders may also redeem
Fund shares through certain registered broker-dealers, who have made
arrangements with the Fund permitting them to redeem shares by telephone or
facsimile transmission and who may charge shareholders a fee for this service if
they have not received any payments under the Distribution Plan.

Further documentation, such as copies of corporate resolutions and
instruments of authority, are normally requested from corporations,
administrators, executors, personal representatives, trustees or custodians to
evidence the authority of the person or entity making the redemption request.

If the Board of Directors should determine that it would be detrimental to
the remaining shareholders of the Fund to make payment wholly or partly in cash,
the Fund may pay the redemption price in whole or in part by a distribution in
kind of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange Commission.
Under such circumstances, shareholders of the Fund receiving distributions in
kind of securities will incur brokerage commissions when they dispose of the
securities.

The Fund may suspend the right of redemption or postpone the date of
payment for more than seven days during any period when (1) trading on the New
York Stock Exchange is restricted or the Exchange is closed, other than
customary weekend and holiday closings; (2) the Securities and Exchange
Commission has by order permitted such suspension or (3) an emergency, as
defined by rules of the Securities and Exchange Commission, exists making
disposal of portfolio investments or determination of the value of the net
assets of the Fund not reasonably practicable.

To minimize expenses, the Fund reserves the right to redeem, upon not less
than 30 days notice, all shares of the Fund in an account (other than an IRA)
which as a result of shareholder redemption has a value below

15
<PAGE> 15

$500. However, a shareholder will be allowed to make additional investments
prior to the date fixed for redemption to avoid liquidation of the account.

TELEPHONE REDEMPTION BY CHECK

The Fund accepts telephone requests for redemption of unissued shares,
subject to a $25,000 limitation. By calling either 1-800-GABELLI (422-3554) or
1-800-872-5365, you may request that a check be mailed to the address of record
on the account, provided that the address has not changed within thirty (30)
days prior to your request. The check will be made payable to the person in
whose name the account is registered and will normally be mailed within seven
(7) days.

BY BANK WIRE

The Fund accepts telephone requests for wire redemption in excess of $1,000
(but subject to a $25,000 limitation) to a predesignated bank either on the
subscription order form or in a subsequent written authorization with the
signature guaranteed. The Fund accepts signature guaranteed written requests for
redemption by bank wire without limitation. The proceeds are normally wired on
the following business day. Your bank must be either a member of the Federal
Reserve System or have a correspondent bank which is a member. Any change to the
banking information made at a later date must be submitted in writing with a
signature guarantee.

Requests for telephone redemption must be received between 9:00 a.m. and
4:00 p.m. eastern time. If your telephone call is received after this time or on
a day when the New York Stock Exchange is not open, the request will be entered
for the following business day. Shares are redeemed at the net asset value next
determined following your request. Fund shares purchased by check or through the
automatic purchase plan will not be available for redemption for up to fifteen
(15) days following the purchase. Shares held in certificate form must be
returned to the Transfer Agent for redemption of shares. Telephone redemption is
not available for IRAs. The proceeds of a telephone redemption may be directed
to an existing account in another mutual fund advised by the Adviser, provided
the account is registered in the redeeming shareholder's name. Such purchase
will be made at the respective net asset value plus applicable sales charge, if
any, with credit for any sales charge previously charged by the Distributor.

The Fund and its Transfer Agent will not be liable for following telephone
instructions reasonably believed to be genuine. In this regard, the Fund and its
Transfer Agent require personal identification information before accepting a
telephone redemption. If the Fund or its Transfer Agent fail to use reasonable
procedures, the Fund might be liable for losses due to fraudulent instructions.

RETIREMENT PLANS

The Fund has available a form of Individual Retirement Account ("IRA") for
investment in Fund shares which may be obtained from the Distributor. The
minimum investment required to open an IRA for investment in shares of the Fund
is $1,000 for an individual except that both the individual and his or her
spouse may establish separate IRAs if their combined investment is $1,250. There
is no minimum for additional investment in an IRA account.

Investors who are self-employed may purchase shares of the Fund through
tax-deductible contributions to retirement plans for self-employed persons,
known as Keogh or H.R. 10 plans. The Fund does not currently act as Sponsor for
such plans. Fund shares may also be a suitable investment for other types of
qualified pension or profit-sharing plans which are employer-sponsored,
including deferred compensation or salary reduction plans known as "401(k)
Plans" which give participants the right to defer portions of their

16
<PAGE> 16

compensation for investment on a tax-deferred basis until distributions are made
from the plans. The minimum initial investment for an individual under such
plans is $1,000 and there is no minimum for additional investments. Under the
Code, individuals may make wholly or partly tax deductible IRA contributions of
up to $2,000 annually, depending on whether they are active participants in an
employer-sponsored retirement plan and on their income level. However, dividends
and distributions held in the account are not taxed until withdrawn in
accordance with the provisions of the Code. An individual with a non-working
spouse may establish a separate IRA for the spouse under the same conditions and
contribute a maximum of $4,000 to either or both IRAs provided that no more than
$2,000 may be contributed to the IRA of either spouse. Beginning January 1,
1998, investors satisfying statutory income level requirements may make non-
deductible contributions up to $2,000 annually to a Roth IRA, distributions from
which are not subject to tax if a statutory five year holding period requirement
is satisfied. New for 1998, the Fund also makes available education IRAs.
Education IRAs permit eligible individuals to contribute up to $500 per year per
beneficiary under 18 years old. The minimum initial investment to an Education
IRA is $250. Distributions from an Education IRA are generally excluded from
income when used for qualified higher education expenses.

Investors should be aware that they may be subject to penalties or
additional tax on contributions or withdrawals from IRAs or other retirement
plans which are not permitted by the applicable provisions of the Code. Persons
desiring information concerning investments through IRA accounts or other
retirement plans should write or telephone the Distributor.

