[PHOTO OF AMERICAN FLAG OMITTED]
[TETON MOUNTAIN GRAPHIC OMITTED]
THE GABELLI EQUITY TRUST INC.
THIRD QUARTER REPORT
SEPTEMBER 30, 2001
[TETON MOUNTAIN GRAPHIC OMITTED]
THE GABELLI EQUITY TRUST INC.
Our cover icon represents the underpinnings of Gabelli.
The Teton mountains in Wyoming represent what we believe in
in America -- that creativity, ingenuity, hard work and a global
uniqueness provide enduring values. They also stand out in
an increasingly complex, interconnected and interdependent
economic world.
[PHOTOS OF STATE FLAGS OMITTED]
ALABAMA ALASKA ARIZONA ARKANSAS CALIFORNIA COLORADO CONNECTICUT
DELAWARE FLORIDA GEORGIA HAWAII IDAHO ILLINOIS INDIANA
IOWA KANSAS KENTUCKY LOUISIANA MAINE MARYLAND MASSACHUSETTS
MICHIGAN MINNESOTA MISSISSIPPI MISSOURI MONTANA NEBRASKA NEVADA
NEW HAMPSHIRE NEW JERSEY NEW MEXICO NEW YORK N. CAROLINA N. DAKOTA
OHIO OKLAHOMA OREGON PENNSYLVANIA RHODE ISLAND S. CAROLINA
S. DAKOTA TENNESSEE TEXAS UTAH VERMONT VIRGINIA WASHINGTON
WEST VIRGINIA WISCONSIN WYOMING
INVESTMENT OBJECTIVE:
The Gabelli Equity Trust Inc. is a closed-end, non-diversified
management investment company whose primary objective is
long-term growth of capital, with income as a secondary
objective.
THIS REPORT IS PRINTED ON RECYCLED PAPER.
TO OUR SHAREHOLDERS,
In the third quarter of 2001, the horrifying terrorist attacks on America
further undermined an already fragile economy and deepened what was already the
worst bear market we have experienced since 1973-74. Prior to September 11,
value stocks had held up well relative to growth stocks, as evidenced by the
superior performance of value indices versus their growth counterparts over the
first eight months of 2001. However, following these unconscionable acts of
terrorism, value stocks spiraled lower with the broad market.
[PHOTO OF MARIO J. GABELLI OMITTED]
[TETON MOUNTAIN GRAPHIC OMITTED]
INVESTMENT PERFORMANCE
For the third quarter ended September 30, 2001, The Gabelli Equity Trust's
(the "Trust") net asset value ("NAV") total return fell 14.49% after adjusting
for the reinvestment of the $0.27 per share distribution paid on September 24,
2001. The Standard & Poor's ("S&P") 500 Index, Nasdaq Composite Index, and Dow
Jones Industrial Average fell 14.67%, 30.64%, and 15.37%, respectively, over the
same period. Each index is an unmanaged indicator of stock market performance.
The Trust fell 16.17% over the trailing twelve-month period after adjusting for
the reinvestment of the $1.31 per share in distributions and an adjustment of
$0.56 per share attributable to the rights offering. The S&P 500 Index, Nasdaq
Composite Index, and Dow Jones Industrial Average declined 26.61%, 59.19%, and
15.48%, respectively, over the same twelve-month period.
For the three-year period ended September 30, 2001, the Trust's total
return averaged 7.05% annually, including reinvestments of $3.67 per share in
distributions, an adjustment of $0.56 per share attributable to the rights
offering, and an adjustment of $0.75 per share attributable to the spin-off of
The Gabelli Utility Trust. The S&P 500 Index and Dow Jones Industrial Average
had average annual total returns of 2.03% and 5.83%, respectively, while the
Nasdaq Composite Index had an average annual decline of 4.00%, over the same
three-year period. For the five-year period ended September 30, 2001, the
Trust's total return averaged 9.48% annually, including reinvestments of $5.75
per share in distributions, an adjustment of $0.56 per share attributable to the
rights offering, and an adjustment of $0.75 per share attributable to the
spin-off of The Gabelli Utility Trust, versus average annual total returns of
10.23%, 4.08%, and 10.40% for the S&P 500, Nasdaq Composite Index, and Dow Jones
Industrial Average, respectively.
For the ten-year period ended September 30, 2001, the Trust's total return
averaged 11.40% annually, including reinvestments of $11.09 per share in
distributions, adjustments of $2.21 per share attributable to rights offerings,
and adjustments of $1.50 per share attributable to the spin-off of The Gabelli
Utility Trust and The Gabelli Global Multimedia Trust, versus average annual
total returns of 12.69%, 11.02%, and 13.88% for the S&P 500, Nasdaq Composite
Index, and Dow Jones Industrial Average, respectively. Since inception on August
21, 1986 through September 30, 2001, the Trust had a cumulative total return of
445.08%, including adjustments of $19.97 per share for distributions, rights
offerings, spin-offs and taxes paid on undistributed long term capital gains,
which equates to an average annual total return of 11.87%.
The Trust's common shares ended the third quarter at $9.91 per share on
the New York Stock Exchange, a premium to the net asset value of 20.41% and a
total return decline of 11.21% for the third quarter. The Trust's common shares
rose 2.79% over the trailing twelve-month period after adjusting for all
distributions and the rights offering.
INVESTMENT RESULTS (a)
--------------------------------------------------------------------------------
Average Annual Returns - September 30, 2001
-------------------------------------------
NAV AVERAGE INVESTMENT AVERAGE
ANNUAL RETURN (A) ANNUAL RETURN (B)
----------------- ------------------
1 Year .............. (16.17)% 2.79%
5 Year .............. 9.48% 14.76%
10 Year ............. 11.40% 13.65%
Life of Fund (c) .... 11.87% 12.74%
(a) Life of Fund return based on initial net asset value of $9.34. Total returns
and average annual returns reflect changes in net asset value, reinvestment of
distributions, adjustments for rights offerings, spin-offs and taxes paid on
undistributed long term capital gains, and are net of expenses. Of course, the
returns noted represent past performance and do not guarantee future results.
Investment returns and the principal value of an investment will fluctuate. When
shares are sold they may be worth more or less than their original cost.
(b) Life of Fund return based on initial offering price of $10.00. Total returns
and average annual returns reflect changes in closing market values on the New
York Stock Exchange, reinvestment of distributions, adjustments for rights
offerings, spin-offs and taxes paid on undistributed long-term capital gains.
(c) From commencement of investment operations on August 21, 1986.
COMMENTARY
THE CAMEL AND THE SCORPION
A camel and a scorpion meet on the banks of a river in the Middle East.
The scorpion asks the camel for a ride across the river. Initially, the camel
declines, fearing the scorpion will sting him. The scorpion finally talks the
camel into ferrying him across the river by explaining that it would make no
sense for him to sting the camel ensuring his own doom. Half way across the
river the scorpion stings the camel. As they are going down to their deaths, the
camel asks the scorpion why he did such a foolish thing. The scorpion replies,
"because this is the Middle East."
Unfortunately, this parable came true on the morning of September 11,
2001. By murdering thousands of innocent Americans (and visitors from at least
60 other countries), Middle Eastern extremist groups (the scorpion) ensured
their own doom. But, the camel (our faith in the security of Fortress America)
is also a victim, and the "peace dividend," which has benefited the U.S. economy
and equities markets in so many ways over the last decade, has been suspended,
perhaps for a considerable period of time.
How will Americans respond to this crisis? The same way they have
responded to numerous past crises. After an initial period of shock, grief, and
disillusion, they will come together to preserve a culture and economy whose
unique principles - personal freedom and entrepreneurial capitalism - have made
America the greatest nation on earth.
PICKING UP THE PIECES
As we prepare this letter, we are working diligently to assess all the
economic and investment ramifications of this terrible tragedy. We can already
make some general observations. First, the economy will dip into recession in
the coming quarters. Second, a corporate profit recovery will be postponed.
Third, the
[GRAPHIC OF TRIANGLE OMITTED]
EDGAR REPRESENTATION OF TRIANGLE TEXT AS FOLLOWS:
EPS
PMV
MANAGEMENT
CASH FLOW
RESEARCH
2
stock market will rapidly discount all the bad news resulting from this crisis
and find a bottom faster than it might have if the economy had simply continued
to limp along.
Prior to September 11, the economy had been struggling, supported only by
the American consumer. With consumer confidence plummeting following the
terrorist attacks, the economy will likely go into recession. However, we
believe the Federal Reserve's response to this crisis along with fiscal stimulus
from a unified Congress will put a floor under the economy and lay the
groundwork for a recovery in 2002.
The recovery in profits may be pushed back several quarters as well,
however, sizable profit gains should be driven by:
o economic recovery, spurred by monetary and fiscal policy already in
place
o lower oil prices
o the absence of sizable inventory corrections
o aggressive cost cutting
o targeted booster shots in the form of tax initiatives
Reported profits will also benefit from the absence of write-offs (it
seems corporate America is writing off as much as possible, including the
proverbial kitchen sink) as well as changes in amortization of goodwill (FASB
142).
Where does this leave the equities market? Before the terrorist attacks,
we were already well into a bear market, sparked initially by excessive equities
valuations in the technology sector and compounded by a decline in capital
spending that eroded earnings in a wider variety of industries. Now, the
economic uncertainty and lack of earnings visibility that has plagued the market
has been supplanted by fear - ironically, the most necessary ingredient for a
bear market bottom. Have we hit bottom yet? Perhaps. However, we will be
surprised (certainly pleasantly) if the strong gains in the last week of
September hold. Yet, with lower equity prices, together with the current level
of (ten year) interest rates, we are in a zone where a margin of safety begins
to be visible for equities.
OUR RESPONSE
Although this senseless tragedy has changed all Americans' lives, it has
not changed our investment principles. We buy the stocks of quality companies
trading at significant discounts to our appraisal of their "real world" economic
value today and into the future. So, our response was not to dump stocks, but
rather to re-assess their longer-term prospects. We asked the same questions we
have always asked in depressed markets. How bad is bad? Does the company have
the resources to address the economic turmoil? How long will it be bad? How good
is good? In short, we focused on portfolio companies' "normalized" cash flows,
earnings, and business values. In general, we have come to the conclusion that
while the short-term outlook for many of our portfolio companies has been
negatively impacted by the events of September 11, their long-term prospects
remain attractive.
For example, operating profits for advertising-supported media companies
will be under pressure as the economy slides into recession. But, we still
expect an economic recovery, the Winter Olympics in Salt Lake City, and the
mid-term election political spending to bolster results in 2002. We continue to
expect a relaxed regulatory posture at the Federal Communications Commission
("FCC") to result in further consolidation of the broadcast, cable television
and newspaper publishing industries. Certainly, this crisis has demonstrated how
effectively news is disseminated from a wealth of media sources in every
American market.
3
We continue to believe rural telephone company stocks will benefit from
attractive earnings growth rates and consolidation in this fragmented sector of
the telecommunications industry. We will see another round of consolidation
among the "wireless" operators. Utilities stocks, particularly those with good
dividends and takeover potential, should continue to offer the dual advantage of
income and reasonably attractive capital appreciation potential. We expect
dominant market share companies in a wide range of economically sensitive
industries to attract favorable investor attention as the economy begins to
recover in the year ahead.
INTERNATIONAL OUTLOOK
A portion of the Trust's portfolio continues to be managed by Caesar
Bryan. Caesar is also the portfolio manager of the Gabelli International Growth
Fund and the co-portfolio manager of The Gabelli Global Opportunity Fund.
Caesar's thoughts on international markets and global economies are provided
below:
The first sentence of our previous shareholder letter read "we are in the
middle of an economic slowdown." So what has changed? In the period between our
previous letter and the September attack, growth rates in most of the world's
leading economies deteriorated, but most policy makers, with the exception of
the U.S. Federal Reserve Board ("Fed"), were unable or unwilling to take
significant action. But it seems the September attack has changed many things,
including the willingness of monetary authorities and governments to initiate
more stimulative policies.
Clearly the economic impact of the September attack will slow activity.
Companies will be more cautious in deciding to undertake capital expenditures
and consumers will be less likely to spend. People will also be less likely to
fly, and this has an adverse effect on the leisure and tourism industries, among
others. To counter this, the Fed has reduced short-term interest rates by a full
one hundred basis points to 2.50%. This is an extremely low level by historical
standards. The European Central Bank ("ECB") has also reduced rates, but only by
50 basis points. This year the Fed has reduced short-term interest rates by 400
basis points and the European Central Bank by only 100 basis points. Deficit
spending is no longer quite such a policy non-starter. In Europe, there are
debates about lifting the strict limits imposed on the levels of government
debt, in order to give economies a booster shot.
Clearly, one effect of the attack will be to deepen the economic slowdown.
Hopefully, the effect of the policy responses will be to shorten the slowdown in
terms of time. In the positive ledger, we have more aggressive monetary easing
and increased government spending. On the negative side, the consumer - for so
long the stalwart of the economy - continues to retrench. Personal balance
sheets have become stretched and the savings rate is likely to rise. Newspaper
headlines reporting further job cuts does not build confidence.
The slowdown in corporate capital expenditures has hit corporate profits
hard. Equity markets were at lofty valuations and have been hurt by the
unexpected and dramatic slowdown in earnings. However, looking forward,
corporate profit comparisons should become easier. Declining inflation and extra
slack in the work force will help keep costs under control. Furthermore, the
decline in the price of oil will act as a tax cut and help businesses and
consumers alike.
