[AMERICAN FLAG GRAPHIC OMITTED] AMERICAN FLAG [TETON MOUNTAIN GRAPHIC OMITTED] THE GABELLI EQUITY TRUST INC. THIRD QUARTER REPORT SEPTEMBER 30, 2002 [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. [STATE FLAG GRAPHICS 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 2002, ongoing economic uncertainty in part reflecting oil prices over $30 per barrel, a crisis in confidence in the integrity of corporate America and the increasing probability of military action against Iraq weighed heavily on the stock market. Near panic selling in July pushed market indices to multi-year lows. A brief rally in August gave way to another wave of selling in September, and at the close of the quarter, the leading market indices were re-testing July lows. Although the Gabelli Equity Trust (the "Trust") declined a disappointing 20.15%, positive returns from selected consumer goods, industrial, cable television and media stocks, which were hurt in the second quarter, buoyed performance. Notwithstanding that, we believe we can continue to provide returns over the long term outpacing those achieved in unmanaged baskets of securities by doing what we do best -- picking stocks. [MARIO GABELLI GRAPHIC OMITTED] MARIO GABELLI [TETON MOUNTAIN GRAPHIC OMITTED] THE GABELLI EQUITY TRUST INC. TABLE I COMPARATIVE RESULTS -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2002 (A) ----------------------------------------------------- YEAR TO SINCE QUARTER DATE INCEPTION (B) 10 YEAR 5 YEAR 3 YEAR 1 YEAR ------- ---- ------------- ------- ------ ------ ------ Gabelli Equity Trust: NAV Return (c) ....................... (20.15)% (27.89)% 9.59% 7.75% (0.28)% (7.34)% (19.00)% Investment Return (d) ................ (26.56)% (27.53)% 10.45% 9.97% 4.41% (2.19)% (19.04)% S&P 500 Index .......................... (17.27)% (28.15)% 10.31% 8.99% (1.62)% (12.88)% (20.47)% Dow Jones Industrial Average ........... (17.40)% (23.11)% 12.00% 11.13% 0.83% (8.19)% (12.49)% Nasdaq Composite Index ................. (19.90)% (39.91)% 7.22% 7.23% (7.01)% (24.71)% (21.80)%(a) Returns 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. The Dow Jones Industrial Average is an unmanaged index of 30 large industrial stocks. The S&P 500 and the Nasdaq Composite Indices are unmanaged indicators of stock market performance. Dividends are considered reinvested (except for the Nasdaq Composite Index). Performance for periods less than one year are not annualized. (b) From commencement of investment operations on August 21, 1986. (c) Total returns and average annual returns reflect changes in net asset value ("NAV"), reinvestment of distributions, adjustments for rights offerings, spin-offs and taxes paid on undistributed long-term capital gains, and are net of expenses. Since Inception return based on initial net asset value of $9.34. (d) 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. Since Inception return based on an initial offering price of $10.00. -------------------------------------------------------------------------------- COMMON STOCK 10% DISTRIBUTION POLICY The Trust continues to maintain its 10% Distribution Policy whereby the Trust pays out to common stock shareholders 10% of its average net assets each year. Pursuant to this policy, the Trust distributed $0.27 per share on September 24, 2002. Under the policy, distributions are made at the annual rate of 10% of the average of the calendar quarter-end net assets of the Trust's common stock at December 2001 and March, June, and September 2002. The Trust currently distributes $0.27 per share to common stock shareholders at quarter-end in March, June, and September. The fourth quarter distribution is a variable adjusting distribution in December. The adjusting distribution is the greater of the remaining portion of 10% of the average net assets to be distributed (10% of the average net assets less the cumulative $0.81 per share ($0.27 x 3) paid in March, June, and September) or the distribution required by IRS regulations. As of September 30, 2002, there would be no requirement for a fourth quarter distribution to common stock shareholders. 10% of the Trust's average net assets using calendar quarter-end net assets of the Trust's common stock for the past four quarters equates to $0.78 per share. The distribution of $0.27 per share paid in September brought the total distribution for 2002 to $0.81 per share, thus satisfying the Trust's 10% Distribution Policy for 2002. The Board of Directors will determine the amount of any potential distribution of income, capital gains or capital (non-taxable return of principal) to be made at the end of the fourth quarter at a meeting in late November. In any event, the Trust will continue to make every effort to provide our common stock shareholders with consistent distributions throughout the year pursuant to our policy. On November 20, 2002, the Board of Directors declared a $0.14 per share cash distribution payable on December 24, 2002 to common stock shareholders of record on December 16, 2002. Additionally, the Board of Directors declared a $0.27 per share cash distribution payable on March 25, 2003 to common stock shareholders of record on March 17, 2003, pursuant to the Trust's 10% Distribution Policy. The Board of Directors will continue to monitor the Trust's 10% Distribution Policy in light of the net asset value and the current low interest rate environment. PREMIUM / DISCOUNT DISCUSSION As a refresher to our shareholders, the price of a closed-end mutual fund is determined in the open market by willing buyers and sellers. Shares of the Trust trade on the New York Stock Exchange and may trade at a premium to (higher than) net asset value ("NAV") (the market value of the Trust's underlying portfolio) or a discount to (lower than) net asset value. Of the 519 publicly-traded closed-end funds in the U.S., approximately 27% currently trade at premiums to NAV versus 26% five years ago and 58% ten years ago. For general equity funds such as the Trust, approximately 13% currently trade at premiums to NAV versus 22% five years ago and 29% ten years ago. Ideally, the Trust's market price will generally track the NAV. The Trust's premium or discount to NAV fluctuates over time. Over our Trust's 16-year history, the range fluctuated from a 38% premium in June 2002 to a 27% discount in December 1987. The average variance from NAV for the Trust since inception is a 0.2% discount to NAV. Beginning in early 2001, the market price of the Trust exceeded the NAV and this premium has gradually increased since. The previous extended period in which a premium existed occurred during a 20-month period from August 1993 to March 1995. "Mr. Market" often provides opportunities to invest at a discount. The Trust has undertaken various initiatives to narrow the discount when appropriate through distribution policies, rights offerings, share repurchase programs and use of leverage. The Trust's long-term investment goal is to generate a real rate of return of 10%. We believe that our stock selection process adds to the investment equation. We have a successful history of investment providing shareholders average annual returns of 10% since inception. However, it is important to remember that "Mr. Market" is a pendulum that swings both ways. As the market moves away from momentum investing and back to basics, we believe that an excessive premium for the Trust is not likely to be sustainable. 