DIVIDENDS, DISTRIBUTIONS AND TAXES

The Fund currently intends to pay dividends and capital gains distributions, if
any, on an annual basis. Each dividend and capital gains distribution, if any,
declared by the Fund on its outstanding shares will, unless the shareholder
elects otherwise, be paid on the payment date fixed by the Board of Directors in
additional shares of the Fund having an aggregate net asset value as of the
ex-dividend date of such dividend or distribution equal to the cash amount of
such distribution. An election to receive dividends and distributions may be
changed by notifying the Fund in writing at any time prior to the record date
for a particular dividend or distribution. There are no sales or other charges
in connection with the reinvestment of dividends and capital gains
distributions. There is no fixed dividend rate, and there can be no assurance
that the Fund will pay any dividends or realize any capital gains.

Failure to qualify would result in the Fund being subject to Federal income
tax on its taxable income and gains.

Dividends from net investment income and distributions from realized
short-term capital gains are taxable to the recipient shareholders as ordinary
income, whether paid in cash or in additional Fund shares. In the case of
corporate shareholders, the portion of the Fund's distributions attributable to
dividends received by the Fund on its investments in common or preferred stock
may be eligible for the dividends received deduction as long as certain
requirements are satisfied by the shareholder. Distributions out of long-term
capital gains are taxable to the recipient as long-term capital gains.
Shareholders will be advised as to what portion of capital gains are to be
treated as "mid-term" or "long term" with respect to the maximum tax rate for
such gains (for

17
<PAGE> 17

noncorporate shareholders, 28% for mid-term gains and 20% for long term gains
(10% for noncorporate shareholders who are subject to the 15% marginal tax
bracket for ordinary income)). Dividends and distributions declared by the Fund
may also be subject to state and local taxes. Prior to investing in shares of
the Fund, prospective shareholders may wish to consult their tax advisers
concerning the Federal, state and local tax consequences of such investment.

GENERAL INFORMATION

DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

The Fund is a series of Gabelli Equity Series Funds, Inc., (the
"Corporation") which was incorporated in Maryland on July 25, 1991. The
authorized capital stock consists of one billion shares of stock having a par
value of one tenth of one cent ($.001) per share, one hundred million of which
have been initially classified as Fund shares. The Corporation is not required,
and does not intend, to hold regular annual shareholder meetings, but may hold
special meetings for consideration of proposals requiring shareholder approval,
such as changing fundamental policies or upon the written request of 10% of the
Fund's shares to replace its Directors. The Corporation's Board of Directors is
authorized to divide the unissued shares into separate series of stock, each
series representing a separate, additional portfolio. The Board currently has
authorized the division of the unissued shares into two series each having a
separate portfolio. Shares of all series will have identical voting rights,
except where by law, certain matters must be approved by a majority of the
shares of the affected series. Each share of any series of shares when issued
has equal dividend, liquidation (see "Redemption of Shares") and voting rights
within the series for which it was issued and each fractional share has those
rights in proportion to the percentage that the fractional share represents of a
whole share. Shares will be voted in the aggregate.

There are no conversion or preemptive rights in connection with any shares
of the Fund. All shares, when issued in accordance with the terms of the
offering, will be fully paid and nonassessable. Shares will be redeemed at net
asset value, at the option of the shareholder.

The Fund sends semi-annual and audited annual reports to all of its
shareholders which include a list of portfolio securities. Unless it is clear
that a shareholder is a nominee for the account of an unrelated person or a
shareholder otherwise specifically requests in writing, the Fund may send a
single copy of semi-annual, annual and other reports to shareholders to all
accounts at the same address and all accounts of any person at that address.

The shares of the Fund have noncumulative voting rights which means that
the holders of more than 50% of the shares can elect 100% of the directors if
the holders choose to do so, and, in that event, the holders of the remaining
shares will not be able to elect any person or persons to the Board of
Directors. Unless specifically requested by an investor who is a shareholder of
record, the Fund does not issue certificates evidencing Fund shares.

SHAREHOLDER APPROVAL

Other than elections of Directors, which is by plurality, any matter for
which shareholder approval is required by the Investment Company Act of 1940
requires the affirmative vote of at least a "majority" (as defined by the
Investment Company Act of 1940) of the outstanding voting securities of the Fund
or the Corporation at a meeting called for the purpose of considering such
approval. A majority of the Fund's outstanding securities is the lesser of (1)
67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are present in person or by proxy or (2) more than 50% of the
outstanding shares.

18
<PAGE> 18

PERFORMANCE INFORMATION

The Fund may furnish data about its investment performance in
advertisements, sales literature and reports to shareholders. "Total return"
represents the annual percentage change in value of $1,000 invested at the
maximum public offering price for the one, five and ten year periods (if
applicable) and the life of the Fund through the most recent calendar quarter,
assuming reinvestment of all dividends and distributions. Quotations of "yield"
will be based on the investment income per share earned during a particular 30
day period, less expenses accrued during the period, with the remainder being
divided by the maximum offering price per share on the last day of the period.
The Fund may also furnish total return and yield calculations for other periods
based on investments at various sales charge levels or net asset values.

CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

State Street Bank and Trust Company is the Custodian for the Fund's cash
and securities as well as the Transfer and Dividend Disbursing Agent for its
shares. Boston Financial Data Services, Inc., an affiliate of State Street Bank
and Trust Company performs the shareholder services on behalf of State Street
and is located at The BFDS Building, Two Heritage Drive, North Quincy, MA 02171.
State Street Bank and Trust Company does not assist in and is not responsible
for investment decisions involving assets of the Fund.

INDEPENDENT AUDITORS

Ernst & Young LLP has been appointed independent auditors for the Fund, and
is located at 787 Seventh Ave., New York, NY 10019.