We became considerably more defensive in the second half of last year. Our
exposure to the technology sector is low and largely limited to the Japanese
market. Also, we have a very limited exposure to the commodity and industrial
sectors. Many stocks in these sectors have suffered a collapse in profitability
and have been punished by the market. However, we do have a number of holdings
in economically sensitive sectors such as broadcasting, entertainment and other
consumer cyclical sectors. For the most part, these stocks have not performed
well. For example, RTL Group, Europe's largest broadcaster, halved in price
during the quarter. NRJ, a French radio broadcaster, Compagnie Financiere
Richemont, the owner of Cartier and other luxury brands, and News Corp., the
4
media giant, all declined by more than 20%. However, these companies have
excellent brands and properties, and we expect them to recover in a better
economic climate.
Looking ahead, we do expect a recovery in corporate earnings during 2002,
and markets are likely to discount this by a few months. We have concentrated
the international holdings on companies that have solid market positions and the
ability to generate free cash flow.
MORE LASTING CHANGES
For the last several years, we have been counseling investors not to
expect the kind of generous returns from the equities markets that they had
become accustomed to over the last ten years. Our caution was based on what we
viewed as excessive equities valuations and the historically low "margin of
safety" in the stock market. We had hoped the market would simply move sideways
for a long enough time to allow fundamentals to catch up with valuations.
Unfortunately, stock prices came tumbling down instead. In essence, what we had
hoped would be an extended period of boring equities returns was compressed into
eighteen months of suffering. Importantly, however, it has had the same result.
Stocks are now much more reasonably priced and a margin of safety has returned
to the market.
This does not mean that once the market bottoms, we will enjoy ten more
years of 20% plus annual returns. The risk premium for equities (the difference
between the returns on stocks versus returns on risk-free Treasury securities)
will increase for the foreseeable future. In other words, the inevitable
economic and market recovery will not lead to the kind of valuations equities
enjoyed after a decade of unprecedented peace and prosperity. Going forward,
this translates into equities returns more in line with historical norms. For us
and you, this means double digit returns on stocks will come from stock
selection prowess...our historical strength.
INVESTMENT SCORECARD
As could be expected, defense stocks including Northrop Grumman, Lockheed
Martin, and Newport News Shipbuilding finished near the top of our third quarter
performance rankings. Placer Dome and Newmont Mining also posted solid gains.
Regional Bell Operating Company investment SBC Communications managed a
respectable return. Bible publisher Thomas Nelson also excelled.
Advertising-supported media companies, including small group broadcasters
Young Broadcasting, cable television operator Cablevision, and multimedia giants
Viacom and AOL Time Warner, declined sharply as already weak advertising
promised to get weaker as a result of the tragedy. Aerospace component
manufacturer SPS Technologies and airplane builder Boeing also sustained
considerable damage due to the serious problems of the airline industry.
5
OUR REGULATORY FOOTPRINT
Gabelli & Company, Inc. published on September 17, 2001 an overview of the
Federal Communications Commission, various regulations that may change, and
sectors and companies that will benefit. We thought we would share this report
with you.
FEDERAL COMMUNICATIONS COMMISSION REGULATORY CHANGE = CATALYST
--------------------------------- ----------------------------
The five member FCC is currently composed of four members: Chairman
Michael Powell (Republican), Kathleen Abernathy (Republican), Kevin Martin
(Republican), and Michael Copps (Democrat). The fifth commissioner, Gloria
Tristani (Democrat), left her position on September 7th. President Bush must
appoint another Democrat to fill her position, and the Republicans will maintain
their 3-2 majority. Michael Powell is a proponent of deregulation and free
markets. Under his watch we expect several rules to be addressed, which should
be favorable for companies in the cable, satellite, broadcasting, publishing,
and telecom industries.
FEDERAL COMMUNICATIONS COMMISSION
FCC
[GRAPHIC OF FCC TREE OMITTED]
MICHAEL POWELL (R)
CHAIRMAN
KATHLEEN ABERNATHY (R)
MICHAEL COPPS (D)
KEVIN MARTIN (R)
OPEN
--------------------------------------------------------------------------------------------------------------------
REGULATION CURRENT STATUS "BULL CASE"
--------------------------------------------------------------------------------------------------------------------
- Cable Ownership Cap 30% of pay TV subscribers Above 50% or no cap
- Affiliated Programming Cap Affiliated content < 40% of first No cap
75 channels
- Cable/Broadcast Cross- No cable and broadcast TV in same Removal of ban
ownership Designated Market Area (DMA)
- Cable Dual Must Carry Must carry analog broadcast signal Not forced to carry both
broadcast digital and analog
- Cable Open Access Notice of Inquiry No forced open access
- Satellite Must Carry Must carry all local analog DBS Co. chooses which
broadcasts if carry one broadcast stations to carry
- Broadcast/Newspaper Cross- No newspaper and broadcast Removal of ban
ownership station in same DMA
- National TV Ownership Cap 35% of television audience Above 50% or no cap
- TV Duopolies Can own two stations in one Eliminate rating and voice tests
market if only one is in top four
and eight independent voices exist
- Wireless Spectrum Cap 45 MHz in urban and 55 MHz in No cap
rural markets
- Wireline - Section 271 Regional Bell Operating Companies RBOCs can offer in-region LD
(RBOCs) cannot offer in-region
Long Distance (LD)
6
CABLE & SATELLITE (Andrew Rittenberry 914-921-6592)
-----------------
CABLE OWNERSHIP CAP
- The 1992 Cable Act called for limits on the number of cable subscribers
one firm could control. In 1993, the FCC set the limit at 30% of cable
subscribers. In 1999, the FCC changed the limit to 30% of all
multichannel video subscribers, including DBS, cable, wireless cable,
etc.
- In March 2001, the DC Federal Court of Appeals rejected the current 30%
ownership cap as "arbitrary" and remanded it back to the FCC. Rather
than appeal the decision, the FCC has filed a Notice of Proposed Rule
Making to modify the rule. On September 13, 2001, the Commission held
an open meeting to discuss its thoughts on a new rule and to solicit
public comments and suggestions. Following a comment period, the FCC
will issue a new ownership ruling. We expect this to occur sometime in
mid to late 2002. The DC Court of Appeals can then take up this rule
again.
- WE EXPECT THE FCC TO RAISE THE CAP ABOVE 50% OR REMOVE IT ALTOGETHER.
AT THE VERY LEAST, WE EXPECT THE FCC TO LIBERALIZE THE RULES FOR
COUNTING ATTRIBUTED SUBSCRIBERS.
- Removal of the cap would provide AT&T Broadband and AOL Time Warner the
ability to merge their two cable systems, creating an industry
juggernaut. More importantly perhaps, removal of the cap could spur a
further round of general industry consolidation. In our opinion, the
most likely takeover candidate in the industry today is Cablevision
Systems.
VERTICAL PROGRAMMING LIMITS
- Currently, cable operators are barred from programming more than 40% of
their first 75 channels with affiliated programming. (Systems with over
75 channels must reserve 45 channels for non-affiliated programming).
- In the same court decision discussed above, the DC court also rejected
this rule and remanded it back to the FCC.
- There has been little comment by the FCC about this change, as no
operator was close to a violation. HOWEVER, WE BELIEVE THIS RULE WILL
BE DROPPED, AS THE LOGIC BEHIND IT IS SUSPECT. Similar to the cap
above, the FCC filed a Notice of Proposed Rulemaking on September 13.
The same process applies.
- The biggest beneficiary in the current marketplace is AOL Time Warner,
though it is still relatively far from the limit.
CABLE/BROADCAST CROSS-OWNERSHIP
- The Telecom Act of 1996 eliminated the statutory prohibition against
cable system/TV broadcast station cross ownership in the same market.
The FCC has yet to change its own rule barring the practice. The DC
Court of Appeals heard oral arguments on the subject on September 7th.
- Initial comments made during the hearing by the justices appear to
support easing this rule. WE EXPECT THAT THE FCC WILL EVENTUALLY REMOVE
THIS BAN.
- Though few companies have been clamoring for a rule change, AOL Time
Warner would be the clear beneficiary. AOL owns the WB network, but
owns no local affiliates, which provide the majority of the free cash
flow to other networks such as ABC, CBS, etc. The WB is the only
network that owns no local Owned & Operated stations today.
7
CABLE DUAL MUST CARRY FOR DIGITAL AND ANALOG
- Currently, cable companies are required to carry all local analog
broadcast signals or negotiate for retransmission consent. Broadcasters
are seeking to force cable operators to carry proposed digital signals
on separate channels, if they are forced by the FCC to broadcast them
for free over the air.
- The National Association of Broadcasters (NAB) is filing numerous
lawsuits, in an attempt to force cable to carry both signals. The NAB
is also attempting to get legislation passed on Capitol Hill mandating
dual must carry of both.
- THE FCC HAS TENTATIVELY INDICATED THAT IT WILL SUPPORT THE CABLE
INDUSTRY IN ITS DESIRE TO CARRY ONLY THE ANALOG OR THE DIGITAL
PROGRAMMING OF LOCAL BROADCASTERS, NOT BOTH THE ANALOG AND DIGITAL
PROGRAMMING. There has been no formal rulemaking as of yet.
- We believe all cable operators will be better off carrying only one
signal. This issue has more weight on Multiple System Operator's (MSO)
in major DMA's. Larger DMA's typically have many more local channels
that must be carried. The cable company typically receives no revenue
from local broadcasters whatsoever. The less local signals that must be
carried, the more capacity there is in the pipe for high-speed data,
video, telephony, etc. That means more revenue and cash flow per unit
of bandwidth to the operator.
INTERNET OPEN ACCESS VIA CABLE
- In 2000, there were three cases involving open access decided in the
court system. Each deemed Internet over cable something different. One
called it an unregulated data service, one a cable service, and the
other a telecommunications service. If deemed a telecommunications
service, it will be open to the same rules as the RBOC's under the
Telecomm Act of 1996, meaning mandatory unbundling and open access.
- The three courts all referred the issue to the FCC. In July of 2001,
the 4th Circuit Court in Richmond, VA, ruled that a county could not
impose open access on a cable system. The court also referred the issue
back to the FCC for guidance.
- THE FCC HAS ISSUED A NOTICE OF INQUIRY (NOI) ON THIS MATTER. However,
given that the FCC appears loath to further regulate or interfere with
the market mechanism, we believe it will not force open access on the
operators for the foreseeable future.
SATELLITE MUST CARRY
- In January 2002, satellite carriers are required to begin carrying all
local channels in a market if they carry any. Today, they only carry
the top 3-4 networks in each market.
- The ability to offer local channels through the satelitte is a major
competitive threat to cable operators. Given the fixed capacity of the
satellite fleet, the less stations the operators must carry, the more
individual markets can be offered the local service.
- THE FCC RECENTLY REAFFIRMED THIS MUST CARRY PROVISION IN A RULING DATED
SEPTEMBER 5TH, 2001. The DBS carriers are fighting this must carry rule
in two cases in the 4th Circuit court in Richmond, VA.
8
BROADCASTING & PUBLISHING (Evan Carpenter 914-921-6595)
-------------------------
BROADCAST/NEWSPAPER CROSS-OWNERSHIP
- Currently, the FCC, as a rule, doesn't allow the same company to own
both a broadcast station and a daily newspaper in the same market.
- Michael Powell has previously supported lifting the ban on
broadcast/newspaper cross-ownership. He has stated, "... the combined
resources may allow for greater and more efficient coverage of local
events that could not be covered by the two individually."
- Recently, the FCC granted News Corp. a 24-month waiver of this rule
when it acquired, from Chris Craft, WWOR-TV in New York, where it also
owns the POST. The FCC defended the waiver by stating that the market
would still exhibit diversity, and it considered not only other TV
stations and newspapers, but also radio stations and cable operators.
- The FCC stated that News Corp. would have to come into compliance with
the rule within the 24-month period provided "it is necessary under our
rules at that time".
- At their open meeting on September 13th, the FCC started reviewing the
ban on cross-ownership. The FCC will reach a conclusion following a
comment period. WE EXPECT THIS BAN TO BE RELAXED.
- Relaxation of this rule should allow companies like Belo, Tribune and
Gannett to acquire newspaper companies in their TV markets like
Pulitzer, Knight-Ridder and McClatchy. Also, Hearst-Argyle would be
allowed to acquire Young Broadcasting.
TELEVISION OWNERSHIP CAP
- Television station groups are limited as to their national audience
reach; no group may reach over 35% of the national audience, with Ultra
High Frequency (UHF) channels counted at half of their actual reach.
- Chairman Powell has also expressed support of raising the ownership
cap. He has argued that the cap limits economies of scale and thus
raises costs.
- The cap is predominantly supported by the network affiliates who argue
that if the networks were allowed to increase their coverage, it would
give them too much leverage over their affiliates.
- On the other hand, the networks and some large broadcast groups, which
want to expand their reach and take advantage of owning more stations
and the economies of scale, oppose the cap.
- Since the broadcasting industry is divided over this rule, we would
expect the FCC to let the courts rule, before they decide whether or
not to address it.