2 September 30, 2002 ------------------ Net Asset Value $ 5.79 Market Price $7.06 Premium 21.93% [GRAPH OMITTED] EDGAR REPRESENTATION OF PLOT POINTS: 9/30/86 0.0067 10/31/86 0.0046 11/30/86 -0.039 12/31/86 -0.0661 1/31/87 -0.1363 2/28/87 -0.1323 3/31/87 -0.1555 4/30/87 -0.1393 5/31/87 -0.1788 6/30/87 -0.2028 7/31/87 -0.2 8/31/87 -0.2052 9/30/87 -0.2128 10/31/87 -0.2074 11/30/87 -0.2154 12/31/87 -0.2061 1/31/88 -0.2235 2/29/88 -0.1145 3/31/88 -0.1523 4/30/88 -0.1477 5/31/88 -0.1906 6/30/88 -0.0819 7/31/88 -0.0984 8/31/88 -0.0942 9/30/88 -0.1097 10/31/88 -0.1256 11/30/88 -0.1104 12/31/88 -0.1113 1/31/89 -0.1214 2/28/89 -0.1108 3/31/89 -0.1006 4/30/89 -0.0925 5/31/89 -0.0699 6/30/89 -0.0468 7/31/89 -0.0854 8/31/89 -0.0243 9/30/89 -0.0385 10/31/89 -0.0257 11/30/89 -0.0217 12/31/89 0.0076 1/31/90 0.0534 2/28/90 -0.0156 3/31/90 0.0242 4/30/90 0.0033 5/31/90 -0.0056 6/30/90 -0.0049 7/31/90 -0.0176 8/31/90 -0.018 9/30/90 -0.0348 10/31/90 -0.1187 11/30/90 -0.0327 12/31/90 0.029 1/31/91 -0.0091 2/28/91 0.0269 3/31/91 0.015 4/30/91 -0.0257 5/31/91 -0.01 6/30/91 0.0138 7/31/91 -0.0032 8/31/91 -0.0009 9/30/91 -0.0298 10/31/91 -0.0083 11/30/91 -0.1014 12/31/91 -0.0366 1/31/92 -0.0077 2/29/92 0.0141 3/31/92 0.0045 4/30/92 0.0069 5/31/92 0.0092 6/30/92 0.0032 7/31/92 0.0165 8/31/92 0.0309 9/30/92 0.0427 10/31/92 -0.0068 11/30/92 -0.0461 12/31/92 -0.0257 1/31/93 -0.0312 2/28/93 -0.0046 3/31/93 0.0265 4/30/93 0.0436 5/31/93 0.012 6/30/93 -0.0207 7/31/93 -0.0093 8/31/93 -0.0358 9/30/93 0.0088 10/31/93 0.0601 11/30/93 0.0659 12/31/93 0.0573 1/31/94 0.0797 2/28/94 0.0673 3/31/94 0.0733 4/30/94 -0.027 5/31/94 0.0524 6/30/94 0.0542 7/31/94 0.0233 8/31/94 0.0597 9/30/94 0.0185 10/31/94 0.0375 11/30/94 0.0622 12/31/94 0.0121 1/31/95 0.0047 2/28/95 0.03 3/31/95 0.017 4/30/95 -0.0122 5/31/95 -0.024 6/30/95 -0.0081 7/31/95 -0.044 8/31/95 -0.0697 9/30/95 -0.0845 10/31/95 -0.1206 11/30/95 -0.075 12/31/95 -0.0578 1/31/96 -0.0625 2/29/96 -0.0821 3/31/96 -0.0385 4/30/96 -0.0732 5/31/96 -0.0916 6/30/96 -0.047 7/31/96 -0.0576 8/31/96 -0.0708 9/30/96 -0.0474 10/31/96 -0.0405 11/30/96 -0.0644 12/31/96 -0.0394 1/31/97 -0.0741 2/28/97 -0.0644 3/31/97 -0.0424 4/30/97 -0.0077 5/31/97 -0.0688 6/30/97 -0.0613 7/31/97 -0.0693 8/31/97 -0.0676 9/30/97 -0.0397 10/31/97 -0.0636 11/30/97 -0.0175 12/31/97 0.0316 1/31/98 0.0119 2/28/98 -0.0088 3/31/98 -0.022 4/30/98 -0.0788 5/31/98 -0.0885 6/30/98 -0.04 7/31/98 -0.042 8/31/98 -0.0814 9/30/98 -0.0091 10/31/98 0.0025 11/30/98 0.0216 12/31/98 0.0026 1/31/99 0.0103 2/28/99 0.0264 3/31/99 0.0202 4/30/99 -0.0068 5/31/99 -0.006 6/30/99 -0.0163 7/31/99 0.007 8/31/99 0.0159 9/30/99 0.0126 10/31/99 -0.0045 11/30/99 -0.0178 12/31/99 -0.0147 1/31/00 -0.0331 2/29/00 -0.0835 3/31/00 -0.0438 4/30/00 -0.078 5/31/00 -0.046 6/30/00 0.0097 7/31/00 -0.0093 8/31/00 0.0073 9/30/00 -0.0179 10/31/00 -0.0298 11/30/00 0.0332 12/31/00 0.0493 1/31/01 -0.045 2/28/01 -0.0067 3/31/01 0.1048 4/30/01 0.0937 5/31/01 0.1453 6/30/01 0.1596 7/31/01 0.1107 8/31/01 0.1614 9/30/01 0.2041 10/31/01 0.2241 11/30/01 0.2314 12/31/01 0.2029 1/31/02 0.2497 2/28/02 0.2463 3/30/02 0.2311 4/30/02 0.248 5/30/02 0.2955 6/30/02 0.3215 7/31/02 0.3318 8/31/02 0.3392 9/30/02 0.2193 COMMENTARY THE ECONOMY: A RECOVERY Economic growth was quite good in the third quarter. Federal Reserve Board ("Fed") Chairman Alan Greenspan is confident the economy is still on a moderate growth path. Investors aren't so sure. On balance, economic data has been mixed. Consumer spending has remained buoyant. Housing starts, existing home sales and auto sales are still quite healthy. Retail sales have held up well, despite the drag from rising unemployment and the toxic impact of the wealth effect. Why is the economy treading water? The business sector is acting like a deer caught in headlights. A dearth of capital spending continues to drag on the economy and uncertainty regarding Iraq is also probably having an impact. Oil hovering over $30 a barrel is taking its toll on all. We saw impressive Gross Domestic Product ("GDP") growth in the first half as companies began rebuilding inventories depleted during the recession and in the aftermath of 9/11. Then the re-stocking of shelves was put on hold as corporate managers devoted much of their time, energy and resources making sure their companies' books were in good order and/or shoring up balance sheets. As these tasks are completed, we should see the inventory rebuilding cycle resume and the economy make more meaningful progress, though the West Coast dock lock-out will mute results. As corporate managers gain confidence that the recovery is for real, we should also see a modest up-tick in capital spending take some of the economic burden off the American consumer's broad shoulders. However, in order for the world economies to gain traction oil would need to be plentiful and priced below $25 per barrel. 