INFORMATION FOR SHAREHOLDERS

All shareholder inquiries regarding administrative procedures including the
purchase and redemption of shares should be directed to the Distributor, Gabelli
& Company, Inc., One Corporate Center, Rye, New York 10580-1434. For assistance,
call 1-800-GABELLI (1-800-422-3554) or through the internet at
http://www.gabelli.com.

As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Adviser is in the process of working with the Fund's service
providers to prepare for the year 2000. Based on information currently
available, the Adviser does not expect that the Fund will incur significant
operating expenses or be required to incur material costs to be year 2000
compliant. Although the Adviser does not anticipate that the year 2000 issue
will have a material impact on the Fund's ability to provide service at current
levels, there can be no assurance that steps taken in preparation for the year
2000 will be sufficient to avoid any adverse impact on the Fund.

Upon request, Gabelli & Company, Inc. will provide without charge, a paper
copy of this Prospectus to investors or their representatives who received this
Prospectus in an electronic format.

This Prospectus omits certain information contained in the Registration
Statement filed with the Securities and Exchange Commission. Copies of the
Registration Statement including items omitted herein, may be obtained from the
Commission by paying the charges prescribed under its rules and regulations. The
Statement of Additional Information included in such Registration Statement may
be obtained without charge from the Fund or its Distributor.

19
<PAGE> 19

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Table of Fees and Expenses............ 2
Financial Highlights.................. 3
Investment Objective and Policies and
Related Risk Factors................ 3
Other Investment Techniques and
Related Risk Factors................ 5
Management of the Fund................ 9
Distribution Plan..................... 11
Purchase of Shares.................... 12
Redemption of Shares.................. 14
Retirement Plans...................... 15
Dividends, Distributions and Taxes.... 16
General Information................... 17
</TABLE>

No dealer, salesman or other person has been authorized to give any information
or to make any representation other than those contained in this Prospectus, and
if given or made, such information or representation may not be relied upon as
being authorized by the Fund, the Adviser, the Administrator, the Distributor or
any affiliate thereof. This Prospectus does not constitute an offer to sell or a
solicitation of any offer to buy in any state to any person to whom it is
unlawful to make such offer in such state.

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

The
Gabelli
Small Cap
Growth
Fund
PROSPECTUS
JANUARY 28, 1998
GABELLI FUNDS, INC.
INVESTMENT ADVISER

GABELLI & COMPANY, INC.
DISTRIBUTOR
------------------------------------------------------
<PAGE> 20

- --------------------------------------------------------------------------------
The Gabelli Equity Income Fund

The Gabelli Equity Income Fund (the "Fund") is a series of Gabelli Equity
Series Funds, Inc., a Maryland corporation (the "Corporation"). The Fund is a
no-load open-end, diversified, management investment company whose investment
objective is to seek a high level of total return on its assets with an emphasis
on income. The Fund seeks to achieve its investment objective through a
combination of capital appreciation and current income by investing primarily in
income producing equity securities.

Shares of the Fund may be purchased without a sales load at net asset
value. The minimum initial investment is $1,000. The Fund has a distribution
plan which permits it to pay up to .25% per year of its average daily net assets
for marketing and shareholder services and expenses. For further information,
contact Gabelli & Company, Inc. at the address or telephone number shown above.
------------------------------

Shares of the Fund are not deposits or obligations of any bank, are not
endorsed or guaranteed by any bank and are not insured or guaranteed by the U.S.
government, The Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency and involve risk, including the possible loss of
principal.
------------------------------

This Prospectus should be retained
by investors for future reference.
------------------------------
- --------------------------------------------------------------------------------

TABLE OF FEES AND EXPENSES

<TABLE>
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases................... None
Maximum Sales Charge Imposed on Reinvested Dividends........ None
Deferred Sales Charge....................................... None
Redemption Fees............................................. None
Exchange Fees............................................... None
Annual Fund Operating Expenses (as a percentage of average
net assets):
Management Fees........................................... 1.00%
12b-1 Expenses (a)........................................ .25%
Other Expenses (b)........................................ .53%
-----
Total Operating Expenses.................................... 1.78%
=====
</TABLE>

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

(a) See "Distribution Plan." Long term investors may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc.

(b) Such expenses include custodian and transfer agency fees and other
customary Fund expenses.

Example:

The foregoing table is to assist you in understanding the various direct
and indirect costs and expenses that an investor in the Fund would bear.

2
<PAGE> 22

FINANCIAL HIGHLIGHTS

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors, whose unqualified report thereon appears in the Statement
of Additional Information: Selected data for a share of capital stock
outstanding throughout each period ended September 30:

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992+
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period....................... $ 13.81 $ 12.65 $ 11.54 $ 12.15 $ 10.40 $ 10.00
------ ------ ------ ------ ------ ------
Net investment income...................................... 0.22 0.28 0.29 0.30 0.29 0.21
Net realized and unrealized gain on investments............ 4.28 1.76 1.77 0.08 1.81 0.37
------ ------ ------ ------ ------ ------
Total from investment operations........................... 4.50 2.04 2.06 0.38 2.10 0.58
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income....................... (0.22) (0.28) (0.29) (0.31) (0.29) (0.18)
Distributions in excess of net investment income........... -- (0.01) -- -- -- --
Distributions from net realized gain on investments........ (0.70) (0.59) (0.66) (0.68) (0.06) --
------ ------ ------ ------ ------ ------
Total Distributions........................................ (0.92) (0.88) (0.95) (0.99) (0.35) (0.18)
------ ------ ------ ------ ------ ------
Net asset value, end of period............................. $ 17.39 $ 13.81 $ 12.65 $ 11.54 $ 12.15 $ 10.40
====== ====== ====== ====== ====== ======
Total Return (a)........................................... 34.00% 16.65% 19.24% 3.30% 20.50% 5.80%
Ratios to average net assets/supplemental data:
Net assets, end of period (in thousands)................... $73,730 $57,006 $54,806 $50,191 $54,585 $44,940
Ratio of operating expenses to average net assets.......... 1.78% 1.93% 1.83% 1.81% 1.78% 1.93%*
Ratio of net investment income to average net assets....... 1.42% 1.99% 2.50% 2.58% 2.62% 2.65%*
Portfolio turnover rate.................................... 43% 20% 30% 20% 76% 22%
Average commission rate per share (b)...................... $ 0.046 $ 0.048 -- -- -- --
</TABLE>

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

* Annualized

+ Fund commenced operations on January 2, 1992.