- Viacom, News Corp., and General Electric have challenged the cap in the
US Court of Appeals for the District of Columbia Circuit. Oral
arguments were heard on September 7th. THIS IS THE SAME COURT THAT
REJECTED THE 30% CABLE OWNERSHIP CAP (SEE ABOVE), AND WE WOULD EXPECT A
SIMILAR RULING FOR BROADCASTERS.
TV DUOPOLY
- A television station group may only own two stations in the same market
provided that (a) there are at least eight independently owned and
operated stations in the market after the combination, and (b) at least
one of the two stations is not in the top four stations in the market
as defined by audience share.
- ALTHOUGH WE BELIEVE THAT GIVEN THE DEREGULATORY NATURE OF THE FCC, IT
WOULD BE IN FAVOR OF EXTENDING THE DUOPOLY PRIVILEGE TO SMALLER
MARKETS, THIS MIGHT ALSO BE DECIDED IN THE COURTS.
9
- Sinclair has already received, from the US Court of Appeals for the
District of Columbia Circuit, a stay of the FCC requirement to divest
four Local Marketing Agreements (LMA) that violate the eight voices
test. Sinclair now has petitioned the court to reverse the order. Oral
arguments are scheduled for January 2002.
- Relaxing the duopoly regulations would benefit companies like Sinclair
and also allow companies like Disney's ABC to strengthen their
positions in certain markets like Los Angeles and San Francisco by
acquiring Young Broadcasting.
TELECOM (Dmitry Khaykin 914-921-5015)
-------
WIRELESS SPECTRUM CAP
- The Commercial Mobile Radio Service (CMRS) spectrum cap governs the
amount of CMRS spectrum that can be licensed to a single entity within
a particular geographic area. Under the current cap, a single entity
may acquire attributable interests in the licenses of broadband
Personal Communications Service (PCS), cellular, and Specialized Mobile
Radio (SMR) services that cumulatively do not exceed 45 MHz of spectrum
within Metropolitan Service Areas (MSA) and 55 MHz of spectrum in Rural
Service Areas (RSA).
- The cellular cross-interest rule, which limits the ability of a party
to have ownership interests in cellular carriers in overlapping
cellular geographic service areas (CGSAs), has been amended and
currently allows a party to have a non-controlling or otherwise
non-attributable direct or indirect ownership interest of up to 20% (up
from 5%) in both cellular licensees in overlapping CGSAs.
- Some of the spectrum under consideration for 3G services (1755-1850
MHz) is currently in the hands of the Department of Defense (DoD). In
our opinion, the latest terrorists acts in New York and Washington, DC
make it even less likely that DoD will give up this spectrum.
- Given the limited availability of clean spectrum suitable for broadband
mobile applications and the increasingly competitive nature of wireless
services, industry participants have been arguing to increase or
eliminate the spectrum cap. Chairman Powell has also expressed his
interest in addressing this issue. WE BELIEVE FCC WILL EITHER LIFT
SPECTRUM CAP OR INCREASE IT SUFFICIENTLY TO SUPPORT FURTHER INDUSTRY
GROWTH.
- The companies that stand to benefit the most from a spectrum cap lift
are regional carriers such as US Cellular, Rural Cellular, Dobson,
Alltel, and Western Wireless, as well as the last independent national
carrier, Nextel.
WIRELINE -- SECTION 271
- Section 271 of the Telecommunications Act of 1996 lays out detailed
requirements that RBOCs must meet in order to gain approval for entry
into the in-region interLATA market. Section 271 contains two central
provisions. One requires the presence of a facilities-based competitor
for both business and residential customers. The second requires
compliance with the "Competitive Checklist".
- Over the past few years, both Verizon and SBC have been successful in
obtaining 271 approvals in several of their in-region states.
- There is a growing belief that once RBOCs gain 271 approvals, they will
focus on gaining market share among lucrative business accounts. We
think that one of the options RBOCs might pursue is to acquire long
distance carriers such as AT&T, Sprint and WorldCom.
- Under the Internet Freedom and Broadband Deployment Act of 2001 (H.R.
1542), also known as the Tauzin-Dingell bill, RBOCs would be allowed to
offer in-region data services regardless of their 271 status. Although
the bill faces uncertainty both in the House and the Senate, the issue
of in-region interLATA services may become moot fairly soon as RBOCs
gradually gain 271 approvals in their territories.
10
- WHILE WE DO NOT EXPECT TAUZIN-DINGELL BILL TO PASS, AT LEAST TWO RBOCS,
VERIZON AND SBC, SHOULD BE IN POSITION TO GAIN STATE-BY-STATE SECTION
271 APPROVAL IN MOST OF THEIR MARKETS BY LATE 2002.
- Long distance companies should benefit from the RBOCs' re-entry into
in-region LD voice and data markets. RBOCs can quickly gain market
share, particularly among business customers, by acquiring established
carriers such as AT&T, WorldCom and Sprint, as well as emerging
providers such as Williams Communications and Global Crossing.
The following table lays out potential combinations that we believe could
take place in a more deregulatory environment.
TABLE 1: SOME BENEFICIARIES (POTENTIAL DEALS)
POTENTIAL POTENTIAL RULE CHANGE
TARGET ACQUIRER NEEDED BENEFIT
-----------------------------------------------------------------------------------------------------------------------
BROADCASTERS
------------
Acme AOL Time Warner Cable/TV AOL would own the distribution of 9 WB
(ACME) Cross- affiliates for their WB TV network.
Ownership
Tribune AOL Time Warner Cable/TV AOL would own the distribution of 16
(TRB) Cross- WB affiliates for their WB TV network.
Ownership
Young Hearst-Argyle TV/Newspaper Hearst would obtain cross-ownership
(YBTVA) Disney Cross- positions in San Francisco and Albany.
Ownership
Duopoly ABC would obtain duopolies in Los Angeles
Angeles and San Francisco plus 6 ABC affiliates.
CABLE
------
AT&T Broadband AOL Time Warner 30% Economies of scale, improved leverage
(T) Ownership over programmers and vendors, larger
Cap platform on which to launch new
products and services.
Cablevision AOL Time Warner 30% Cablevision's suburban New York cable
Systems Ownership systems would allow AOL to dominate
(CVC) Cap the U.S.'s top DMA.
NETWORKS
--------
Paxson General Electric 35% NBC would own TV stations reaching
(PAX) Ownership close to 70% of US households and 2
Cap broadcast networks.
NEWSPAPERS
----------
Pulitzer Gannett TV/Newspaper Gannett would obtain a cross-owner-
(PTZ) Belo Cross- ship position in St. Louis. Belo would
Ownership obtain cross-ownership positions in St.
Louis and Tucson.
11
POTENTIAL POTENTIAL RULE CHANGE
TARGET ACQUIRER NEEDED BENEFIT
-----------------------------------------------------------------------------------------------------------------------
McClatchy Gannett TV/Newspaper Gannett would obtain cross-ownership
(MNI) Cross- positions in Minneapolis and Sacramento.
Ownership
Knight-Ridder Tribune TV/Newspaper Tribune would obtain cross-ownership
(KRI) Cross- positions in Philadelphia, Dallas-Ft.
Ownership Worth, Miami, and Seattle (including
Knight-Ridder's 49.5% ownership of the
Seattle Times Company).
WIRELESS
--------
Dobson (DCEL) Cingular Spectrum Cap Both Cingular and AT&T would com-
AT&T Wireless plement their footprints and substan-
(AWE) tially reduce their roaming costs.
Rural Cellular AT&T Wireless Spectrum Cap RCCC has limited footprint overlap with
(RCCC) Verizon some of these carriers. AWE and VZ
Dobson can fill in the gaps in their footprints and
US Cellular lower their roaming expense. Regional
Western Wireless carriers (DCEL, USM, WWCA) can
strengthen their competitive position
and grow revenue and cash flows.
US Cellular AT&T Wireless Spectrum Cap Improve footprint in several markets
(USM) Verizon across the country and lower roaming costs.
Cingular
Leap Wireless Verizon Spectrum Cap All of these carriers would be able to fill
(LWIN) Cingular in some gaps in their footprints.
VoiceStream
Alltel (AT) Verizon Spectrum Cap Allows Verizon to create a fully national
footprint and recapture earlier divested
properties.
Nextel (NXTL) AT&T Wireless Spectrum Cap Gain access to eight million high-value
Verizon business customers and increase spec-
Cingular trum ownership by about 20 MHz in top
300 MSAs.
Western Wireless AT&T Wireless Spectrum Cap These carriers would gain network
(WWCA) Verizon coverage and ownership in some of the
country's mostly scarcely populated
areas and substantially reduce roaming
expense.
WIRELINE
----------
AT&T (T) Verizon Section 271 RBOC and LD combinations would re-
Sprint (FON, SBC create fully integrated national service
PCS) BellSouth providers able to offer local and long
WorldCom distance voice and data.
(WCOM)
12
COMPANIES MENTIONED (SYMBOL - 9/10/01 PRICE - EXCHANGE):
ACME Communications (ACME - $7.35 - NASDAQ) Nextel Communications Inc. (NXTL - $10.55 - NASDAQ)
Alltel Corp.(AT - $57.07 - NYSE) Paxson Communications (PAX - $9.24 - AMEX)
AOL Time Warner Inc. (AOL - $34.41 - NYSE) Pulitzer Inc. (PTZ -$47.45 - NYSE)
AT&T Corp. (T - $17.65 - NYSE) Rural Cellular Corporation (RCCC - $32.61 - NASDAQ)
AT&T Wireless (AWE - $13.80 - NYSE) SBC Communications Inc. (SBC - $43.43 - NYSE)
BellSouth Corp. (BLS - $39.72 - NYSE) Sinclair Broadcast Grp. Inc. (SBGI - $9.87 - NASDAQ)
Belo Corp. (BLC - $18.02 - NYSE) Sprint FON Group (FON - $21.64 - NYSE)
Cablevision Systems Corp. (CVC - $42.00 - NYSE) Sprint PCS Group (PCS - $23.49 - NYSE)
Dobson Communications (DCEL - $11.21 - NASDAQ) Tribune Company (TRB - $38.99 - NYSE)
Gannett Inc. (GCI - $63.72 - NYSE) US Cellular Corp. (USM - $49.65 - AMEX)
General Electric Company (GE - $39.35 - NYSE) Verizon Communications (VZ - $50.70 - NYSE)
Hearst-Argyle Television Inc. (HTV - $20.24 - NYSE) Viacom Inc. (VIA - $37.90 - NYSE)
Knight-Ridder (KRI - $60.34 - NYSE) Walt Disney Company (DIS - $23.58 - NYSE)
Leap Wireless Intl. Inc. (LWIN - $14.30 - NASDAQ) Western Wireless Corp. (WWCA - $30.00 - NASDAQ)
McClatchy Company (MNI - $42.95 - NYSE) WorldCom Inc. (WCOM - $12.92 - NASDAQ)
MCI Group (MCIT - $13.19 - NASDAQ) Young Broadcasting (YBTVA - $21.89 - NASDAQ)
News Corp. (NWS - $30.75 - NYSE)
Note: Gabelli Asset Management Inc. and its affiliates own on behalf of
themselves or their clients less than 5% of the following companies: Acme
Communications, Alltel Corp., AOL Time Warner, AT&T Corp., AT&T Wireless Corp.,
BellSouth Corp., Belo, Dobson Communications, Gannett, General Electric,
Hearst-Argyle, Knight-Ridder, MCI Group, News Corp., Nextel Communications, SBC
Communications, Sinclair Broadcast Group, Sprint FON Group, Sprint PCS Group,
Tribune, US Cellular, Verizon, Walt Disney, Western Wireless and WorldCom. Those
companies owned in excess of 5% follow:
COMPANY % OF OWNERSHIP
------- --------------
Cablevision Systems 6.50% of class A common stock
Leap Wireless Intl., Inc. 6.73% of common stock
McClatchy Company 6.43% of class A common stock
Paxson Communications 10.93% of class A common stock
Pulitzer Inc. 29.14% of common stock
Rural Cellular Corp. 6.15% of class A common stock
Viacom Inc. 7.59% of class A common stock
Young Broadcasting, Inc. 11.15% of class A common stock
One of the analysts who prepared this report owns less than 1,000 shares
of stock of the following: AOL Time Warner, AT&T, AT&T Wireless, Gannett Inc.,
General Electric, Knight-Ridder, MCI Group, News Corp., Nextel, Rural Cellular,
Walt Disney Company, Worldcom Inc., and Young Broadcasting.
Evan Carpenter Dmitry Khaykin Andrew Rittenberry
(914) 921-6595 (914) 921-5015 (914) 921-6592
[COPYRIGHT] Gabelli & Company, Inc. 2001
ONE CORPORATE CENTER RYE, NY 10580 GABELLI & COMPANY, INC.
TEL (914) 921-3700 FAX (914) 921-5098
--------------------------------------------------------------------------------
This report has been prepared as a matter of general information. It is not
intended to be a complete description of any security or company mentioned and
is not an offer to buy or sell any security. Unless otherwise noted, stock
prices for 2001 reflect the closing price through the business day immediately
prior to the date of this report. All facts and statistics are from sources
believed reliable, but are not guaranteed as to accuracy. The firm and its
affiliates, employees and clients may have recently established or disposed of,
or may be establishing or disposing of, positions in securities mentioned in
this report. Since portfolio managers make individual investment decisions in
the accounts under their supervision, transactions in such accounts may be
inconsistent with research reports. Additional information on these securities
and companies is available upon request. [COPYRIGHT] Gabelli & Company, Inc.