3 Higher energy prices are essentially a tax on virtually every business and consumer. At around $30 per barrel, oil appears to be discounting a serious disruption in supply resulting from a potential war in Iraq, and, closer to home, a threatened strike by Mexican oil workers. It is impossible to predict what will happen in the coming months. However, should the supply lines remain open, we believe oil prices will come down from current levels and no longer pose a serious threat to a global economic recovery. Longer term, the U.S. must consume less and find alternative ways to power our ubiquitous automobile. The corporate earnings picture remains cloudy. In our second quarter 2002 letter to shareholders, we opined that given steady economic progress, increased productivity, cost cutting, financial re-engineering, a decline in the "everything including the kitchen sink" write-offs taken in 2001 and a weakening dollar, the result would be a favorable impact on 2002 earnings. We went on to say that although stocks did not yet look cheap, rising earnings would make valuations appear more reasonable. Second half 2002 earnings growth will likely provide help to battered stocks. It appears that the earnings recovery is good but not as vigorous as assumed. Equity valuations, however, have come down. Once the economy gains traction, we believe the aforementioned factors will contribute to more substantial earnings growth in 2003 and provide a foundation for equity returns over the balance of this decade. THE STOCK MARKET: WHERE IS THE BOTTOM? When and where will the stock market bottom out? We wish we knew. At this juncture, stock prices appear to be discounting most if not all of the bad news. In July and again in September, we witnessed the kind of near panic selling that usually foreshadows market bottoms. We believe the old adage that "bull markets climb a wall of worry," and it is apparent that investors have plenty to worry about. We also echo our observation that the two ingredients for a stock market recovery -- low interest rates and a better earnings environment -- are in place. SOME PERSPECTIVE We have experienced one of the deepest and most prolonged bear markets in history. At the end of the quarter, the S&P 500 Index was off 47% and the technology-heavy Nasdaq Composite Index was down 77% from their respective highs. The S&P 500 Index appears headed for the third straight year of negative returns, the first time this has happened since 1939-41. The causes of this bear market are obvious. Grossly inflated equity valuations ran head on into a rapidly decelerating economy. The tragic events of 9/11 and massive frauds at Enron, Adelphia and WorldCom (among others) further damaged investor psychology. The excessive exuberance Fed Chairman Greenspan warned about in 1996 has given way to despair. Investors who couldn't pay too much for Internet start-ups in the fourth quarter of 1999 and early 2000 are now shunning well established, financially strong companies with dominant positions in their industries. Market cheerleaders forecasting a doubling of the Dow Jones Industrial Average by 2005 have been replaced by doomsayers predicting an extended period of flat to negative equity returns. We have experienced such periods, most recently from 1966 through 1981, during which the annualized return for the Dow Jones Industrial Average was negative (minus 0.6%). Indeed, in the late 1970s, BUSINESSWEEK heralded "the death of equities" in one of its weekly issues. But, that time period was characterized by high inflation, economic contraction and rising prices, creating a new economic term, stagflation. Inflation, as represented by the Consumer Price Index, averaged nearly 7% a year. At its peak, inflation reached the mid-teens. Long-term interest rates made 4 it to the high-teens. In addition, that period also included the final years of the disastrous Vietnam War, a tripling of oil prices imposed by the Organization of Petroleum Exporting Countries ("OPEC") following the 1973 Arab/Israeli War, the Watergate Scandal and President Richard Nixon's resignation. Despite today's economic and political uncertainties, it is difficult to imagine this kind of catastrophic market backdrop developing during the next decade. But, since our economic underpinnings are fragile, the risk of an external event could cause a total collapse in investor confidence. Should this occur, we would find even more bargains. What do we expect from equity markets over the next five years? Based on an economic model with 3.5% Gross World Product ("GWP") growth (3% in the U.S.) and 3% inflation, we expect after-tax corporate earnings to grow by approximately 6% annually. In addition, now that investors recognize the benefits of dividends, we could see dividends grow by as much as 2% annually. Multiples are unlikely to expand. Under this scenario, ownership of U.S. equities should return close to 8% annually -- hardly inspiring by Roaring 90s standards and below the long-term average, but still a significantly better return than can be expected from most other asset classes. Of course, through diligent fundamental research focused on identifying high quality companies trading at attractive valuations relative to the "real world" economic value of assets and/or earnings growth prospects, we plan to do better than the market. PUTTING HUMPTY DUMPTY BACK TOGETHER When past market bubbles burst, lots of debris washed ashore. This time, the bubble was bigger and the debris was more hideous and more widespread. Accountants, analysts and investment bankers (among others) lost their checks and balances and did not act as safety nets and buffers. We are in a camp that believes that securities analysts do a terrific job. Beginning in May of 1975, a payment mechanism for research was removed with the collapse of fixed price commissions. The conflicts in the late 1990s are directly traceable to "May Day." Where next? When we joined Wall Street in 1967, research that was performed on a brokerage firm's investment banking client was identified as such. To get back there is an easy fix. Regulation Fair Disclosure ("FD") already put analysts back on the fundamental research track. Accountants should not perform services beyond audit functions, except where the fee is small relative to the audit engagement. Perhaps we need to revisit the Glass-Steagall Act. The safeguards put in place by that Act were there for a reason. All in all, we believe that most corporate managers we see come to work every day to grow the intrinsic value of their enterprise and work hard to have the public stock track the underlying value of the business. Our job remains the same -- to ferret out those companies that Mr. Market puts on the bargain counter. 