(a) 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.

(b) For fiscal years beginning after September 1, 1995, the SEC requires the
Fund to disclose of the average commission rate paid per share for purchases
and sales of investment securities.

INVESTMENT OBJECTIVE AND POLICIES AND RELATED RISK FACTORS

The Fund's investment objective is to seek a high level of total return on
its assets with an emphasis on income, through a combination of capital
appreciation and current income by investing primarily in income producing
equity securities including securities convertible into common stock. The
Adviser will look for such securities that have a better yield than the average
of the Standard & Poor's 500 Stock Index, as well as capital gains potential.
Although the Fund may also invest in any type of debt instrument and may use
various special investment techniques, under normal market conditions the Fund
will invest at least 65% of its total assets in income producing equity
securities (which include common stocks, preferred stocks and securities
convertible into or exchangeable for common and preferred stock). Risks inherent
in the Fund's investment objective and policies are discussed below.

EQUITY SECURITIES

3
<PAGE> 23

Equity securities also include preferred stock (whether or not convertible
into common stock) and debt securities convertible into or exchangeable for
common or preferred stock. Preferred stock has a preference over common stock in
liquidation (and generally dividends as well) but is subordinated to the
liabilities of the issuer in all respects. As a general rule the market value of
preferred stock with a fixed dividend rate and no conversion element varies
inversely with interest rates and perceived credit risk, while the market price
of convertible preferred stock generally also reflects some element of
conversion value. Because preferred stock is junior to debt securities and other
obligations of the issuer, deterioration in the credit quality of the issuer
will cause greater changes in the value of a preferred stock than in a more
senior debt security with similarly stated yield characteristics. Debt
securities that are convertible into or exchangeable for preferred common stock
are liabilities of the issuer but are generally subordinated to more senior
elements of the issuer's balance sheet. Although such securities also generally
reflect an element of conversion value, their market value also varies with
interest rates and perceived credit risk.

The Adviser believes that opportunities for capital appreciation may also
be found in the preferred stock and convertible securities of companies. This is
particularly true in the case of companies that have performed below
expectations at the time the preferred stock or convertible security was issued.
If the company's performance has been poor enough, its preferred stock and
convertible debt securities will trade more like the common stock than like a
fixed income security and may result in above average appreciation once it
becomes apparent that performance is improving. Even if the credit quality of
the company is not in question, the market price of the convertible security
will often reflect little or no element of conversion value if the price of its
common stock has fallen substantially below the conversion price. This leads to
the possibility of capital appreciation if the price of the common stock
recovers. Preferred stocks and convertible securities have many of the same
characteristics and risks as nonconvertible debt securities described below.

Many convertible securities are not investment grade, that is, not rated
BBB or better by Standard & Poor's Corporation ("S&P") or Baa or better by
Moody's Investors Service ("Moody's") and not considered by the Adviser to be of
similar quality.

The Fund may invest up to 35% of its assets in convertible and
nonconvertible fixed income securities rated, at the time of investment, less
than BBB by S&P or Baa by Moody's or are unrated but of comparable quality in
the judgment of the Adviser. Securities which are not investment grade are
viewed by the rating agencies as being predominantly speculative in character
and are characterized by substantial risk concerning payments of interest and
principal, sensitivity to economic conditions and changes in interest rates, as
well as by market price volatility and/or relative lack of secondary market
trading among other risks and may involve major risk exposure to adverse
conditions or be in default. However, the Fund does not expect to invest more
than 5% of its assets in securities which are in default at the time of
investment and will invest in such securities only when the Adviser expects that
the securities will appreciate in value. There is no minimum rating of
securities in which the Fund may invest. Securities rated less than BBB by S&P
or Baa by Moody's or comparable unrated securities are typically referred to in
the financial press as "junk bonds." For further information regarding lower
rated securities and the risks associated therewith, see "Other Investment
Techniques" in the Additional Statement and the Description of Corporate Bond,
Corporate Debt and Preferred Stock Ratings attached thereto as an Appendix.

NONCONVERTIBLE DEBT SECURITIES

Under normal market conditions, the Fund may invest up to 35% of its assets
in fixed income securities which are not convertible or exchangeable for common
stock. These securities include preferred stocks, bonds, debentures, notes,
asset and mortgage backed securities and money market instruments such as
commercial paper and bankers acceptances. There is no minimum credit rating for
these securities in which the Fund may invest. Accordingly, the Fund could
invest in securities in default although the Fund will not invest more than

4
<PAGE> 24

5% of its assets in such securities. See "Equity Securities" for a discussion of
credit considerations. Preferred stocks are subject to the same types of risks
as debt instruments.

ASSET-BACKED AND MORTGAGE-BACKED SECURITIES

For temporary defensive purposes the Fund may invest up to 100% of its
assets in nonconvertible fixed income securities or high quality money market
instruments.

OTHER INVESTMENT TECHNIQUES AND RELATED RISK FACTORS

FOREIGN SECURITIES

The Fund may invest up to 35% of its total assets in the securities of
non-U.S. issuers. These investments involve certain risks not ordinarily
associated with investments in securities of domestic issuers. These risks
include fluctuations in foreign exchange rates (which the Fund will not seek to
hedge), future political and economic developments, and the possible imposition
of exchange controls or other foreign governmental laws or restrictions. In
addition, with respect to certain countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social instability
or diplomatic developments which could adversely affect investments in those
countries.