2001
13
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Trust.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend that we believe will develop over
time.
AT&T CORP. (T - $19.30 - NYSE) provides voice, data and video communications
services to large and small businesses, as well as consumers and government
entities. AT&T and its subsidiaries furnish domestic and international long
distance, regional, local and wireless communications services, cable television
and Internet communications services. Recently, the company announced that it
would split into four separate companies. As part of the restructuring, AT&T has
recently converted AT&T Wireless from a tracking stock to an asset based stock
and spun it off to AT&T shareholders. AT&T Broadband, which includes cable, will
have an initial public offering ("IPO") for a tracking stock, and within 12
months of the IPO the tracking stock is expected to be converted to an
asset-based stock. AT&T Consumer will become a new consumer tracking stock that
will mirror the performance of the companies' residential long distance and
WorldNet Internet access business. AT&T's principal unit would be AT&T Business,
and shareholders would ultimately own all four. Recently, Comcast Corp. (CCZ -
$55.40 - NYSE) submitted an unsolicited bid to acquire cable assets of AT&T for
$58 billion in Comcast stock and assumed debt. AT&T management is reviewing this
bid.
BERKSHIRE HATHAWAY INC. (BRK'A - $70,000 - NYSE) is Warren Buffett. The company
has interests in insurance (notably GEICO and General Re), publishing, aviation,
retailing, and manufacturing. Its investment portfolio includes over $37 billion
of marketable equity securities. Berkshire has grown rapidly through
acquisitions over the past 15 years, including Kirby vacuum cleaners; World Book
encyclopedias; H. H. Brown, Dexter and Justin footwear; Executive Jet aviation;
Dairy Queen restaurants and snack treats; Johns Manville building products;
Benjamin Moore paints; Shaw Industries carpets; GEICO insurance; and General Re
reinsurance. GEICO, the sixth largest auto insurer in the U.S., contributes 19%
of revenues while General Re, the fourth largest reinsurer globally, contributes
30% of revenues.
CABLEVISION SYSTEMS CORP. (CVC - $40.94 - NYSE) is one of the nation's leading
communications and entertainment companies, with a portfolio of operations that
spans state-of-the-art cable television services, championship professional
sports teams and national cable television networks. Headquartered in Bethpage,
N.Y., Cablevision serves nearly 3 million cable customers in the most important
cable TV market - New York. Cablevision also owns and operates New York City's
famed Madison Square Garden (MSG), which includes the arena complex, the N.Y.
Knicks, the N.Y. Rangers and the MSG network. MSG operates Radio City
Entertainment and holds a long-term lease for Radio City Music Hall, home of the
world-famous Rockettes. On March 30, 2001, shares that track the performance of
the firm's national cable programming subsidiary, Rainbow Media Group (RMG -
$20.25 - NYSE), began trading on the NYSE. Rainbow manages growing content
offerings such as American Movie Classics, Bravo and The Independent Film
Channel.
HELLER FINANCIAL INC. (HF - $52.77 - NYSE) is a lender to small and mid-sized
businesses, and has agreed to be acquired by GE Capital for $5.3 billion in
cash. GE Capital will launch a tender offer under which HF holders will receive
$53.75 per share. Subject to customary regulatory approvals, the tender should
close on October 24, 2001. The Fuji Bank, which owns 52% of the fully diluted
shares of HF, has agreed to tender its shares into the offer. The offer price
values HF at 15.4 times 2002 earnings per share ("EPS"), a premium to the 14
times 2002 EPS that Tyco International (TYC - $45.50 - NYSE) paid to acquire HF
rival CIT Group.
MEDIA GENERAL INC. (MEG - $43.36 - NYSE) is a Richmond, Virginia-based
communications company that is primarily focused on the Southeast. Its newspaper
publishing operations include the RICHMOND TIMES-DISPATCH, the WINSTON-SALEM
JOURNAL, THE TAMPA TRIBUNE, and 22 other daily newspapers. This includes 5 daily
newspapers,
14
clustered in Alabama and South Carolina, which the company acquired from Thomson
Corp. for $237 million in August 2000. The company also owns a 20 percent
interest in the DENVER POST. Media General also operates twenty-six television
stations primarily located in Southeastern markets, including eight purchased
from Spartan Communications on March 27, 2000 for $605 million. The company sold
its Garden State Paper Co. to Enron Corp. (ENE - $27.23 - NYSE) for $72 million
in August 2000, but still owns 33% of SP Newsprint Company.
NAVISTAR INTERNATIONAL CORP. (NAV - $28.25 - NYSE), with world headquarters
outside of Chicago, is a leading North American manufacturer and marketer of
medium and heavy trucks and school buses, and a worldwide leader in the
manufacture of mid-range diesel engines, produced in a range of 160 to 300
horsepower for the International[R] brand. The company is also a private label
designer and manufacturer of diesel engines for the full-size pickup truck and
van markets. The company's products, parts and services are sold through a
network of 1,000 International[R] brand dealer outlets in the United States,
Canada, Brazil and Mexico, and through more than 90 separate dealers in 75
countries. Navistar provides financing for its customers and distributors
principally through its wholly-owned subsidiary, Navistar Financial Corporation.
NEWS CORP. LTD. (NWS'A - $6.12 - NYSE; NWS - $24.10 - NYSE) is a leading global
media firm, with interests in broadcast television, cable networks, publishing,
magazine inserts, global satellite distribution, and British and Australian
newspapers. In the U.S., News Corp. owns the Fox network and one of the
country's largest TV station groups. In addition, the company runs 20th Century
Fox films and is one of the largest producers of television programming. News
Corp. is currently in discussions with General Motors Corp. (GM - $42.90 - NYSE)
about acquiring the assets of Hughes Electronics (GMH - $13.33 - NYSE), which
owns DirectTV in the U.S. and Latin America.
PEPSICO INC. (PEP - $48.50 - NYSE) is a $25 billion food and beverage company
after the acquisition of Quaker Oats was completed on August 2, 2001. PepsiCo
added several products to its existing portfolio of the Pepsi-Cola and Frito Lay
brands such as Gatorade and the Quaker Oats snack and food businesses. The
company is focused on the faster growing convenience category, improving their
distribution systems and extracting the synergies expected from the merger.
PepsiCo is also benefiting from the introduction of new products such as
Mountain Dew Code Red, Pepsi with Lemon, Bistro chips and the continued robust
growth of Aquafina.
RALSTON PURINA CO. (RAL - $32.80 - NYSE), based in St. Louis completed the
tax-free spin-off of Energizer Holdings on April 1, 2000. Ralston Purina now
operates in a single business segment, pet products, and is the world's largest
manufacturer of dry pet food. The company is also a leading manufacturer of cat
litter products in North America. Ralston's brands include DOG CHOW, CAT CHOW,
MEOW MIX, PRO PLAN, and TIDY CATS. In January, Nestle announced a definitive
merger agreement with Ralston to acquire all shares for $33.50 per share in
cash.
TELEPHONE & DATA SYSTEMS INC. (TDS - $94.30 - AMEX) provides mobile and local
phone services to 3.6 million customers in 35 states. TDS conducts its cellular
operations through an 81% owned United States Cellular Corp. (USM - $49.50 -
AMEX) and its wireline telephone operations through its wholly owned TDS
Telecommunications Corp. ("TDS Telecom") subsidiary, a full-service local
exchange carrier. Having completed a merger of its 82%-owned PCS subsidiary
Aerial Communications with VoiceStream Wireless Corp., which has recently been
acquired by Deutsche Telekom (DT - $15.50 - NYSE), a former German phone
monopoly, TDS now owns 131.6 million shares of Deutsche Telekom valued at $2
billion. As part of the VoiceStream/Deutsche Telekom deal, TDS also received
$570 million in cash.
VIACOM INC. (VIA - $34.95 - NYSE) is a diversified media company with businesses
across many media platforms. The firm operates cable networks (including VH1,
MTV, Showtime and Nickelodeon), television networks and stations (including the
CBS and UPN Television networks and numerous affiliated TV stations in major
markets), major market radio stations and outdoor advertising (through Infinity
Broadcasting), a movie studio (Paramount), a
15
publishing house (Simon and Schuster), amusement parks (Paramount Parks) and
video rental operations (Blockbuster). The company focuses on high growth
businesses and aims to deliver cash flow growth that is above the industry
average.
COMMON STOCK 10% DISTRIBUTION POLICY
The Equity Trust continues to maintain its 10% Distribution Policy whereby
the Equity Trust pays out to common stock shareholders 10% of its average net
assets each year. Pursuant to this policy, the Equity Trust distributed $0.27
per share on September 24, 2001. The next distribution is scheduled for December
2001.
7.25% TAX ADVANTAGED CUMULATIVE PREFERRED STOCK - DIVIDENDS
The Trust's 7.25% Tax Advantaged Cumulative Preferred Stock paid a cash
distribution on September 26, 2001 of $0.453125 per share. For the twelve-months
ended September 30, 2001, Preferred Stock shareholders received distributions
totaling $1.8125, the annual dividend rate per share of Preferred Stock. The
next distribution is scheduled for December 2001.
7.20% TAX ADVANTAGED SERIES B CUMULATIVE PREFERRED STOCK - DIVIDENDS
The Trust's 7.20% Tax Advantaged Series B Cumulative Preferred Stock paid
an initial cash distribution on September 26, 2001 of $0.48 per share. The
Series B Preferred Shares were issued on June 20, 2001 at $25.00 per share and
will pay distributions quarterly at an annual dividend rate of $1.80 per share.
The next distribution is scheduled for December 2001.
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at http://www.gabelli.com
contains information about Gabelli Asset Management Inc., the Gabelli Mutual
Funds, IRAs, 401(k)s, quarterly reports, closing prices and other current news.
You can send us e-mail at info@gabelli.com.
In our efforts to bring our shareholders more timely portfolio
information, Gabelli Fund's portfolio managers regularly participate in chat
sessions at www.gabelli.com as reflected below.
WHO WHEN
--- ----
Special Chats: Mario J. Gabelli First Monday of each month
Howard Ward First Tuesday of each month
In addition, every Wednesday will feature a different portfolio manager.
The upcoming Wednesday chat schedule is as follows:
NOVEMBER DECEMBER JANUARY
-------- -------- --------
1st Wednesday Lynda Calkin Caesar Bryan Walter Walsh
2nd Wednesday Walter Walsh Ivan Arteaga Lynda Calkin
3rd Wednesday Laura Linehan Tim O'Brien Tim O'Brien
4th Wednesday Barbara Marcin Barbara Marcin Caesar Bryan
5th Wednesday Barbara Marcin
16
All chat sessions start at 4:15 ET. Please arrive early, as participation
is limited.
You may sign up for our HIGHLIGHTS email newsletter at www.gabelli.com and
receive early notice of chat sessions, closing mutual fund prices, news events
and media sightings.
IN CONCLUSION
We have suffered a great loss - not just the lives of thousands of
innocent Americans, but also some loss of faith in the security of Fortress
America. This tragedy will change our lives forever. It will not alter the
spirit of entrepreneurial capitalism that has made America great or diminish the
important role the equities markets serve in promoting economic progress. The
American economy and equities markets have weathered numerous political and
economic crises, including two World Wars, the Great Depression, the Korea War,
the Cuban Missile Crisis, the Kennedy Assassination, the Vietnam War, the
inflation of the 1970's and countless serious recessions. They will weather this
crisis as well.
The time tested investment principles we adhere to will also survive.
Buying the stocks of quality companies trading at deep discounts to their "real
world" economic value makes as much sense today as it did on September 10 and
will for all the Septembers to come.
Finally, we want to extend our sympathy to the families and friends of all
the victims of this terrible tragedy. We in the New York area financial services
community have lost many friends and colleagues. Brave police officers, fire
fighters and emergency workers have given their lives attempting to save others.
We are all united as we fortify America from a moral, physical, and economic
framework.
Sincerely,
/S/ MARIO J. GABELLI
MARIO J. GABELLI, CFA
Portfolio Manager and Chief Investment Officer
October 31, 2001
-----------------------------------------------------------------------
SELECTED HOLDINGS
SEPTEMBER 30, 2001
------------------
AT&T Corp. News Corp. Ltd.
Berkshire Hathaway Inc. PepsiCo Inc.
Cablevision Systems Corp. Ralston Purina Co.
Heller Financial Inc. Telephone & Data Systems Inc.
Media General Inc. Viacom Inc.
-----------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio managers
only through the end of the period stated in this report. The managers' views
are subject to change at any time based on market and other conditions.