5 [RESEARCH GRAPHIC OMITTED] -------------------------------------------------------------------------------- WHAT IS RESEARCH? ---------------------------------------------------------------------- CONGRATULATIONS TO THE 2002 ALL AMERICAN INSTITUTIONAL INVESTOR RESEARCH TEAM THE FIRM WHERE RESEARCH IS KING. GABELLI & COMPANY, INC., ONE CORPORATE CENTER, RYE, NY 10580 914-921-5130 o FAX 914-921-5098 o RESEARCH@GABELLI.COM [EPS/PMV GRAPHIC OMITTED] TRIANGLE EPS PMV MANAGEMENT CASH FLOW RESEARCH ---------------------------------------------------------------------- ---------------------------------------------------------------------- Research (ri' surch) Careful or Diligent Research Studious inquiry or examination, esp: investigation or experimentation aimed at the discovery or interpretation of facts, revisions of accepted theories or laws in the light of new facts, or practical application of such new or revised theories or laws. INDEPENDENT RESEARCH FOR OVER 25 YEARS GABELLI & COMPANY, INC., ONE CORPORATE CENTER, RYE, NY 10580 914-921-5130 o FAX 914-921-5098 o RESEARCH@GABELLI.COM [EPS/PMV GRAPHIC OMITTED] TRIANGLE EPS PMV MANAGEMENT CASH FLOW RESEARCH ---------------------------------------------------------------------- ---------------------------------------------------------------------- SECURITY ANALYSIS OBJECTIVES: 1) Seek to present the important facts regarding a publicly held corporate stock or bond issue in a manner most informing and useful to an actual or potential owner. 2) Seek to reach a dependable conclusion based upon the facts and applicable standard as to the safety and attractiveness of a given security at the current market price or at some assured price. SECURITY ANALYSIS PRINCIPLES AND TECHNIQUE, GRAHAM, DODD, COTTLE. INDEPENDENT RESEARCH FOR OVER 25 YEARS GABELLI & COMPANY, INC., ONE CORPORATE CENTER, RYE, NY 10580 914-921-5130 o FAX 914-921-5098 o RESEARCH@GABELLI.COM [EPS/PMV GRAPHIC OMITTED] TRIANGLE EPS PMV MANAGEMENT CASH FLOW RESEARCH ---------------------------------------------------------------------- ---------------------------------------------------------------------- SECURITY ANALYST o Deals with the past, present and future o Describes the business o Sets forth strong and weak points o Estimates future earnings power o Makes elaborate comparisons o Finally, expresses an opinion INDEPENDENT RESEARCH FOR OVER 25 YEARS GABELLI & COMPANY, INC., ONE CORPORATE CENTER, RYE, NY 10580 914-921-5130 o FAX 914-921-5098 o RESEARCH@GABELLI.COM [EPS/PMV GRAPHIC OMITTED] TRIANGLE EPS PMV MANAGEMENT CASH FLOW RESEARCH ---------------------------------------------------------------------- GABELLI ASSET MANAGEMENT INC. -------------------------------------------------------------------------------- 6 INVESTMENT SCORECARD We had a few winners in an awful market. Positions in the consumer products sector such as J.M. Smucker, Givaudan and Gallaher Group posted respectable gains. Publishing companies Meredith Corp., PRIMEDIA and McGraw-Hill also buoyed performance. Telecommunications stocks, the worst performing industry sector in recent years, rebounded with wireless operator Nextel Communications and AT&T making our top-ten performance list. There was no particular industry theme to our laggards list. Amusement park operator Six Flags, telecom equipment manufacturers Lucent Technologies and Corning, cable television provider UnitedGlobalCom and industrial manufacturer Flowserve were among our biggest portfolio disappointments. 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. AUTONATION INC. (AN - $11.52 - NYSE) is the largest automotive retailer in the U.S., with over $20 billion in annual sales generated from 280 locations covering nearly 400 franchises. In addition to retailing new and used vehicles, the company sells vehicle finance and insurance products from third parties such as GMAC, and provides parts and repair services covered by factory warranties. The company aims to use its enormous size to spread overhead and interest costs over many locations to generate margins in excess of industry averages. BERKSHIRE HATHAWAY INC. (BRK'A - $73,900 - 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 $28 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; MiTek steel connectors; XTRA transportation leasing; GEICO insurance; and General Re reinsurance. GEICO, the sixth largest auto insurer in the U.S., contributes 17% of revenues while General Re, the fourth largest reinsurer globally, contributes 23% of revenues. CENTURYTEL INC. (CTL - $22.43 - NYSE), based in Monroe, Louisiana, is the eighth largest local telephone company in the U.S., with over 2.5 million access lines in the South and Midwest including recently closed acquisitions of 676,000 access lines from Verizon for $2.16 billion. Through acquisitions, CTL has created clusters of rural telephone and cellular companies within commuting distance of metropolitan areas in states including Wisconsin, Michigan, Ohio, Louisiana and Arkansas. In July 2001, the company received an unsolicited bid from Alltel Corp. (AT - $40.13 - NYSE) to acquire CenturyTel for $43 per share in cash and Alltel stock. CenturyTel management has rejected Alltel's initial offer. CenturyTel recently completed a sale of its wireless operations to Alltel Corp. for $1.6 billion in cash. The sale of the wireless business to Alltel and acquisition of lines from Verizon has repositioned CenturyTel as a premiere pure-play rural local exchange carrier with over 2.5 million access lines. CH ENERGY GROUP INC. (CHG - $46.93 - NYSE) is the last small electric utility in New York State, now that RGS Energy has been acquired by Energy East (EAS - $19.81 - NYSE). CH Energy serves the territory directly north of New York City that is mainly rural and suburban. There are several potential buyers for whom CH Energy would be a good fit, including Consolidated Edison (ED - $40.22 - NYSE), Energy East, KeySpan (KSE - $33.50 - NYSE), 7 National Grid (NGG - $35.60 - NYSE) or Public Service Enterprise Group (PEG - $30.50 - NYSE). The buyer could create significant savings by rationalizing outside plant operations and eliminating all of the corporate, finance, regulatory and public company overhead, for the benefit of shareholders and customers. Although it is tough to predict when a deal might happen, we would point out that National Grid completed its takeover of Niagara Mohawk several months ago and Grid has typically waited less than a year between takeovers in the U.S. where it has already bought three utilities. Con Edison meanwhile, having done a terrific job in the aftermath of September 11 and with a strong balance sheet and premium stock price valuation, might be ready to make an offer for CH Energy. CRANE CO. (CR - $19.76 - NYSE) is a diversified industrial company that focuses on