Dividend and interest income from non-U.S. securities will generally be
subject to withholding taxes by the country in which the issuer is located and
may not be recoverable by the Fund or the investor.

CORPORATE REORGANIZATIONS

Subject to the Fund's policy of investing at least 65% of its assets in
income producing equity securities, the Fund may invest without limit in
securities for which a tender or exchange offer has been made or announced and
in securities of companies for which a merger, consolidation, liquidation or
similar reorganization proposal has been announced if, in the judgment of the
Adviser, there is a reasonable prospect of capital appreciation significantly
greater than the added portfolio turnover expenses inherent in the short term
nature of such transactions. The principal risk is that such offers or proposals
may not be consummated within the time and under the terms contemplated at the
time of the investment, in which case, unless such offers or

5
<PAGE> 25

proposals are replaced by equivalent or increased offers or proposals which are
consummated, the Fund may sustain a loss. For further information on such
investments, see "Other Investment Techniques" in the Additional Statement.

OPTIONS AND FUTURES

The Fund may purchase or sell options on individual securities as well as
on indices of securities as a means of achieving additional return or of hedging
the value of the Fund's portfolio.

A call option is a contract that gives the holder of the option the right,
in return for a premium paid, to buy from the seller the security underlying the
option at a specified exercise price at any time during the term of the option
or, in some cases, only at the end of the term of the option. The seller of the
call option has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price. A put option is a
contract that gives the holder of the option the right, in return for a premium
paid, to sell to the seller the underlying security at a specified price. The
seller of the put option, on the other hand, has the obligation to buy the
underlying security upon exercise at the exercise price.

The purchaser of an option risks a total loss of the premium paid for the
option if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unexercized but
foregoes any capital appreciation in excess of the exercise price in the case of
a call option and may be required to pay a price in excess of current market
value in the case of a put option. Options purchased and sold other than on an
exchange in private transactions also impose on the Fund the credit risk that
the counterparty will fail to honor its obligations. The Fund will not purchase
options if, as a result, the aggregate cost of all outstanding options exceeds
10% of the Fund's assets. To the extent that puts, straddles and similar
investment strategies involve instruments regulated by the Commodity Futures
Trading Commission the Fund is limited to an investment not in excess of 5% of
its total assets.

WARRANTS AND RIGHTS

WHEN ISSUED, DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS

6
<PAGE> 26

SHORT SALES

The Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. government
securities or other highly liquid securities. The Fund will also be required to
deposit similar collateral with its custodian to the extent, if any, necessary
so that the value of both collateral deposits in the aggregate is at all times
equal to the greater of the price at which the security is sold short or 100% of
the current market value of the security sold short. Depending on arrangements
made with the broker-dealer from which it borrowed the security regarding
payment over of any payments received by the Fund on such security, the Fund may
not receive any payments (including interest) on its collateral deposited with
such broker-dealer.

RESTRICTED AND ILLIQUID SECURITIES

7
<PAGE> 27

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.

REPURCHASE AGREEMENTS

The Fund may invest in repurchase agreements, which are agreements pursuant
to which securities are acquired by the Fund from a third party with the
understanding that they will be repurchased by the seller at a fixed price on an
agreed date. These agreements may be made with respect to any of the portfolio
securities in which the Fund is authorized to invest. Repurchase agreements may
be characterized as loans secured by the underlying securities. The Fund may
enter into repurchase agreements with (i) member banks of the Federal Reserve
System having total assets in excess of $500 million and (ii) securities
dealers, provided that such banks or dealers meet the creditworthiness standards
established by the Fund's Board of Directors ("Qualified Institutions"). The
Adviser will monitor the continued creditworthiness of Qualified Institutions,
subject to the supervision of the Fund's Board of Directors. The resale price
reflects the purchase price plus an agreed upon market rate of interest which is
unrelated to the coupon rate or date of maturity of the purchased security. The
collateral is marked-to-market daily. Such agreements permit the Fund to keep
all its assets earning interest while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature.

LOANS OF PORTFOLIO SECURITIES

BORROWING

8
<PAGE> 28

including the meeting of redemption requests, which would otherwise require the
untimely disposition of its portfolio securities. Borrowing may not, in the
aggregate, exceed 15% of assets after giving effect to the borrowing and
borrowing for purposes other than meeting redemptions may not exceed 5% of the
value of the Fund's assets after giving effect to the borrowing. The Fund will
not make additional investments when borrowings exceed 5% of assets. The Fund
may mortgage, pledge or hypothecate assets to secure such borrowings.

PORTFOLIO TURNOVER

The investment policies of the Fund may lead to frequent changes in
investments, particularly in periods of rapidly fluctuating interest or currency
exchange rates. The portfolio turnover is expected to be less than 100%.
Portfolio turnover generally involves some expense to the Fund, including
brokerage commissions or dealer mark-ups and other transaction costs on the sale
of securities and reinvestment in other securities. The portfolio turnover rate
is computed by dividing the lesser of the amount of the securities purchased or
securities sold by the average monthly value of securities owned during the year
(excluding securities whose maturities at acquisition were one year or less).