17
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
QUARTER ENDED SEPTEMBER 30, 2001
(UNAUDITED)
OWNERSHIP AT
SEPTEMBER 30,
SHARES 2001
------ -----------
NET PURCHASES
COMMON STOCKS
Albertson's Inc. ................................. 60,000 200,000
Allstate Corp. ................................... 5,000 95,000
America Movil, SA de CV, Cl. L, ADR .............. 25,000 80,000
American Express Co. ............................. 150,000 420,000
AMETEK Inc. ...................................... 20,000 120,000
AMR Corp. ........................................ 28,000 100,000
Archer-Daniels-Midland Co. (a) ................... 50,000 1,050,000
AT&T Corp. ....................................... 200,000 850,000
AT&T Wireless Services Inc. (b) .................. 215,170 280,170
Aventis SA ....................................... 2,000 12,000
Bank of New York Co. Inc. ........................ 80,000 80,000
Benesse Corp. .................................... 4,000 14,000
Boeing Co. ....................................... 118,000 118,000
British Telecommunications plc, ADR .............. 10,000 10,000
BroadWing Inc. ................................... 60,000 85,000
Cable & Wireless plc, ADR ........................ 25,000 175,000
Cablevision Systems Corp., Cl. A ................. 5,000 420,000
Cadbury Schweppes plc, ADR ....................... 9,000 10,000
Carter-Wallace Inc. .............................. 6,300 526,300
CenturyTel Inc. .................................. 70,000 130,000
Citizens Communications Co. ...................... 50,000 100,000
Coca-Cola Enterprises Inc. ....................... 70,000 120,000
Commerzbank AG, ADR .............................. 50,000 100,000
Conoco Inc., Cl. A ............................... 5,000 160,000
Cooper Industries Inc. ........................... 60,000 110,000
CoreComm Ltd. .................................... 200,000 200,000
Corning Inc. ..................................... 60,000 120,000
Dana Corp. ....................................... 31,000 115,161
Deutsche Bank AG, ADR ............................ 10,000 160,000
Deutsche Telekom AG, ADR ......................... 30,000 54,278
Diageo plc ....................................... 100,000 100,000
Diageo plc, ADR .................................. 35,000 175,000
Disney (Walt) Co. ................................ 80,000 220,000
DQE Inc. ......................................... 5,000 25,000
DTE Energy Co. ................................... 2,000 12,366
EMC Corp. ........................................ 70,000 100,000
Energizer Holdings Inc. .......................... 64,400 350,001
Ferro Corp. ...................................... 10,000 325,000
Flowers Foods Inc. ............................... 15,000 15,000
Flowserve Corp. .................................. 20,000 150,000
Ford Motor Co. ................................... 5,000 15,000
Fox Entertainment Group Inc., Cl. A .............. 85,000 110,000
Friends Provident plc ............................ 126,000 126,000
GC Companies Inc. ................................ 50,000 50,000
Gemstar-TV Guide International Inc. .............. 4,000 22,432
Genuity Inc. ..................................... 10,000 160,000
Gray Communications
Systems Inc., Cl. B ........................... 5,000 15,000
Grupo Televisa SA, ADR ........................... 52,000 190,000
Gucci Group NV, ADR .............................. 7,000 7,000
Heinz (H.J.) Co. ................................. 13,000 35,000
Heller Financial Inc., Cl. A ..................... 868,300 868,300
Hilton Group plc ................................. 405,000 1,450,000
Hilton Hotels Corp. .............................. 50,000 600,000
Honeywell Inc. ................................... 105,000 330,000
Interbrew SA ..................................... 5,000 30,000
Japan Telecom Co. Ltd. (c) ....................... 219 265
Kerr-McGee Corp. (d) ............................. 13,632 13,632
KPN NV ........................................... 100,000 100,000
Leap Wireless International Inc. ................. 107,500 120,000
Louis Dreyfus Natural Gas Corp. .................. 25,000 25,000
Lucent Technologies Inc. ......................... 40,000 100,000
Mellon Financial Corp. ........................... 15,000 75,000
MGM Mirage Inc. .................................. 95,000 115,000
J.P. Morgan Chase & Co. .......................... 1,900 50,000
Motorola Inc. .................................... 50,000 100,000
Nashua Corp. ..................................... 11,500 70,000
National Presto Industries Inc. .................. 2,000 44,000
National Service Industries Inc. ................. 10,000 140,000
Neiman Marcus Group Inc., Cl. A .................. 20,000 70,000
Newport News Shipbuilding Inc. ................... 2,000 110,000
Nextel Communications Inc., Cl. A ................ 130,000 230,000
Nikko Securities Co. Ltd. ........................ 30,000 171,500
Northeast Utilities .............................. 50,000 125,000
NTL Inc. ......................................... 20,000 72,625
NTT DoCoMo Inc. .................................. 56 56
Paxson Communications Corp., Cl. A ............... 10,300 131,000
PepsiCo Inc. (e) ................................. 260,000 525,000
Phoenix Companies Inc. ........................... 85,000 165,000
Precision Castparts Corp. ........................ 6,000 50,000
PRIMEDIA Inc. .................................... 125,800 225,800
ProSieben Sat.1 Media AG, Pfd. ................... 3,000 43,000
Publishing & Broadcasting Ltd. ................... 10,000 175,000
Pulitzer Inc. .................................... 3,000 30,000
Ralston Purina Group ............................. 145,000 945,000
Reader's Digest Association Inc., Cl. B .......... 15,000 175,000
Rogers Wireless Communications Inc.,
Cl. B ......................................... 70,000 150,000
Rohm Co. Ltd. .................................... 1,300 6,400
Scripps (E.W.) Co., Cl. A ........................ 25,000 25,000
Six Flags Inc. ................................... 19,000 29,000
SJW Corp. ........................................ 6,000 10,000
Sony Corp., ADR .................................. 11,000 45,000
Starwood Hotels & Resorts
Worldwide Inc. ................................ 60,000 60,000
Sulzer AG ........................................ 6,000 12,000
Sulzer Medica AG (f) ............................. 32,000 32,000
Swatch Group AG, Cl. B (g) ....................... 13,500 15,000
Swiss Re (h) ..................................... 9,690 10,200
T. Rowe Price Group Inc. ......................... 32,000 70,000
Telecom Italia SpA, RNC .......................... 135,000 135,000
THK Co. Ltd. ..................................... 13,000 48,000
Thomas & Betts Corp .............................. 42,600 242,600
Telecom Italia Mobile SpA ........................ 200,000 1,400,000
Tribune Co. ...................................... 40,000 200,000
UnitedGlobalCom Inc., Cl. A ...................... 105,000 265,000
Vivendi Universal SA, ADR ........................ 5,000 210,000
Waddell & Reed Financial Inc., Cl. A ............. 5,000 35,000
18
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES (CONTINUED)
QUARTER ENDED SEPTEMBER 30, 2001
(UNAUDITED)
OWNERSHIP AT
SEPTEMBER 30,
SHARES 2001
------ -----------
NET PURCHASES (CONTINUED)
COMMON STOCKS (CONTINUED)
Western Resources Inc. ........................... 24,200 24,200
Winn-Dixie Stores Inc. ........................... 50,000 50,000
WorldCom Inc. - MCI Group ........................ 30,000 40,000
Young Broadcasting Inc., Cl. A ................... 40,000 90,000
PREFERRED STOCKS
News Corp. Ltd., Pfd., ADR (i) (j) ............... 757,491 767,491
Sequa Corp.,
$5.00 Cv. Pfd. ................................. 500 500
PRINCIPAL
AMOUNT
--------
CORPORATE BONDS
Waste Management Inc. ............................
Sub. Deb. Cv. 4.00%, 02/01/02 .................... $39,000 $2,039,000
SHARES
------
NET SALES
COMMON STOCKS
Banca Intesa SpA ................................. (175,000) 0
Block (H&R) Inc. (k) ............................. (5,000) 5,000
Chris-Craft Industries Inc. (i) .................. (336,192) 0
Chris-Craft Industries Inc., Cl. B (i) ........... (592,895) 0
Church & Dwight Co. Inc. ......................... (15,000) 10,000
Computer Associates International Inc. ........... (5,000) 10,000
Delphi Automotive Systems Corp. .................. (5,000) 65,000
Embratel Participacoes SA, ADR ................... (17,000) 150,000
General Chemical Group Inc. (l) .................. (330,200) 0
General Mills Inc. ............................... (10,000) 110,000
Granada Compass plc .............................. (150,940) 0
Gulf Canada Resources Ltd.,
Toronto (m) .................................... (100,000) 0
Gulf Canada Resources Ltd.,
New York (m) ................................... (100,000) 0
Harcourt General Inc. (n) ........................ (150,000) 0
Hewlett-Packard Co. .............................. (9,000) 35,000
HS Resources Inc. (d) ............................ (50,000) 0
IBP Inc. (o) ..................................... (23,919) 28,581
IDEX Corp. ....................................... (1,000) 297,000
ITT Industries Inc. .............................. (2,000) 138,000
Loral Space & Communications Ltd. ................ (80,000) 70,000
News Corp. Ltd. .................................. (30,000) 115,000
Nokia Corp., Cl. A, ADR .......................... (27,000) 0
OWNERSHIP AT
SEPTEMBER 30,
SHARES 2001
------ -----------
Pacific Century CyberWorks Ltd., ADR ............. (5,000) 0
Parmalat Finanziaria SpA ......................... (15,000) 154,000
Pearson plc ...................................... (57,727) 0
Philips Electronics NV ........................... (1,200) 25,440
Quaker Oats Co. (e) .............................. (70,000) 0
Republic Services Inc. ........................... (5,000) 55,000
Royce Value Trust Inc. ........................... (1,942) 44,000
Ryder System Inc. ................................ (5,000) 25,000
Scheib (Earl) Inc. ............................... (5,000) 75,000
Sealed Air Corp. ................................. (5,000) 0
Sony Corp. ....................................... (11,000) 0
Swire Pacific Ltd., Cl. A ........................ (82,000) 0
Tyler Technologies Inc. .......................... (10,000) 10,000
United Television Inc. (j) ....................... (245,009) 0
USA Networks Inc. ................................ (5,000) 565,000
Viacom Inc., Cl. A ............................... (10,000) 855,000
Waste Management Inc. ............................ (30,000) 320,000
Willamette Industries Inc. ....................... (20,000) 240,000
Xerox Corp. ...................................... (1,000) 14,000
XO Communications Inc., Cl. A .................... (10,000) 0
------------------------------------
(a) 5.00% stock dividend
(b) Spinoff--0.3218 shares of AT&T Wireless Services Inc. for every 1 share of
AT&T Corp.
(c) 5 for 1 stock split
(d) Merger--0.27266 shares of Kerr-McGee Corp. for every 1 share of HS Resources
Inc.
(e) Merger--2.3 shares of PepsiCo Inc. for every 1 share of Quaker Oats Co.
(f) Spinoff--2 shares of Sulzer Medica AG for every 1 share of Sulzer AG
(g) 10 for 1 stock split
(h) 20 for 1 stock split
(i) Merger--0.568 shares of News Corp. Ltd., Pfd., ADR for every 1 share of
Chris-Craft Industries Inc. and Chris-Craft Industries Inc., Cl. B
(j) Merger--0.9378 shares of News Corp. Ltd., Pfd., ADR for every 1 share of
United Television Inc.