proprietary engineered products in aerospace, fiberboard panels, vending machines, pumps and valves, and industrial controls. CEO Eric Fast is focusing on improving operations by leveraging the firm's intellectual capital by creating a culture where different business groups share experience, improve customer focus and improve operational performance. The company has a strong balance sheet, with a 29% net debt to capital ratio, and generates about $100 million of free cash flow a year. Crane has $1 billion available to spend on acquisitions of which half comes from free cash flow and the other half from debt. Acquisitions will focus on strengthening the existing businesses and enhancing earnings growth. FLOWSERVE CORP. (FLS - $10.00 - NYSE) is a manufacturer of engineered pumps, control valves and mechanical seals for the petroleum, chemical, power, water and other general industries. After integrating the operations of Ingersoll-Dresser Pump, Flowserve purchased the flow control business from Invensys. Invensys Flow Control (IFC) is a manufacturer of valves and valves automation products, with $500 million of revenues. The transaction gives Flowserve a better balance of end markets, greater geographical reach, economies of scale and plant consolidation opportunities. Already the second largest global pump company, IFC makes Flowserve the second largest global valve company. The critical mass should allow the company to gain market share as customers are reducing their suppliers and moving to one stop shopping. Consistent with the company's acquisition strategy, the transaction is expected to be accretive in the first year of ownership. IRISH LIFE & PERMANENT PLC (IPM.I - $11.36 - DUBLIN STOCK EXCHANGE) is the third largest financial institution in Ireland. The company offers a broad array of financial products to consumers in Ireland. Expansion into overseas markets has been reversed, making Irish Life & Permanent a pure play on the exciting growth prospects for the Irish economy. KELLOGG CO. (K - $33.25 - NYSE), a producer of cereal and convenience foods, completed its largest acquisition in company history in March 2001 with the purchase of Keebler Foods Company. Keebler is the number two cookie and cracker producer in the United States. Along with Keebler's top brands, Kellogg acquired their direct store door (DSD) delivery system, which is now being utilized for its own snack brands. This year Kellogg is focused on the integration of Keebler and has placed a renewed emphasis on profitable sales growth and cash flow. Kellogg's other food brands include Special K, Rice Krispies, Pop-Tarts, Nutri-Grain, Eggo, Cheez-It, Carr's, Morningstar Farms, Famous Amos and Kashi. SCRIPPS (E.W.) CO. (SSP - $69.30 - NYSE), headquartered in Cincinnati, Ohio, is a diversified media company with operations throughout the United States combining traditional and new media. The company is the tenth largest newspaper publisher in the U.S. with 21 daily newspapers. Scripps also has 10 television stations, reaching one in every ten homes in America. Additionally, Scripps Networks includes four national cable networks: Home & Garden Television, Food Network, Do It Yourself, and Fine Living. Lastly, the company has a global licensing and syndication business which syndicates more than 150 comic strips and editorial features, including PEANUTS and DILBERT. Scripps is focused on growing and strengthening its cable television business. 8 STARWOOD HOTELS & RESORTS WORLDWIDE INC. (HOT - $22.30 - NYSE) is one of the world's largest hotel and leisure companies with 745 hotels, 225,208 rooms and 14 timeshare resorts in its system. The company's brands primarily compete in the upper-upscale segment of the lodging industry and include St. Regis, The Luxury Collection, Sheraton, Westin, W and Four Points by Sheraton. 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, 2002 of $0.453125 per share. For the twelve months ended September 30, 2002, Preferred Stock shareholders received distributions totaling $1.8125, the annual dividend rate per share of Preferred Stock. The next distribution is scheduled for December 2002. The Preferred Shares will be callable at any time at the liquidation value of $25.00 per share plus accrued dividends following the expiration of the five-year call protection on June 9, 2003. 7.20% TAX ADVANTAGED SERIES B CUMULATIVE PREFERRED STOCK - DIVIDENDS The Trust's 7.20% Tax Advantaged Series B Cumulative Preferred Stock paid a cash distribution on September 26, 2002 of $0.45 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 2002. SERIES C AUCTION RATE CUMULATIVE PREFERRED STOCK On June 27, 2002, the Trust successfully completed its offering of 5,200 Shares of Series C Auction Rate Cumulative Preferred Stock at $25,000 per share. The dividend rates for the Series C Preferred Shares ranged from 1.80% to 1.95% during the third quarter. Dividend rates for the Preferred Shares are cumulative at a rate that may be reset every seven days based on the results of an auction. The Preferred Shares do not trade on an exchange. 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 closedend@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 Charles Minter & Martin Weiner Charles Minter & Martin Weiner Ivan Arteaga 2nd Wednesday Caesar Bryan Walter Walsh & Laura Linehan Charles Minter & Martin Weiner 3rd Wednesday Walter Walsh & Laura Linehan Hart Woodson Walter Walsh & Laura Linehan 4th Wednesday Barbara Marcin Barbara Marcin 9 All chat sessions start at 4:15 PM (Eastern Time). Please arrive early, as participation is limited. You may sign up for our e-mail alerts at www.gabelli.com and receive early notice of chat sessions, closing mutual fund prices, news events and media sightings. IN CONCLUSION The great irony is that investors' appetite for stocks is always strongest near market tops and weakest near market bottoms. It is important to remember that like bull markets, bear markets always end, usually when least expected. We do not know when the market will bottom. However, we believe low interest rates and increasingly attractive equity valuations point to more fertile days for firms that have focused research efforts. The goal of every portfolio manager and every analyst is to find well managed, growing companies that are selling at a discount to their intrinsic value, particularly where a catalyst is in place. We have long argued that in a world of rapid change, Mr. Market will provide us with many opportunities to load up our portfolios with these "stock picks." The events of the third quarter will again prove a fertile ground for the type of analysis that Graham and Dodd heralded in the 1930s. Sincerely, /S/ MARIO J. GABELLI MARIO J. GABELLI, CFA Portfolio Manager and Chief Investment Officer November 1, 2002 -------------------------------------------------------------------------------- SELECTED HOLDINGS SEPTEMBER 30, 2002 ------------------ AutoNation Inc. Flowserve Corp. Berkshire Hathaway Inc. Irish Life & Permanent plc CenturyTel Inc. Kellogg Co. CH Energy Group Inc. Scripps (E.W.) Co. Crane Co. Starwood Hotels & Resorts Worldwide 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. 