MANAGEMENT OF THE FUND

The Fund's Board of Directors (who, with its officers, are described in the
Additional Statement) has overall responsibility for the management of the Fund.
The Board of Directors decides upon matters of general policy and reviews the
actions of the Distributor, the Adviser and the Sub-Administrator (as defined
below). Pursuant to an Investment Advisory Contract with the Fund, the Adviser,
provides a continuous investment program for the Fund's portfolio; provides
investment research and makes and executes recommendations for the purchase and
sale of securities and the exercise of all voting and other rights appertaining
thereto; provides facilities and personnel required for the Fund's
administrative management; supervises the performance of administrative and
professional services provided by others; and pays the compensation of the Sub-
Administrator and all officers and directors of the Fund who are its affiliates.
Mr. Mario J. Gabelli -- Portfolio Manager, will be primarily responsible for the
day-to-day management of the Gabelli Equity Income Fund. Mr. Gabelli is
Chairman, Chief Investment Officer and a Director of the Adviser. As
compensation for its services and the related expenses borne by the Adviser, the
Fund pays the Adviser a fee, computed daily and payable monthly, equal, on an
annual basis, to 1.00% of the Fund's average daily net assets, which is higher
than that paid by most mutual funds. For fiscal years ended September 30, 1995,
1996 and 1997, the Adviser received fees of $512,370, $561,461, and $640,070.
The Adviser is located at One Corporate Center, Rye, New York 10580-1434.

The Adviser was formed in 1980 and as of December 31, 1997 acts as
investment adviser to the following funds with aggregate assets in excess of
$5.5 billion:

9
<PAGE> 29

<TABLE>
<CAPTION>
NET ASSETS
OPEN-END FUNDS: 12/31/97
- --------------------------------------------------------------------------------- -------------
(IN MILLIONS)
<S> <C>
Gabelli Asset Fund............................................................... $ 1,334
Gabelli Growth Fund.............................................................. 952
Gabelli Gold Fund, Inc........................................................... 8
Gabelli Value Fund Inc........................................................... 597
Gabelli Small Cap Growth Fund.................................................... 293
Gabelli Equity Income Fund....................................................... 76
Gabelli U.S. Treasury Money Market Fund.......................................... 283
Gabelli ABC Fund................................................................. 35
Gabelli Global Telecommunications Fund........................................... 118
Gabelli Global Interactive Couch Potato(R) Fund.................................. 41
Gabelli Global Convertible Securities Fund....................................... 9
Gabelli International Growth Fund, Inc........................................... 18
Gabelli Capital Asset Fund....................................................... 104
CLOSED-END FUNDS:
- ---------------------------------------------------------------------------------
Gabelli Convertible Securities Fund, Inc......................................... 122
Gabelli Equity Trust Inc......................................................... 1,201
Gabelli Global Multimedia Trust Inc.............................................. 140
</TABLE>

Gabelli & Company, Inc., the Distributor of each open-end fund's respective
shares, is an indirect majority owned subsidiary of the Adviser. GAMCO
Investors, Inc, ("GAMCO"), a wholly owned subsidiary of the Adviser, acts as
investment adviser for individuals, pension trusts, profit sharing trusts and
endowments. As of December 31, 1997, GAMCO had aggregate assets in excess of
$6.0 billion under its management. Gabelli Advisers, Inc. is an affiliated
Investment Adviser to The Gabelli Westwood Funds with aggregate assets in excess
of $266 million. Gabelli Fixed Income LLC is an affiliated Investment Adviser to
The Treasurer's Fund, Inc. And separate accounts with aggregate assets in excess
of $1.5 billion. Mr. Mario J. Gabelli may be deemed a "controlling person" of
the Adviser and the Distributor on the basis of his ownership of stock of the
Adviser.

In addition to the fees of the Adviser, the Fund is responsible for the
payment of all its other expenses incurred in the operation of the Fund, which
include, among other things, expenses for legal and independent auditors'
services, costs of printing all materials sent to shareholders, charges of State
Street Bank and Trust Company (the "Custodian", "Transfer Agent" and dividend
paying agent) and any other persons hired by the Fund, Securities and Exchange
Commission fees, fees and expenses of unaffiliated directors, accounting and
printing costs for reports and similar materials sent to shareholders, the
Fund's pro rata portion of membership fees in trade organizations, fidelity bond
coverage for the Fund's officers and employees, interest, brokerage and other
trading costs, taxes, expenses of qualifying the Fund for sale in various
jurisdictions, expense of the Fund's distribution plan adopted under Rule 12b-1,
expenses of personnel performing shareholder servicing functions, litigation and
other extraordinary or non-recurring expenses and other expenses properly
payable by the Fund.

The Additional Statement contains further information about the Investment
Advisory Contract including a more complete description of the advisory and
expense arrangements, and administrative provisions.

SUB-ADMINISTRATOR

10
<PAGE> 30

materials for meetings of the Fund's Board of Directors, compliance testing of
Fund activities and assistance in the preparation of proxy statements, reports
to shareholders and other documentation. The Sub-Administrator's services do not
include the investment advisory and portfolio management services of the
Adviser. For the services and the related expenses borne by BISYS, the Adviser
pays it a prorated monthly fee at the annual rate of .0625% of the average net
assets (with a minimum annual fee of $30,000 per portfolio) on the first $350
million of all the funds advised by the Adviser and affiliates and administered
by BISYS; .0425% of any assets above $350 million and .0225% of any assets above
$700 million which, together with the services to be rendered, are subject to
negotiation between the parties and both parties retain the right unilaterally
to terminate the arrangement on not less than 60 days' notice. BISYS has its
principal office at 3435 Stelzer Rd., Columbus, Ohio 43219.

DISTRIBUTION PLAN

The Board of Directors of the Fund has approved as being in the best
interests of the Fund and its shareholders a Distribution Plan which authorizes
payments by the Fund in connection with the distribution of its shares at an
annual rate, of up to .25% of the Fund's average daily net assets.