(k) 2 for 1 stock split
(l) 1 for 10 stock split
(m) Cash merger at $12.40 a share
(n) Cash merger at $59.00 a share
(o) Cash merger at $30.00 a share
19
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2001 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS -- 82.1%
FINANCIAL SERVICES -- 10.1%
26,000 Aegon NV ..................................... $ 680,048
4,100 Allianz AG ................................... 926,014
95,000 Allstate Corp. ............................... 3,548,250
420,000 American Express Co. ......................... 12,205,200
30,000 Argonaut Group Inc. .......................... 491,700
90,000 Banco Santander Central
Hispano SA, ADR ............................ 678,600
99,000 Bank of Ireland .............................. 784,398
80,000 Bank of New York Co. Inc. .................... 2,800,000
105,000 Bank One Corp. ............................... 3,304,350
282,000 Bankgesellschaft Berlin AG ................... 719,099
260 Berkshire Hathaway Inc., Cl. A+ .............. 18,200,000
5,000 Block (H&R) Inc. ............................. 192,800
100,000 Commerzbank AG, ADR .......................... 1,648,380
160,000 Deutsche Bank AG, ADR ........................ 8,720,914
20,000 Dun and Bradstreet Corp.+ .................... 560,000
126,000 Friends Provident plc+ ....................... 357,402
56,000 HBOS plc ..................................... 604,106
868,300 Heller Financial Inc., Cl. A ................. 45,820,191
25,000 Hibernia Corp., Cl. A ........................ 408,750
20,000 Invik & Co. AB, Cl. B ........................ 749,914
100,000 Irish Life & Permanent plc, Dublin ........... 983,571
50,000 JP Morgan Chase & Co. ........................ 1,707,500
6,000 Jafco Co. Ltd. ............................... 329,892
64,000 Leucadia National Corp. ...................... 1,996,800
75,000 Mellon Financial Corp. ....................... 2,424,750
100,000 Midland Co. .................................. 4,060,000
30,000 Moody's Corp. ................................ 1,110,000
171,500 Nikko Securities Co. Ltd. .................... 911,269
165,000 Phoenix Companies Inc.+ ...................... 2,384,250
50,000 Prudential plc ............................... 514,396
50,000 RAS SpA ...................................... 601,071
60,000 Riggs National Corp. ......................... 930,000
80,000 State Street Corp. ........................... 3,640,000
30,000 Stilwell Financial Inc.+ ..................... 585,000
20,000 SunTrust Banks Inc. .......................... 1,332,000
10,200 Swiss Re+ .................................... 1,003,266
70,000 T. Rowe Price Group Inc. ..................... 2,051,000
50,000 Unitrin Inc. ................................. 1,911,000
112,000 Wachovia Corp. ............................... 3,472,000
35,000 Waddell & Reed Financial Inc., Cl. A ......... 910,000
------------
136,257,881
------------
TELECOMMUNICATIONS -- 7.9%
8,132 Aliant Inc. .................................. 159,427
7,500 Allegiance Telecom Inc.+ ..................... 22,575
30,000 ALLTEL Corp. ................................. 1,738,500
MARKET
SHARES VALUE
------ ------
20,000 AT&T Canada Inc., Cl. B+ ..................... $ 580,200
850,000 AT&T Corp. ................................... 16,405,000
3,333 Avaya Inc.+ .................................. 32,997
230,000 BCE Inc. ..................................... 5,071,500
33,400 Brasil Telecom Participacoes SA, ADR ......... 908,480
10,000 British Telecommunications plc, ADR .......... 511,500
85,000 BroadWing Inc.+ .............................. 1,366,800
2,893,090 Cable & Wireless Jamaica Ltd. ................ 105,222
95,000 Cable & Wireless plc ......................... 391,290
175,000 Cable & Wireless plc, ADR .................... 2,259,250
130,000 CenturyTel Inc. .............................. 4,355,000
100,000 Citizens Communications Co. .................. 940,000
255,466 Commonwealth Telephone
Enterprises Inc.+ .......................... 9,388,375
20,000 Commonwealth Telephone
Enterprises Inc., Cl. B+ ................... 780,000
35,000 Compania de Telecomunicaciones
de Chile SA, ADR ........................... 344,750
200,000 CoreComm Ltd.+ ............................... 18,000
54,278 Deutsche Telekom AG, ADR ..................... 841,309
21,600 Elisa Communications Oyj, Cl. A .............. 220,320
150,000 Embratel Participacoes SA, ADR+ .............. 418,500
265 Japan Telecom Co. Ltd. ....................... 825,275
100,000 KPN NV ....................................... 273,214
155,000 RCN Corp.+ ................................... 496,000
9,655 Rogers Communications Inc.,
Cl. B+ ..................................... 123,460
110,345 Rogers Communications Inc.,
Cl. B, ADR+ ................................ 1,417,933
115,000 SBC Communications Inc. ...................... 5,418,800
350,000 Sprint FON Group ............................. 8,403,500
186,554 Tele Norte Leste
Participacoes SA, ADR ........................ 1,688,314
8,000 Telecom Argentina Stet
France Telecom SA, ADR ....................... 69,520
400,040 Telecom Italia SpA ........................... 3,020,228
135,000 Telecom Italia SpA, RNC ...................... 572,930
123,000 Telecom Italia SpA, ADR ...................... 9,368,910
265,249 Telefonica SA, ADR ........................... 9,005,204
16,256 Telefonica SA, BDR+ .......................... 179,571
36,000 Telefonos de Mexico SA, Cl. L, ADR ........... 1,162,440
12,750 TELUS Corp. .................................. 152,544
52,500 TELUS Corp., ADR ............................. 628,122
4,250 TELUS Corp., Non-Voting ...................... 48,292
27,500 TELUS Corp., Non-Voting, ADR ................. 312,478
295,000 Verizon Communications ....................... 15,962,450
40,000 WorldCom Inc. - MCI Group .................... 609,200
------------
106,597,380
------------
20
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2001 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
CONSUMER PRODUCTS -- 6.6%
70,000 Altadis SA ................................... $ 1,115,624
526,300 Carter-Wallace Inc. .......................... 10,752,309
43,000 Christian Dior SA ............................ 1,031,884
10,000 Church & Dwight Co. Inc. ..................... 258,500
1,100 Compagnie Financiere Richemont AG,
Cl. A ...................................... 2,076,126
35,000 Department 56 Inc.+ .......................... 222,250
350,001 Energizer Holdings Inc.+ ..................... 5,817,017
90,000 Fortune Brands Inc. .......................... 3,015,000
250,000 Gallaher Group plc, ADR ...................... 6,675,000
275,000 Gillette Co. ................................. 8,195,000
2,000 Givaudan SA+ ................................. 602,529
100,000 Harley Davidson Inc. ......................... 4,050,000
15,000 Matsushita Electric Industrial Co. Ltd.,
ADR ........................................ 181,200
65,000 Mattel Inc. .................................. 1,017,900
25,000 Maytag Corp. ................................. 616,000
44,000 National Presto Industries Inc. .............. 1,183,600
9,500 Nintendo Co. Ltd. ............................ 1,364,434
20,000 Philip Morris Companies Inc. ................. 965,800
112,000 Procter & Gamble Co. ......................... 8,152,480
945,000 Ralston Purina Co. ........................... 30,996,000
32,000 Shimano Inc. ................................. 403,190
15,000 Swatch Group AG, Cl. B ....................... 1,085,665
10,425 Syratech Corp.+ .............................. 63,853
------------
89,841,361
------------
ENTERTAINMENT -- 6.3%
365,000 AOL Time Warner Inc.+ ........................ 12,081,500
160,000 Canal Plus, ADR+ ............................. 103,168
220,000 Disney (Walt) Co. ............................ 4,096,400
100,000 EMI Group plc, ADR ........................... 698,840
110,000 Fox Entertainment Group Inc., Cl. A+ ......... 2,101,000
50,000 GC Companies Inc.+ ........................... 26,500
22,432 Gemstar-TV Guide International Inc.+ ......... 442,135
190,000 Grupo Televisa SA, ADR+ ...................... 5,453,000
24,000 Liberty Livewire Corp., Cl. A+ ............... 161,520
1,550,000 Liberty Media Corp., Cl. A ................... 19,685,000
175,000 Publishing & Broadcasting Ltd. ............... 748,767
29,000 Six Flags Inc. ............................... 354,670
565,000 USA Networks Inc.+ ........................... 10,158,700
855,000 Viacom Inc., Cl. A+ .......................... 29,882,250
------------
85,993,450
------------
FOOD AND BEVERAGE -- 6.0%
10,108 Advantica Restaurant Group Inc.+ ............. 7,379
10,000 Cadbury Schweppes plc, ADR ................... 254,000
15,000 Coca-Cola Co. ................................ 702,750
MARKET
SHARES VALUE
------ ------
120,000 Coca-Cola Enterprises Inc. ................... $ 1,840,800
150,940 Compass Group plc+ ........................... 1,052,616
90,000 Corn Products International Inc. ............. 2,585,700
100,000 Diageo plc ................................... 1,050,102
175,000 Diageo plc, ADR .............................. 7,262,500
15,000 Flowers Foods Inc.+ .......................... 543,750
110,000 General Mills Inc. ........................... 5,005,000
20,000 Hain Celestial Group Inc.+ ................... 368,200
35,000 Heinz (H.J.) Co. ............................. 1,475,250
28,581 IBP Inc. ..................................... 675,941
30,000 Interbrew SA+ ................................ 762,267
270,000 Kellogg Co. .................................. 8,100,000
75,000 Kerry Group plc, Cl. A ....................... 942,446
60,500 LVMH Moet Hennessy
Louis Vuitton, ADR ......................... 393,099
154,000 Parmalat Finanziaria SpA ..................... 405,322
590,595 PepsiAmericas Inc. ........................... 8,829,395
525,000 PepsiCo Inc. ................................. 25,462,500
60,000 Ralcorp Holdings Inc.+ ....................... 1,167,600
10,000 Sara Lee Corp. ............................... 213,000
100,830 Tootsie Roll Industries Inc. ................. 3,857,756
150,000 Wrigley (Wm.) Jr. Co. ........................ 7,695,000
------------
80,652,373
------------
EQUIPMENT AND SUPPLIES -- 5.6%
120,000 AMETEK Inc. .................................. 3,153,600
80,000 Amphenol Corp., Cl. A+ ....................... 2,780,000
10,000 Caterpillar Inc. ............................. 448,000
95,000 CIRCOR International Inc.+ ................... 1,425,000
107,000 CLARCOR Inc. ................................. 2,557,300
320,000 Deere & Co. .................................. 12,035,200
255,000 Donaldson Co. Inc. ........................... 7,349,100
150,000 Flowserve Corp.+ ............................. 2,962,500
6,500 Franklin Electric Co. ........................ 468,000
110,000 Gerber Scientific Inc. ....................... 1,155,000
297,000 IDEX Corp. ................................... 8,212,050
20,000 Ingersoll-Rand Co. ........................... 676,000
60,000 Lufkin Industries Inc. ....................... 1,375,200
1,000 Manitowoc Co. Inc. ........................... 24,240
430,000 Navistar International Corp.+ ................ 12,147,500
25,000 Olympus Optical Co. Ltd. ..................... 351,507
20,000 PACCAR Inc. .................................. 981,400
84,500 Sequa Corp., Cl. A+ .......................... 3,822,780
75,000 Sequa Corp., Cl. B+ .......................... 3,993,750
170,000 SPS Technologies Inc.+ ....................... 5,140,800
10,000 Sybron Dental Specialties Inc.+ .............. 186,000
48,000 THK Co. Ltd. ................................. 483,505
70,000 UCAR International Inc.+ ..................... 623,000
250,000 Watts Industries Inc., Cl. A ................. 3,275,000
100,000 Weir Group plc ............................... 349,789
------------
75,976,221
------------
21
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2001 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
WIRELESS COMMUNICATIONS -- 5.3%
80,000 America Movil, SA de CV, Cl. L, ADR+ ......... $ 1,186,400
280,170 AT&T Wireless Services Inc.+ ................. 4,185,740
120,000 Leap Wireless International Inc.+ ............ 1,884,000
230,000 Nextel Communications Inc., Cl. A+ ........... 1,987,200
56 NTT DoCoMo Inc.+ ............................. 756,820
150,000 Rogers Wireless Communications Inc.,
Cl. B+ ..................................... 1,597,500
220,000 Sprint PCS Group+ ............................ 5,783,800
16,700 Tele Celular Sul Participacoes SA, ADR ....... 173,680
55,666 Tele Centro Oeste Celular
Participacoes SA, ADR ...................... 275,547
3,340 Tele Leste Celular
Participacoes SA, ADR ...................... 41,082
8,350 Tele Nordeste Celular
Participacoes SA, ADR ...................... 150,300
3,340 Tele Norte Celular
Participacoes SA, ADR ...................... 68,069
1,400,000 Telecom Italia Mobile SpA .................... 6,795,745
8,350 Telemig Celular Participacoes SA, ADR ........ 189,545
450,000 Telephone & Data Systems Inc. ................ 42,435,000
66,800 Telesp Celular Participacoes SA, ADR ......... 352,704
553,888 Vodafone Group plc ........................... 1,221,075
100,000 Vodafone Group plc, ADR ...................... 2,196,000
------------
71,280,207
------------
PUBLISHING -- 3.6%
12,000 Dow Jones & Co. Inc. ......................... 545,160
646,000 Independent News & Media plc, Dublin ......... 964,846
97,000 McGraw-Hill Companies Inc. ................... 5,645,400
400,000 Media General Inc., Cl. A .................... 17,344,000
125,000 Meredith Corp. ............................... 4,016,250
115,000 New York Times Co., Cl. A .................... 4,488,450
115,000 News Corp. Ltd. .............................. 703,735
5,000 News Corp. Ltd., ADR ......................... 120,500
400,000 Penton Media Inc. ............................ 1,420,000
225,800 PRIMEDIA Inc.+ ............................... 530,630
30,000 Pulitzer Inc. ................................ 1,328,400
175,000 Reader's Digest Association Inc., Cl. B 3,108,000
25,000 Scripps (E.W.) Co., Cl. A .................... 1,522,750
91,842 Seat-Pagine Gialle SpA ....................... 67,582
400,000 South China Morning Post Holdings ............ 192,320
75,000 Thomas Nelson Inc. ........................... 636,000
200,000 Tribune Co. .................................. 6,280,000
------------
48,914,023
------------
ENERGY AND UTILITIES -- 3.2%
73,400 AGL Resources Inc. ........................... 1,465,798
34,000 Apache Corp. ................................. 1,462,000
120,000 BP plc ....................................... 991,167
248,800 BP plc, ADR .................................. 12,233,496
MARKET
SHARES VALUE
------ ------
135,000 Burlington Resources Inc. .................... $ 4,618,350
160,000 Conoco Inc., Cl. A ........................... 4,068,800
25,000 DQE Inc. ..................................... 481,000
12,366 DTE Energy Co. ............................... 532,356
400,000 El Paso Electric Co.+ ........................ 5,260,000
20,000 Energy East Corp. ............................ 402,200
55,000 Halliburton Co. .............................. 1,240,250