10 THE GABELLI EQUITY TRUST INC. PORTFOLIO CHANGES QUARTER ENDED SEPTEMBER 30, 2002 (UNAUDITED) OWNERSHIP AT SEPTEMBER 30, SHARES 2002 --------- ------------ NET PURCHASES COMMON STOCKS ATX Communications Inc. (a) ............ 40,540 40,540 Aventis SA ............................. 3,000 15,000 BAE Systems plc ........................ 25,000 125,000 Boots Co. plc .......................... 15,000 75,000 BorgWarner Inc. ........................ 1,000 37,802 Cablevision Systems Corp., Cl. A (b) ... 1,016,443 1,551,443 Cadbury Schweppes plc, ADR ............. 4,200 15,000 Campbell Soup Co. ...................... 10,000 80,000 Carlsberg AS, Cl. B .................... 11,000 11,000 ConocoPhillips (c) ..................... 98,217 98,217 Denny's Corp. .......................... 62,463 62,463 Denny's Corp., warrants, expires 01/07/05 .................... 10,108 10,108 Disney (Walt) Co. ...................... 40,000 260,000 DPL Inc. ............................... 5,000 20,000 Duke Energy Corp. ...................... 580,000 580,000 El Paso Corp. .......................... 40,000 120,000 EMI Group plc .......................... 110,000 110,000 Energy East Corp. ...................... 10,000 30,000 Exxon Mobile Corp. ..................... 40,000 40,000 Fast Retailing Co. Ltd. ................ 10,000 10,000 FleetBoston Financial Corp. ............ 50,000 50,000 Gas Natural SDG SA ..................... 5,000 30,000 Gemstar-TV Guide International Inc. .... 100,000 240,432 Gray Television Inc. ................... 25,000 25,000 Gray Television Inc., Cl. A ............ 28,000 28,000 Hershey Foods Corp. .................... 15,000 15,000 Honeywell International Inc. ........... 20,000 400,000 Ito-Yokado Co. Ltd. .................... 8,000 8,000 Mellon Financial Corp. ................. 15,000 100,000 Midland Co. (d) ........................ 99,700 199,400 Nestle SA .............................. 1,000 1,000 Nikko Cordial Corp. .................... 21,000 207,500 NTL Inc., rights (e) ................... 298 298 Qwest Communications International Inc. .................. 500,000 700,000 Royal Dutch Petroleum Co. .............. 7,500 7,500 SBC Communications Inc. ................ 20,000 225,000 Six Flags Inc. ......................... 125,000 225,000 TELUS Corp., Non-Voting ................ 4,250 4,250 Terumo Corp. ........................... 20,000 20,000 Texas Instruments Inc. ................. 90,000 200,000 Tyco International Ltd. ................ 20,000 55,000 Vivendi Universal SA ................... 5,000 40,900 Vivendi Universal SA, ADR .............. 80,000 310,000 Wrigley (Wm.) Jr. Co. .................. 27,000 177,000 Wyeth .................................. 17,000 55,000 Xcel Energy Inc. ....................... 60,000 60,000 OWNERSHIP AT SEPTEMBER 30, SHARES 2002 --------- ------------ PREFERRED STOCKS Citizens Communications Co., 5.000% Cv. Pfd. ..................... 1,000 21,000 Hercules Trust I, 9.420% Pfd. .......... 251,800 273,500 PRINCIPAL AMOUNT CORPORATE BONDS --------- Charter Communications Inc., Cv., 4.750%, 06/01/06 ............... $ 400,000 $1,300,000 SHARES NETSALES --------- COMMON STOCKS Acterna Corp. .......................... (8,000) 60,000 Adelphia Communications Corp., Cl. A ............................... (20,000) 100,000 Advantica Restaurant Group Inc. ........ (10,108) -- Advantica Restaurant Group Inc., warrants, expires 01/07/05 .......... (62,463) -- Allegiance Telecom Inc. ................ (3,000) 6,000 Cheung Kong Life Science International Inc., rights .......... (3,000) -- Compagnie Financiere Richemont AG, Cl. A ............................... (10,000) 100,000 Conoco Inc. (c) ........................ (210,000) -- CoreComm Ltd. (a) ...................... (1,577,000) -- CRH plc ................................ (20,000) 92,500 Energizer Holdings Inc. (f) ............ (345,001) -- Ferro Corp. ............................ (10,000) 330,000 France Telecom SA, ADR ................. (3,000) 24,000 Gray Communications Systems Inc. ....... (28,000) -- Gray Communications Systems Inc., Cl. B ............................... (25,000) -- HBOS plc ............................... (66,000) -- Leap Wireless International Inc. ....... (17,100) 142,900 Midas Inc. ............................. (5,000) 105,000 mm02 plc, ADR .......................... (15,200) 125,600 Muenchener Rueckversicherungs- Gesellschaft AG ..................... (5,000) -- Nortek Inc. ............................ (2,200) 137,800 Novartis AG ............................ (5,000) 41,000 Prudential plc ......................... (50,000) -- Rainbow Media Group, Cl. A (b) ......... (560,000) -- Rohm and Haas Co. ...................... (5,000) 15,000 Superior Industries International Inc. . (1,000) 24,000 Swiss Re ............................... (4,200) -- Syratech Corp. ......................... (10,425) -- TELUS Corp., Non-Voting, ADR ........... (4,250) 27,500 THK Co. Ltd. ........................... (33,000) -- Viacom Inc., Cl. A ..................... (10,000) 840,000 Winn-Dixie Stores Inc. ................. (15,000) 25,000 11 THE GABELLI EQUITY TRUST INC. PORTFOLIO CHANGES (CONTINUED) QUARTER ENDED SEPTEMBER 30, 2002 (UNAUDITED) OWNERSHIP AT PRINCIPAL SEPTEMBER 30, AMOUNT 2002 --------- ------------ CORPORATE BONDS Standard Motor Products Inc., Sub. Deb. Cv., 6.750%, 07/15/09 ............................ $ (100,000) $1,400,000 --------------- (a) Merger - 0.0257 shares of ATX Communications Inc. for every 1 share of CoreComm Ltd. (b) Merger - 1.1909 shares of Cablevision Systems Corp., Cl. A for every 1 share of Rainbow Media Group, Cl. A (c) Merger - 0.4677 shares of ConocoPhillips for every 1 share of Conoco Inc. (d) 2 for 1 stock split (e) Spinoff - 0.0149 shares of NTL Inc., rights for every 1 share of NTL Inc. (f) Tender Offer at $29.00 per share 12 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2002 (UNAUDITED) MARKET SHARES VALUE ------ ------ COMMON STOCKS -- 84.2% FINANCIAL SERVICES -- 7.7% 90,000 Allstate Corp. .............................. $ 3,199,500 550,000 American Express Co. ........................ 