The Plan has been implemented by written agreements between the Fund and/or
the Distributor and each person (including the Distributor) to which payments
may be made. Administration of the Plan is regulated by Rule 12b-1 under the
Investment Company Act of 1940 which includes requirements that the Board of
Directors receive and review, at least quarterly, reports concerning the nature
and qualification of expenses for which payments are made, that the Board of
Directors approve all agreements implementing the Plan and that the Plan may be
continued from year to year only if the Board of Directors concludes, at least
annually, that continuation of the Plan is likely to benefit shareholders. To
the extent any of these payments are based on allocations by the Distributor,
the Fund may be considered to be participating in joint distribution activities
with other funds distributed by the Distributor. Any such allocations would be
subject to approval by the Fund's non-interested Directors and would be based on
such factors as the net assets of each Fund, the number of shareholder inquiries
and similar pertinent criteria. For the fiscal year ended September 30, 1997,
the Fund incurred distribution costs of $159,992 or 0.25% of average net assets
under the Plan.

PURCHASE OF SHARES

Shares of the Fund are currently offered without a sales charge. The
minimum initial investment is $1,000. There is no minimum for subsequent
investments. Shares of the Fund are sold at the net asset value per share next
determined after receipt of an order by the Fund's Distributor or Transfer Agent
in proper form with accompanying check or bank wire payment arrangements
satisfactory to the Fund. Although most shareholders elect not to receive stock
certificates, certificates for whole shares only can be obtained on specific
written request to the Transfer Agent.

11
<PAGE> 31

Shares of the Fund may be purchased through registered broker-dealers. Such
broker-dealers may charge the investor a fee for their services. Such fees may
vary among broker-dealers, and such broker-dealers may impose higher initial or
subsequent investment requirements than those established by the Fund. Services
provided by broker-dealers may include allowing the investor to establish a
margin account and to borrow on the value of the Fund's shares in that account.

Prospectuses, sales material and applications may be obtained from the
Distributor. The Fund and its Distributor reserve the right in their sole
discretion (1) to suspend the offerings of the Fund's shares and (2) to reject
purchase orders when, in the judgment of the Fund's management, such rejection
is in the best interest of the Fund. The net asset value per share of the Fund
is determined as of the close of the regular session of the New York Stock
Exchange, which is generally 4:00 p.m. Eastern time, on each day that trading is
conducted on the New York Stock Exchange by dividing the value of the Fund's net
assets (i.e., the value of its securities and other assets less its liabilities,
including expenses payable or accrued) by the number of shares outstanding at
the time the determination is made. Portfolio securities for which market
quotations are readily available are valued at market value as determined by the
last quoted sale price prior to the valuation time on the valuation date in the
case of securities traded on securities exchanges or other markets for which
such information is available. Other readily marketable securities are valued at
the average of the latest bid and asked quotations for such securities prior to
the valuation time. Debt securities with remaining maturities of 60 days or less
are valued at amortized cost. All other assets are valued at fair value as
determined by or under the supervision of the Board of Directors of the Fund.
See "Determination of Net Asset Value" in the Additional Statement.

MAIL

To make an initial purchase by mail, send a completed subscription order
form with a check for the amount of the investment payable to "The Gabelli
Equity Income Fund" to:

THE GABELLI FUNDS
P.O. BOX 8308
BOSTON, MA 02266-8308

12
<PAGE> 32

BANK WIRE

State Street Bank and Trust Company
ABA #011-0000-28 REF DDA #99046187
Attn: Shareholder Services
Re: The Gabelli Equity Income Fund
A/C #

- -------------------------------------------------------------------------
Account of (Registered Owner)
225 Franklin Street, Boston, MA
02110

Personal Delivery Deliver a check made payable to "The Gabelli Equity
Income Fund" along with a completed subscription order form to:

THE GABELLI FUNDS
The BFDS Building, 6th Floor
Two Heritage Drive
North Quincy, MA 02171

TELEPHONE INVESTMENT PLAN

AUTOMATIC INVESTMENT PLAN

SYSTEMATIC WITHDRAWAL PLAN

13
<PAGE> 33

OTHER INVESTORS

REDEMPTION OF SHARES

Upon receipt by the Distributor or the Transfer Agent of a redemption
request in proper form, shares of the Fund will be redeemed at their next
determined net asset value. Redemption requests received after the time as of
which the Fund's net asset value is determined on a particular day will be
redeemed at the net asset value of the Fund determined on the next day that net
asset value is determined. Checks for redemption proceeds will normally be
mailed to the shareholder's address of record within seven days, but will not be
mailed until all checks in payment for the purchase of the shares to be redeemed
have been honored, which may take up to 15 days. Redemption requests may be made
by letter to the Transfer Agent, specifying the name of the Fund, the dollar
amount or number of shares to be redeemed, and the account number. The letter
must be signed in exactly the same way the account is registered (if there is
more than one owner of the shares, all must sign) and, if any certificates for
the shares to be redeemed are outstanding, presentation of such certificates
properly endorsed is also required. Signatures on a redemption request and/or
certificates must be guaranteed by an "eligible guarantor institution" as such
term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, which
includes certain banks, brokers, dealers, credit unions, securities exchanges
and associations, clearing agencies and savings associations (signature
guarantees by notaries public are not acceptable). Shareholders may also redeem
Fund shares through certain registered broker-dealers, who have made
arrangements with the Fund permitting them to redeem shares by telephone or
facsimile transmission and who may charge shareholders a fee for this service if
they have not received any payments under the Distribution Plan.

14
<PAGE> 34

$500. However, a shareholder will be allowed to make additional investments
prior to the date fixed for redemption to avoid liquidation of the account.