13,632 Kerr-McGee Corp. ............................. 707,637
25,000 Louis Dreyfus Natural Gas Corp.+ ............. 972,500
210,000 Niagara Mohawk Holdings Inc.+ ................ 3,563,700
100,000 NiSource Inc.+ ............................... 212,000
125,000 Northeast Utilities .......................... 2,341,250
75,000 Pennzoil-Quaker State Co.+ ................... 838,500
100,000 Progress Energy Inc. ......................... 30,000
10,000 SJW Corp. .................................... 819,000
14,000 Southwest Gas Corp. .......................... 296,800
4,907 Total Fina Elf SA ............................ 659,159
24,200 Western Resources Inc. ....................... 400,510
------------
43,596,473
------------
DIVERSIFIED INDUSTRIAL -- 3.1%
195,000 Ampco-Pittsburgh Corp. ....................... 1,872,000
110,000 Cooper Industries Inc. ....................... 4,561,700
270,000 Crane Co. .................................... 5,918,400
102,000 GATX Corp. ................................... 3,431,280
150,000 GenTek Inc. .................................. 487,500
330,000 Honeywell Inc. ............................... 8,712,000
138,000 ITT Industries Inc.+ ......................... 6,182,400
390,000 Lamson & Sessions Co.+ ....................... 1,560,000
140,000 National Service Industries Inc. ............. 2,891,000
78,715 Park-Ohio Holdings Corp.+ .................... 240,081
100,000 Sensient Technologies Corp. .................. 1,863,000
12,420 Smith Industries plc ......................... 120,109
12,000 Sulzer AG .................................... 1,796,452
75,000 Thomas Industries Inc. ....................... 1,616,250
50,000 Trinity Industries Inc. ...................... 1,082,500
------------
42,334,672
------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.5%
20,000 ArvinMeritor Inc. ............................ 285,800
25,802 BorgWarner Inc. .............................. 1,039,821
115,161 Dana Corp. ................................... 1,796,512
65,000 Delphi Automotive Systems Corp.+ ............. 763,750
260,000 GenCorp Inc. ................................. 2,948,400
195,000 Genuine Parts Co. ............................ 6,212,700
114,000 Johnson Controls Inc. ........................ 7,437,360
90,000 Midas Inc. ................................... 891,000
330,000 Modine Manufacturing Co. ..................... 8,111,400
75,000 Scheib (Earl) Inc.+ .......................... 149,250
163,000 Standard Motor Products Inc. ................. 1,907,100
22
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2001 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
AUTOMOTIVE: PARTS AND ACCESSORIES (CONTINUED)
70,000 Superior Industries International Inc. ....... $ 2,324,700
27,000 TI Automotive Ltd.+
105,000 TransPro Inc. ................................ 320,250
------------
34,188,043
------------
HEALTH CARE -- 2.3%
40,000 American Home Products Corp. ................. 2,330,000
60,000 Amgen Inc.+ .................................. 3,526,200
40,000 Apogent Technologies Inc.+ ................... 956,000
10,000 AstraZeneca plc, London ...................... 465,161
35,146 AstraZeneca plc, Stockholm ................... 1,611,040
12,000 Aventis SA ................................... 910,349
26,000 Biogen Inc.+ ................................. 1,445,080
75,036 GlaxoSmithKline plc+ ......................... 2,117,387
4,000 GlaxoSmithKline plc, ADR ..................... 224,480
56,011 Invitrogen Corp.+ ............................ 3,683,283
46,000 Novartis AG .................................. 1,801,277
108,000 Novartis AG, Registered ...................... 4,203,360
45,000 Pfizer Inc. .................................. 1,804,500
17,900 Roche Holding AG ............................. 1,284,488
20,000 Sanofi-Synthelabo SA ......................... 1,302,320
10,000 Schering-Plough Corp. ........................ 371,000
32,000 Sulzer Medica AG ............................. 1,722,218
18,000 Takeda Chemical Industries Ltd. .............. 831,025
------------
30,589,168
------------
CABLE -- 2.1%
420,000 Cablevision Systems Corp., Cl. A+ ............ 17,194,800
40,000 Comcast Corp., Cl. A ......................... 1,422,000
90,000 Comcast Corp., Cl. A, Special ................ 3,228,300
72,625 NTL Inc.+ .................................... 225,137
210,000 Rainbow Media Group+ ......................... 4,252,500
20,000 Shaw Communications Inc., Cl. B .............. 405,138
80,000 Shaw Communications Inc., Cl. B,
Non-Voting+ ................................ 1,620,000
265,000 UnitedGlobalCom Inc., Cl. A+ ................. 614,800
------------
28,962,675
------------
PAPER AND FOREST PRODUCTS -- 2.1%
260,000 Greif Bros. Corp., Cl. A ..................... 5,959,200
3,400 Greif Bros. Corp., Cl. B ..................... 95,200
180,000 Pactiv Corp.+ ................................ 2,608,200
253,000 St. Joe Co. .................................. 6,540,050
105,000 Westvaco Corp. ............................... 2,698,500
240,000 Willamette Industries Inc. ................... 10,797,600
------------
28,698,750
------------
MARKET
SHARES VALUE
------ ------
HOTELS AND GAMING -- 1.7%
120,000 Aztar Corp.+ ................................. $ 1,569,600
90,000 Boca Resorts Inc., Cl. A+ .................... 895,500
234,500 Gaylord Entertainment Co. .................... 4,713,450
5,000 GTECH Holdings Corp.+ ........................ 172,700
1,450,000 Hilton Group plc ............................. 3,899,854
600,000 Hilton Hotels Corp. .......................... 4,710,000
115,000 MGM Mirage Inc.+ ............................. 2,585,200
430,000 Park Place Entertainment Corp.+ .............. 3,151,900
60,000 Starwood Hotels &
Resorts Worldwide Inc. ....................... 1,320,000
------------
23,018,204
------------
RETAIL -- 1.6%
200,000 Albertson's Inc. ............................. 6,376,000
320,000 AutoNation Inc.+ ............................. 2,812,800
14,000 Coldwater Creek Inc.+ ........................ 256,200
16,000 Delhaize Le Lion SA, ADR ..................... 886,400
7,000 Gucci Group NV, ADR .......................... 572,460
100,000 Lillian Vernon Corp. ......................... 790,000
70,000 Neiman Marcus Group Inc., Cl. A+ ............. 1,711,500
320,000 Neiman Marcus Group Inc., Cl. B+ ............. 7,584,000
50,000 Winn-Dixie Stores Inc. ....................... 572,500
------------
21,561,860
------------
BUSINESS SERVICES -- 1.4%
60,000 ANC Rental Corp.+ ............................ 31,200
155,000 Cendant Corp.+ ............................... 1,984,000
1,000 CheckFree Corp.+ ............................. 16,970
100,000 Landauer Inc. ................................ 3,395,000
70,000 Nashua Corp.+ ................................ 381,500
10,833 Reuters Group plc, ADR ....................... 566,024
13,000 Secom Co. Ltd. ............................... 670,024
250,000 Securicor Group plc .......................... 429,888
3,500 SYNAVANT Inc.+ ............................... 10,500
30,900 Vivendi Universal SA ......................... 1,430,972
210,000 Vivendi Universal SA, ADR .................... 9,733,500
------------
18,649,578
------------
SPECIALTY CHEMICALS -- 1.3%
5,400 Ciba Specialty Chemicals, ADR+ (b) ........... 163,026
10,000 du Pont de Nemours (E.I.) & Co. .............. 375,200
325,000 Ferro Corp. .................................. 7,533,500
12,000 Fuller (H.B.) Co. ............................ 549,600
100,000 Hercules Inc.+ ............................... 825,000
210,000 Omnova Solutions Inc. ........................ 1,312,500
195,000 Rohm & Haas Co. .............................. 6,388,200
11,697 Syngenta AG, ADR+ ............................ 116,619
------------
17,263,645
------------
23
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2001 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
AEROSPACE -- 1.2%
125,000 BAE Systems plc .............................. $ 608,089
118,000 Boeing Co. ................................... 3,953,000
100,000 Lockheed Martin Corp. ........................ 4,375,000
75,000 Northrop Grumman Corp. ....................... 7,575,000
------------
16,511,089
------------
AGRICULTURE -- 1.0%
1,050,000 Archer-Daniels-Midland Co. ................... 13,219,500
5,000 Delta & Pine Land Co. ........................ 84,900
------------
13,304,400
------------
BROADCASTING -- 1.0%
50,000 Ackerley Group Inc. .......................... 535,000
16,666 Corus Entertainment Inc., Cl. B+ ............. 273,351
33,000 Gray Communications Systems Inc. ............. 501,600
15,000 Gray Communications Systems Inc.,
Cl. B ...................................... 198,450
200,000 Liberty Corp. ................................ 7,950,000
4,000 Nippon Broadcasting System Inc. .............. 125,241
50,375 NRJ Groupe+ .................................. 586,311
131,000 Paxson Communications Corp., Cl. A+ .......... 943,200
17,700 RTL Group (New York) ......................... 483,589
100,000 Television Broadcasting Ltd. ................. 271,172
90,000 Young Broadcasting Inc., Cl. A+ .............. 1,305,000
------------
13,172,914
------------
BUILDING AND CONSTRUCTION -- 1.0%
112,500 CRH plc ...................................... 1,670,021
32,222 Huttig Building Products Inc.+ ............... 165,943
15,000 Martin Marietta Materials Inc. ............... 586,650
110,000 Newport News Shipbuilding Inc. ............... 7,392,000
144,000 Nortek Inc.+ ................................. 3,103,200
5,000 Nortek Inc., Special Common+ (a) ............. 107,750
------------
13,025,564
------------
REAL ESTATE -- 0.8%
450,000 Catellus Development Corp.+ .................. 7,866,000
75,000 Cheung Kong (Holdings) Ltd. .................. 584,174
44,000 Florida East Coast Industries Inc., Cl. A .... 968,000
58,451 Florida East Coast Industries Inc., Cl. B .... 1,262,542
55,000 Griffin Land & Nurseries Inc.+ ............... 683,100
4,753 HomeFed Corp.+ ............................... 4,278
------------
11,368,094
------------
ENVIRONMENTAL SERVICES -- 0.7%
55,000 Republic Services Inc.+ ...................... 891,000
320,000 Waste Management Inc. ........................ 8,556,800
------------
9,447,800
------------
MARKET
SHARES VALUE
------ ------
ELECTRONICS -- 0.6%
41,000 Fujitsu Ltd. ................................. $ 343,818
3,000 Hitachi Ltd., ADR ............................ 201,000
9,000 Molex Inc., Cl. A ............................ 218,700
7,500 NEC Corp., ADR ............................... 60,075
25,440 Philips Electronics NV ....................... 493,490
38,800 Philips Electronics NV, ADR .................. 748,840
6,400 Rohm Co. Ltd. ................................ 623,185
45,000 Sony Corp., ADR .............................. 1,494,000
242,600 Thomas & Betts Corp. ......................... 4,240,648
------------
8,423,756
------------
CONSUMER SERVICES -- 0.6%
40,000 Loewen Group Inc. ............................ 2,000
510,000 Rollins Inc. ................................. 7,930,500
------------
7,932,500
------------
AUTOMOTIVE -- 0.5%
15,000 Ford Motor Co. ............................... 260,250
157,942 General Motors Corp. ......................... 6,775,712
------------
7,035,962
------------
COMMUNICATIONS EQUIPMENT -- 0.5%
68,000 Acterna Corp.+ ............................... 216,240
290,000 Allen Telecom Inc.+ .......................... 2,523,000
120,000 Corning Inc. ................................. 1,058,400
100,000 Lucent Technologies Inc. ..................... 573,000
100,000 Motorola Inc. ................................ 1,560,000
44,000 Scientific-Atlanta Inc. ...................... 772,200
------------
6,702,840
------------
AVIATION: PARTS AND SERVICES -- 0.4%
98,000 Curtiss-Wright Corp. ......................... 4,566,800
110,000 Fairchild Corp., Cl. A+ ...................... 374,000
50,000 Precision Castparts Corp. .................... 1,110,000
------------
6,050,800
------------
METALS AND MINING -- 0.3%
72,500 Harmony Gold Mining Co. Ltd. ................. 394,383
15,000 Harmony Gold Mining Co. Ltd., ADR ............ 79,650
100,000 Newmont Mining Corp. ......................... 2,360,000
50,000 Placer Dome Inc. ............................. 639,500
------------
3,473,533
------------
TRANSPORTATION -- 0.2%
100,000 AMR Corp.+ ................................... 1,914,000
7,500 Kansas City Southern Industries Inc. ......... 90,000
31,273 MIF Ltd.+ .................................... 423,106
25,000 Ryder System Inc. ............................ 499,750
------------
2,926,856
------------
24
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2001 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
SATELLITE -- 0.2%
180,323 General Motors Corp., Cl. H+ .................$ 2,403,706
340,000 Liberty Satellite &
Technology Inc., Cl. A+ ...................... 421,600
70,000 Loral Space & Communications Ltd.+ ........... 91,000
---------------
2,916,306
---------------
COMPUTER SOFTWARE AND SERVICES -- 0.2%
20,000 Capcom Co. Ltd. .............................. 412,994
10,000 Computer Associates International Inc. ....... 257,400
100,000 EMC Corp.+ ................................... 1,175,000
160,000 Genuity Inc.+ ................................ 251,200
2,500 Obic Co. Ltd. ................................ 463,569
10,000 Tyler Technologies Inc. ...................... 29,000
---------------
2,589,163
---------------
CLOSED END FUNDS -- 0.2%
59,000 Central European Equity Fund Inc. ............ 554,600
70,000 Dresdner RCM Europe Fund Inc. ................ 521,500
18,592 France Growth Fund Inc. ...................... 128,285
40,250 Italy Fund Inc. .............................. 256,795
68,000 New Germany Fund Inc. ........................ 361,760
44,000 Royce Value Trust Inc. ....................... 578,160
---------------
2,401,100
---------------
COMPUTER HARDWARE -- 0.0%
35,000 Hewlett-Packard Co. .......................... 563,500
14,000 Xerox Corp. .................................. 108,500
---------------
672,000
---------------
EDUCATIONAL SERVICES -- 0.0%
14,000 Benesse Corp. ................................ 428,943
---------------
TOTAL COMMON STOCKS .......................... 1,112,759,584
---------------
PREFERRED STOCKS -- 1.4%
PUBLISHING -- 1.2%
767,491 News Corp. Ltd., Pfd., ADR ................... 16,339,880
---------------
AEROSPACE -- 0.2%
14,021 Northrop Grumman Corp.,
7.00% Cv. Pfd., Ser. B ..................... 1,735,099
---------------
TELECOMMUNICATIONS -- 0.0%
15,000 Citizens Communications Co.,
5.00% Cv. Pfd. ............................. 653,100
---------------
BROADCASTING -- 0.0%
43,000 ProSieben Sat.1 Media AG, Pfd. ............... 201,677
---------------
EQUIPMENT AND SUPPLIES -- 0.0%
500 Sequa Corp.,
$5.00 Cv. Pfd. ............................. 39,500
---------------
MARKET
SHARES VALUE
------ ------
WIRELESS COMMUNICATIONS -- 0.0%
10,760,547 Telesp Celular Participacoes SA, Pfd.+ .......$ 23,169
---------------
TOTAL PREFERRED STOCKS ....................... 18,992,425
---------------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS -- 0.3%
ENVIRONMENTAL SERVICES -- 0.1%
$2,039,000 Waste Management Inc., Sub. Deb. Cv.