17,149,000 36,400 Argonaut Group Inc. ......................... 627,900 90,000 Banco Santander Central Hispano SA, ADR ................................... 466,200 110,000 Bank of Ireland ............................. 1,070,769 80,000 Bank of New York Co. Inc. ................... 2,299,200 85,000 Bank One Corp. .............................. 3,179,000 282,000 Bankgesellschaft Berlin AG+ ................. 501,636 260 Berkshire Hathaway Inc., Cl. A+ ............. 19,214,000 5,000 Block (H&R) Inc. ............................ 210,050 190,000 Commerzbank AG, ADR ......................... 1,248,661 160,000 Deutsche Bank AG, ADR ....................... 7,267,200 20,000 Dun and Bradstreet Corp.+ ................... 672,200 50,000 FleetBoston Financial Corp. ................. 1,016,500 25,000 Hibernia Corp., Cl. A ....................... 499,750 20,000 Invik & Co. AB, Cl. B ....................... 314,911 100,000 Irish Life & Permanent plc, Dublin .......... 1,136,487 60,000 John Hancock Financial Services Inc. ........ 1,668,000 50,000 JP Morgan Chase & Co. ....................... 949,500 64,000 Leucadia National Corp. ..................... 2,176,000 100,000 Mellon Financial Corp. ...................... 2,593,000 199,400 Midland Co. ................................. 3,355,902 30,000 Moody's Corp. ............................... 1,455,000 207,500 Nikko Cordial Corp. ......................... 986,877 185,000 Phoenix Companies Inc. ...................... 2,519,700 2,500 Prudential Financial Inc.+ .................. 71,400 60,000 RAS SpA ..................................... 705,017 60,000 Riggs National Corp. ........................ 857,400 50,000 Schwab (Charles) Corp. ...................... 435,000 80,000 State Street Corp. .......................... 3,091,200 30,000 Stilwell Financial Inc. ..................... 362,100 20,000 SunTrust Banks Inc. ......................... 1,229,600 100,000 T. Rowe Price Group Inc. .................... 2,496,000 7,000 Travelers Property Casualty Corp., Cl. A+ .................................... 92,400 58,500 Unitrin Inc. ................................ 1,795,950 130,000 Wachovia Corp. .............................. 4,249,700 55,100 Waddell & Reed Financial Inc., Cl. A ........ 973,066 -------------- 92,135,776 -------------- TELECOMMUNICATIONS -- 7.6% 8,132 Aliant Inc. ................................. 152,415 6,000 Allegiance Telecom Inc.+ .................... 4,980 30,000 ALLTEL Corp. ................................ 1,203,900 1,500,000 AT&T Corp. .................................. 18,015,000 40,540 ATX Communications Inc.+ .................... 15,000 3,333 Avaya Inc.+ ................................. 4,766 320,000 BCE Inc. .................................... 5,664,000 33,400 Brasil Telecom Participacoes SA, ADR ........ 741,814 850,000 Broadwing Inc.+ ............................. 1,683,000 MARKET SHARES VALUE ------ ------ 1,775,000 BT Group plc ................................ $ 4,591,863 34,000 BT Group plc, ADR ........................... 878,560 3,338,192 Cable & Wireless Jamaica Ltd. ............... 86,087 173,000 Cable & Wireless plc, ADR ................... 934,200 130,000 CenturyTel Inc. ............................. 2,915,900 100,000 Citizens Communications Co.+ ................ 678,000 255,466 Commonwealth Telephone Enterprises Inc.+ ......................... 8,882,553 20,000 Commonwealth Telephone Enterprises Inc., Cl. B+ .................. 695,800 45,000 Compania de Telecomunicaciones de Chile SA, ADR ............................. 393,300 240,278 Deutsche Telekom AG, ADR .................... 1,987,099 200,000 Embratel Participacoes SA, ADR+ ............. 120,000 24,000 France Telecom SA, ADR ...................... 167,520 230 Japan Telecom Holdings Co. Ltd. ............. 572,449 100,000 KPN NV+ ..................................... 518,831 700,000 Qwest Communications International Inc.+ ....................... 1,596,000 110,000 RCN Corp.+ .................................. 56,100 9,655 Rogers Communications Inc., Cl. B+ .......... 60,868 110,345 Rogers Communications Inc., Cl. B, ADR+ ............................... 692,967 225,000 SBC Communications Inc. ..................... 4,522,500 350,000 Sprint Corp. - FON Group .................... 3,192,000 186,554 Tele Norte Leste Participacoes SA, ADR ................................... 988,736 40,000 Telecom Argentina Stet France Telecom SA, ADR+ .......................... 32,800 400,040 Telecom Italia SpA .......................... 2,850,397 123,000 Telecom Italia SpA, ADR ..................... 8,776,050 135,000 Telecom Italia SpA, RNC ..................... 671,071 265,139 Telefonica SA, ADR+ ......................... 5,923,205 16,912 Telefonica SA, BDR+ ......................... 121,262 36,000 Telefonos de Mexico SA, Cl. L, ADR .......... 1,013,400 12,750 TELUS Corp. ................................. 94,366 52,500 TELUS Corp., ADR ............................ 388,565 4,250 TELUS Corp., Non-Voting ..................... 28,937 27,500 TELUS Corp., Non-Voting, ADR ................ 187,238 340,000 Verizon Communications Inc. ................. 9,329,600 120,000 WorldCom Inc. - MCI Group ................... 19,200 -------------- 91,452,299 -------------- FOOD AND BEVERAGE -- 7.5% 15,000 Cadbury Schweppes plc, ADR .................. 400,050 80,000 Campbell Soup Co. ........................... 1,766,400 11,000 Carlsberg AS, Cl. B ......................... 570,815 30,000 Coca-Cola Co. ............................... 1,438,800 50,000 Coca-Cola Enterprises Inc. .................. 1,062,000 20,000 Coca-Cola Hellenic Bottling Co. SA .......... 291,336 100,000 Corn Products International Inc. ............ 2,875,000 10,108 Denny's Corp.+ .............................. 7,682 100,000 Diageo plc .................................. 1,240,799 13 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED) MARKET SHARES VALUE ------ ------ COMMON STOCKS (CONTINUED) FOOD AND BEVERAGE (CONTINUED) 224,000 Diageo plc, ADR ............................. $ 11,179,840 20,000 Dreyer's Grand Ice Cream Inc. ............... 1,397,200 41,600 Flowers Foods Inc.+ ......................... 