TELEPHONE REDEMPTION BY CHECK

BY BANK WIRE

RETIREMENT PLANS

15
<PAGE> 35

compensation for investment on a tax-deferred basis until distributions are made
from the plans. The minimum initial investment for an individual under such
plans is $1,000 and there is no minimum for additional investments. Under the
Code, individuals may make wholly or partly tax deductible IRA contributions of
up to $2,000 annually, depending on whether they are active participants in an
employer-sponsored retirement plan and on their income level. However, dividends
and distributions held in the account are not taxed until withdrawn in
accordance with the provisions of the Code. An individual with a non-working
spouse may establish a separate IRA for the spouse under the same conditions and
contribute a maximum of $4,000 annually to either or both IRAs provided that no
more than $2,000 may be contributed to the IRA of either spouse. Beginning
January 1, 1998, investors satisfying statutory income level requirements may
make non-deductible contributions up to $2,000 annually to a Roth IRA,
distributions from which are not subject to tax if a statutory five year holding
period requirement is satisfied. New for 1998, the Fund also makes available
Education IRAs. Education IRAs permit eligible individuals to contribute up to
$500 per year per beneficiary under 18 years old. The minimum initial investment
for an Education IRA is $250. Distributions from an education IRA are generally
excluded from income when used for qualified higher education expenses.

DIVIDENDS, DISTRIBUTIONS AND TAXES

The Fund currently intends to pay dividends quarterly and capital gains
distributions, if any, on an annual basis. Each dividend and capital gains
distribution, if any, declared by the Fund on its outstanding shares will,
unless the shareholder elects otherwise, be paid on the payment date fixed by
the Board of Directors in additional shares of the Fund having an aggregate net
asset value as of the ex-dividend date of such dividend or distribution equal to
the cash amount of such distribution. An election to receive dividends and
distributions may be changed by notifying the Fund in writing at any time prior
to the record date for a particular dividend or distribution. There are no sales
or other charges in connection with the reinvestment of dividends and capital
gains distributions. There is no fixed dividend rate, and there can be no
assurance that the Fund will pay any dividends or realize any capital gains.

The Fund has qualified and intends to continue to qualify as a "Regulated
Investment Company" under the Code and thus is not subject to Federal income tax
on that portion of its net investment income and realized capital gain that it
pays out to its shareholders. Failure to qualify would result in the Fund being
subject to Federal income tax on its taxable income and gains.

A redemption of shares will generally result in the recognition of gain or
loss for income tax purposes equal to the difference between the proceeds of the
redemption and the shareholder's basis in the shares redeemed. Dividends from
net investment income and distributions from realized short-term capital gains
are taxable to the recipient shareholders as ordinary income, whether paid in
cash or in additional Fund shares. In the case of corporate shareholders, the
portion of the Fund's distributions attributable to dividends received by the
Fund on its investments in common or preferred stock may be eligible for the
dividends received deduction as long as certain requirements are satisfied by
the shareholder. Distributions out of long-term capital gains are taxable to the
recipient as long-term capital gains. Shareholders will be advised as to what
portion of capital gains are to be treated as "mid-term" or "long term" with
respect to the maximum tax rate for such gains (for noncorporate shareholders,
28% for mid-term gains and 20% for long term gains (10% for noncorporate
shareholders who are subject to the 15% marginal tax bracket for ordinary
income)). Dividends and distributions declared by the Fund may also be subject
to state and local taxes. Prior to investing in shares of

16
<PAGE> 36

the Fund, prospective shareholders may wish to consult their tax advisers
concerning the Federal, state and local tax consequences of such investment.

GENERAL INFORMATION

DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

The Fund is a series of Gabelli Equity Series Funds, Inc., which was
incorporated in Maryland on July 25, 1991. The authorized capital stock consists
of one billion shares of stock having a par value of one tenth of one cent
($.001) per share, one hundred million of which have been initially classified
as Fund shares. The Corporation is not required, and does not intend, to hold
regular annual shareholder meetings, but may hold special meetings for
consideration of proposals requiring shareholder approval, such as changing
fundamental policies or upon the written request of 10% of the Fund's shares to
replace its Directors. The Corporation's Board of Directors is authorized to
divide the unissued shares into separate series of stock, each series
representing a separate, additional portfolio. The Board currently has
authorized the division of the unissued shares into two series each having a
separate portfolio. Shares of all series will have identical voting rights,
except where by law, certain matters must be approved by a majority of the
shares of the affected series. Each share of any series of shares when issued
has equal dividend, liquidation (see "Redemption of Shares") and voting rights
within the series for which it was issued and each fractional share has those
rights in proportion to the percentage that the fractional share represents of a
whole share. Shares will be voted in the aggregate.

SHAREHOLDER APPROVAL

PERFORMANCE INFORMATION

17
<PAGE> 37

the maximum public offering price for the one, five and ten year periods (if
applicable) and the life of the Fund through the most recent calendar quarter,
assuming reinvestment of all dividends and distributions. Quotations of "yield"
will be based on the investment income per share earned during a particular 30
day period, less expenses accrued during the period, with the remainder being
divided by the maximum offering price per share on the last day of the period.
The Fund may also furnish total return and yield calculations for other periods
based on investments at various sales charge levels or net asset values.

CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

INDEPENDENT AUDITORS

Ernst & Young LLP has been appointed independent auditors for the Fund, and
is located at 787 Seventh Ave., New York, NY 10019.

INFORMATION FOR SHAREHOLDERS

Upon request, Gabelli and Company, Inc. will provide without charge, a
paper copy of this Prospectus to investors or their representatives who received
this Prospectus in an electronic format.

18
<PAGE> 38

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Table of Fees and Expenses............ 2
Financial Highlights.................. 3
Investment Objective and Policies and
Related Risk Factors................ 3
Other Investment Techniques and
Related Risk Factors................ 5
Management of the Fund................ 9
Distribution Plan..................... 11
Purchase of Shares.................... 11
Redemption of Shares.................. 14
Retirement Plans...................... 15
Dividends, Distributions and Taxes.... 16
General Information................... 17
</TABLE>

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

The
Gabelli
Equity
Income
Fund
PROSPECTUS
JANUARY 28, 1998
GABELLI FUNDS, INC.
INVESTMENT ADVISER

GABELLI & COMPANY, INC.
DISTRIBUTOR
------------------------------------------------------