4.00%, 02/01/02 ............................ 2,049,195
---------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1%
1,500,000 Standard Motor Products Inc.,
Sub. Deb. Cv.
6.75%, 07/15/09 ............................ 1,016,250
---------------
AVIATION: PARTS AND SERVICES -- 0.1%
1,000,000 Kaman Corp., Sub. Deb. Cv.
6.00%, 03/15/12 ............................ 916,250
---------------
PUBLISHING -- 0.0%
200,000 News America Holdings Inc.,
Sub. Deb. Cv.
Zero Coupon, 03/31/02 ...................... 265,368
---------------
HOTELS AND GAMING -- 0.0%
230,000 Hilton Hotels Corp., Sub. Deb. Cv.
5.00%, 05/15/06 ............................ 187,162
---------------
CONSUMER PRODUCTS -- 0.0%
1,000,000 Pillowtex Corp.,
Sub. Deb. Cv.
6.00%, 03/15/12+ ........................... 0
---------------
TOTAL CORPORATE BONDS ........................ 4,434,225
---------------
SHARES
------
WARRANTS -- 0.0%
METALS AND MINING -- 0.0%
5,000 Harmony Gold Mining Co. Ltd., ADR,
expires 06/29/03 ........................... 9,500
---------------
FOOD AND BEVERAGE -- 0.0%
62,463 Advantica Restaurant Group Inc.,
expires 01/07/05+ .......................... 1,249
---------------
TOTAL WARRANTS ............................... 10,749
---------------
25
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2001 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
--------- ---------------
U.S. GOVERNMENT OBLIGATIONS -- 15.1%
$205,140,000 U.S. Treasury Bills,
1.83% to 3.45%++,
due 10/04/01 to 12/13/01 ...................$ 204,402,710
---------------
REPURCHASE AGREEMENTS -- 1.8%
24,215,000 Agreement with State Street
Bank & Trust Co.,
3.05%, dated 09/28/01,
due 10/01/01, proceeds
at maturity $24,221,155 (c) ................ 24,215,000
---------------
TOTAL INVESTMENTS -- 100.7%
(Cost $1,116,753,656) ..................................... 1,364,814,693
OTHER ASSETS, LIABILITIES, AND
LIQUIDATION VALUE OF CUMULATIVE
PREFERRED STOCK -- (22.8)% ................................ (308,442,222)
---------------
NET ASSETS -- COMMON STOCK -- 77.9%
(128,408,254 common shares outstanding) ................... 1,056,372,471
---------------
NET ASSETS -- PREFERRED STOCK -- 22.1%
(11,967,900 preferred shares outstanding) ................. 299,197,500
---------------
TOTAL NET ASSETS -- 100.0% .................................. $1,355,569,971
===============
NET ASSET VALUE PER COMMON SHARE
($1,056,372,471 / 128,408,254 shares outstanding) ......... $8.23
-----
PRINCIPAL SETTLEMENT NET UNREALIZED
AMOUNT DATE DEPRECIATION
---------- ---------- --------------
FORWARD FOREIGN EXCHANGE CONTRACTS
4,992,000(d) Deliver Hong Kong Dollars
in exchange for
USD 639,820 .......... 08/01/02 $(326)
=====
---------------------
For Federal tax purposes:
Aggregate cost ................................. $1,116,753,656
=============
Gross unrealized appreciation .................. $ 344,035,276
Gross unrealized depreciation .................. (95,974,239)
==============
Net unrealized appreciation .................... $ 248,061,037
==============
---------------------
(a) Security fair valued under procedures established by the Board of
Directors.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At
September 30, 2001, the market value of Rule 144A securities amounted to
$163,026 or 0.0% of total net assets.
(c) Collateralized by U.S. Treasury Bond, 6.63%, due 02/15/27, market value
$24,701,178.
(d) Principal amount denoted in Hong Kong Dollars.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depositary Receipt
BDR - Brazilian Depositary Receipt
RNC - Non-Convertible Savings Shares
USD - United States Dollars
% of
Market Market
Value Value
------ --------------
GEOGRAPHIC DIVERSIFICATION
United States ................ 85.8% $1,171,328,381
Europe ....................... 9.9 134,889,349
Asia/Pacific Rim ............. 2.4 32,480,764
Canada ....................... 1.0 13,031,445
Latin America ................ 0.9 12,610,722
South Africa ................. 0.0 474,032
------ --------------
Total Investments ............ 100.0% $1,364,814,693
====== ==============
26
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
ENROLLMENT IN THE PLAN
It is the policy of The Gabelli Equity Trust Inc. ("Equity Trust") to
automatically reinvest dividends. As a "registered" shareholder you
automatically become a participant in the Equity Trust's Automatic Dividend
Reinvestment Plan (the "Plan"). The Plan authorizes the Equity Trust to issue
shares to participants upon an income dividend or a capital gains distribution
regardless of whether the shares are trading at a discount or a premium to net
asset value. All distributions to shareholders whose shares are registered in
their own names will be automatically reinvested pursuant to the Plan in
additional shares of the Equity Trust. Plan participants may send their stock
certificates to State Street Bank and Trust Company ("State Street") to be held
in their dividend reinvestment account. Registered shareholders wishing to
receive their distribution in cash must submit this request in writing to:
The Gabelli Equity Trust Inc.
c/o State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Shareholders requesting this cash election must include the shareholder's
name and address as they appear on the share certificate. Shareholders with
additional questions regarding the Plan may contact State Street at 1 (800)
336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at State Street
Bank must do so in writing or by telephone. Please submit your request to the
above mentioned address or telephone number. Include in your request your name,
address and account number. The cost to liquidate shares is $2.50 per
transaction as well as the brokerage commission incurred. Brokerage charges are
expected to be less than the usual brokerage charge for such transactions.
If your shares are held in the name of a broker, bank or nominee, you
should contact such institution. If such institution is not participating in the
Plan, your account will be credited with a cash dividend. In order to
participate in the Plan through such institution, it may be necessary for you to
have your shares taken out of "street name" and re-registered in your own name.
Once registered in your own name your dividends will be automatically
reinvested. Certain brokers participate in the Plan. Shareholders holding shares
in "street name" at participating institutions will have dividends automatically
reinvested. Shareholders wishing a cash dividend at such institution must
contact their broker to make this change.
The number of shares of Common Stock distributed to participants in the
Plan in lieu of cash dividends is determined in the following manner. Under the
Plan, whenever the market price of the Equity Trust's Common Stock is equal to
or exceeds net asset value at the time shares are valued for purposes of
determining the number of shares equivalent to the cash dividends or capital
gains distribution, participants are issued shares of Common Stock valued at the
greater of (i) the net asset value as most recently determined or (ii) 95% of
the then current market price of the Equity Trust's Common Stock. The valuation
date is the dividend or distribution payment date or, if that date is not a New
York Stock Exchange trading day, the next trading day. If the net asset value of
the Common Stock at the time of valuation exceeds the market price of the Common
Stock, participants will receive shares from the Equity Trust valued at market
price. If the Equity Trust should declare a dividend or capital gains
distribution payable only in cash, State Street will buy Common Stock in the
open market, or on the New York Stock Exchange or elsewhere, for the
participants' accounts, except that State Street will endeavor to terminate
purchases in the open market and cause the Equity Trust to issue shares at net
asset value if, following the commencement of such purchases, the market value
of the Common Stock exceeds the then current net asset value.
27
The automatic reinvestment of dividends and capital gains distributions
will not relieve participants of any income tax which may be payable on such
distributions. A participant in the Plan will be treated for Federal income tax
purposes as having received, on a dividend payment date, a dividend or
distribution in an amount equal to the cash the participant could have received
instead of shares.
The Equity Trust reserves the right to amend or terminate the Plan as
applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to written notice of the change sent to the members of the Plan
at least 90 days before the record date for such dividend or distribution. The
Plan also may be amended or terminated by State Street on at least 90 days'
written notice to participants in the Plan.
VOLUNTARY CASH PURCHASE PLAN
The Voluntary Cash Purchase Plan is yet another vehicle for our
shareholders to increase their investment in the Equity Trust. In order to
participate in the Voluntary Cash Purchase Plan, shareholders must have their
shares registered in their own name.
Participants in the Voluntary Cash Purchase Plan have the option of making
additional cash payments to State Street for investments in the Equity Trust's
shares at the then current market price. Shareholders may send an amount from
$250 to $10,000. State Street will use these funds to purchase shares in the
open market on or about the 1st and 15th of each month. State Street will charge
each shareholder who participates $0.75, plus a pro rata share of the brokerage
commissions. Brokerage charges for such purchases are expected to be less than
the usual brokerage charge for such transactions. It is suggested that any
voluntary cash payments be sent to State Street Bank and Trust Company, P.O. Box
8200, Boston, MA 02266-8200 such that State Street receives such payments
approximately 10 days before the 15th of the month. Funds not received at least
five days before the investment date shall be held for investment in the
following month. A payment may be withdrawn without charge if notice is received
by State Street at least 48 hours before such payment is to be invested.
For more information regarding the Dividend Reinvestment Plan and
Voluntary Cash Purchase Plan, brochures are available by calling (914) 921-5070
or by writing directly to the Equity Trust.
28
DIRECTORS AND OFFICERS
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER, RYE, NY 10580-1434
DIRECTORS
Mario J. Gabelli, CFA
CHAIRMAN & CHIEF INVESTMENT OFFICER,
GABELLI ASSET MANAGEMENT INC.
Dr. Thomas E. Bratter
PRESIDENT, JOHN DEWEY ACADEMY
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
James P. Conn
FORMER MANAGING DIRECTOR AND CHIEF INVESTMENT OFFICER,
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
Frank J. Fahrenkopf, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER,
AMERICAN GAMING ASSOCIATION
Arthur V. Ferrara
FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
Karl Otto Pohl
FORMER PRESIDENT, DEUTSCHE BUNDESBANK
Anthony R. Pustorino
CERTIFIED PUBLIC ACCOUNTANT,
PROFESSOR EMERITUS, PACE UNIVERSITY
Salvatore J. Zizza
CHAIRMAN, HALLMARK ELECTRICAL SUPPLIES CORP.
OFFICERS
Mario J. Gabelli, CFA
PRESIDENT & CHIEF INVESTMENT OFFICER
Bruce N. Alpert
VICE PRESIDENT & TREASURER
Carter W. Austin
VICE PRESIDENT
James E. McKee
SECRETARY
INVESTMENT ADVISOR
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1434
CUSTODIAN
Boston Safe Deposit and Trust Company
COUNSEL
Willkie Farr & Gallagher
TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
STOCK EXCHANGE LISTING
COMMON 7.25% PREFERRED 7.20% PREFERRED
------ --------------- ---------------
NYSE-
Symbol: GAB GAB Pr GAB PrB
Shares
Outstanding: 128,408,254 5,367,900 6,600,000
The Net Asset Value appears in the Publicly Traded Funds column, under the
heading "General Equity Funds," in Sunday's The New York Times and in Monday's
The Wall Street Journal. It is also listed in Barron's Mutual Funds/Closed End
Funds section under the heading "General Equity Funds".
The Net Asset Value may be obtained each day by calling (914) 921-5071.
--------------------------------------------------
For general information about the Gabelli Funds,
call 1-800-GABELLI (1-800-422-3554), fax us at
914-921-5118, visit Gabelli Funds' Internet
homepage at: HTTP://WWW.GABELLI.COM
or e-mail us at: closedend@gabelli.com
--------------------------------------------------
--------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Equity Trust may, from time to
time, purchase shares of its common stock in the open market when the
Equity Trust shares are trading at a discount of 10% or more from the net
asset value of the shares. The Equity Trust may also, from time to time,
purchase shares of its Cumulative Preferred Stock in the open market when
the shares are trading at a discount to the Liquidation Value of $25.00.
--------------------------------------------------------------------------------
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER
RYE, NY 10580-1434
(914) 921-5070
HTTP://WWW.GABELLI.COM
THIRD QUARTER REPORT
SEPTEMBER 30, 2001
GBFCM 09/01