945,568 90,000 General Mills Inc. .......................... 3,997,800 440,000 Grupo Bimbo SA de CV, Ser. A ................ 653,796 20,000 Hain Celestial Group Inc.+ .................. 293,000 114,000 Heinz (H.J.) Co. ............................ 3,804,180 15,000 Hershey Foods Corp. ......................... 930,750 30,000 Interbrew SA ................................ 710,947 350,000 Kellogg Co. ................................. 11,637,500 75,000 Kerry Group plc, Cl. A ...................... 964,214 60,500 LVMH Moet Hennessy Louis Vuitton, ADR .............................. 441,650 41,300 Mondavi (Robert) Corp., Cl. A+ .............. 1,257,998 1,000 Nestle SA ................................... 218,569 150,000 Parmalat Finanziaria SpA .................... 410,618 600,595 PepsiAmericas Inc. .......................... 8,528,449 500,000 PepsiCo Inc. ................................ 18,475,000 7,000 Pernod-Ricard SA ............................ 629,515 60,000 Ralcorp Holdings Inc.+ ...................... 1,276,200 20,000 Sara Lee Corp. .............................. 365,800 2,000 Smucker (J.M.) Co. .......................... 73,400 103,854 Tootsie Roll Industries Inc. ................ 3,086,541 177,000 Wrigley (Wm.) Jr. Co. ....................... 8,759,730 -------------- 89,691,147 -------------- ENERGY AND UTILITIES -- 6.5% 52,000 AES Corp.+ .................................. 130,520 70,000 AGL Resources Inc. .......................... 1,546,300 37,400 Apache Corp. ................................ 2,223,430 120,000 BP plc ...................................... 802,038 248,800 BP plc, ADR ................................. 9,927,120 150,000 Burlington Resources Inc. ................... 5,754,000 115,000 CH Energy Group Inc. ........................ 5,396,950 20,000 Cinergy Corp. ............................... 628,600 98,217 ConocoPhillips .............................. 4,541,554 10,000 Constellation Energy Group Inc. ............. 247,900 2,500 Dominion Resources Inc. ..................... 126,825 20,000 DPL Inc. .................................... 329,000 100,000 DQE Inc. .................................... 1,500,000 30,366 DTE Energy Co. .............................. 1,235,896 580,000 Duke Energy Corp. ........................... 11,339,000 120,000 El Paso Corp. ............................... 992,400 400,000 El Paso Electric Co.+ ....................... 4,752,000 30,000 Energy East Corp. ........................... 594,300 40,000 Exxon Mobil Corp. ........................... 1,276,000 9,400 FPL Group Inc. .............................. 505,720 30,000 Gas Natural SDG SA .......................... 508,454 280,000 Halliburton Co. ............................. 3,614,800 38,632 Kerr-McGee Corp. ............................ 1,678,174 90,000 Mirant Corp.+ ............................... 198,900 100,000 NiSource Inc.+ .............................. 181,000 MARKET SHARES VALUE ------ ------ 250,000 Northeast Utilities ......................... $ 4,225,000 358,200 Pennzoil-Quaker State Co. ................... 7,869,654 100,000 Progress Energy Inc., CVO+ .................. 21,000 7,500 Royal Dutch Petroleum Co. ................... 301,275 10,400 SJW Corp. ................................... 811,200 14,000 Southwest Gas Corp. ......................... 311,500 7,907 Total Fina Elf SA ........................... 1,040,837 260,000 Westar Energy Inc. .......................... 2,615,600 60,000 Xcel Energy Inc. ............................ 558,600 -------------- 77,785,547 -------------- ENTERTAINMENT -- 6.0% 620,000 AOL Time Warner Inc.+ ....................... 7,254,000 160,000 Canal Plus, ADR ............................. 132,192 260,000 Disney (Walt) Co. ........................... 3,936,400 110,000 EMI Group plc ............................... 294,080 100,000 EMI Group plc, ADR .......................... 534,680 120,000 Fox Entertainment Group Inc., Cl. A+ ........ 2,643,600 50,000 GC Companies Inc.+ .......................... 14,750 240,432 Gemstar-TV Guide International Inc.+ ........ 605,889 24,000 Liberty Livewire Corp., Cl. A+ .............. 37,680 1,840,000 Liberty Media Corp., Cl. A+ ................. 13,211,200 300,000 Metro-Goldwyn-Mayer Inc.+ ................... 3,585,000 160,000 Publishing & Broadcasting Ltd. .............. 681,572 15,000 Regal Entertainment Group, Cl. A+ ........... 267,000 225,000 Six Flags Inc.+ ............................. 792,000 840,000 Viacom Inc., Cl. A+ ......................... 34,062,000 40,900 Vivendi Universal SA ........................ 458,760 310,000 Vivendi Universal SA, ADR ................... 3,530,900 -------------- 72,041,703 -------------- PUBLISHING -- 5.1% 20,000 Dow Jones & Co. Inc. ........................ 768,200 196,000 Independent News & Media plc, Dublin .................................... 261,491 15,900 Knight-Ridder Inc. .......................... 896,919 5,000 McClatchy Co., Cl. A ........................ 304,750 105,000 McGraw-Hill Companies Inc. .................. 6,428,100 400,000 Media General Inc., Cl. A ................... 20,340,000 125,000 Meredith Corp. .............................. 5,381,250 115,000 New York Times Co., Cl. A ................... 5,226,750 120,000 News Corp. Ltd. ............................. 573,120 11,016 News Corp. Ltd., ADR ........................ 212,058 400,000 Penton Media Inc.+ .......................... 96,000 350,000 PRIMEDIA Inc.+ .............................. 486,500 33,000 Pulitzer Inc. ............................... 1,374,450 140,000 Reader's Digest Association Inc., Cl. B ..... 2,592,800 400,000 SCMP Group Ltd. ............................. 173,087 70,000 Scripps (E.W.) Co., Cl. A ................... 4,851,000 91,842 Seat-Pagine Gialle SpA+ ..................... 53,278 75,000 Thomas Nelson Inc.+ ......................... 660,000 250,000 Tribune Co. ................................. 10,452,500 -------------- 61,132,253 -------------- 14 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED) MARKET SHARES VALUE ------ ------ COMMON STOCKS (CONTINUED) DIVERSIFIED INDUSTRIAL -- 5.0% 220,000 Acuity Brands Inc. .......................... $ 2,697,200 195,000 Ampco-Pittsburgh Corp. ...................... 1,912,950 120,000 Cooper Industries Ltd., Cl. A ............... 3,642,000 270,000 Crane Co. ................................... 5,335,200 110,000 GATX Corp. .................................. 2,178,000 200,000 GenTek Inc. ................................. 16,000 260,000 Greif Bros. Corp., Cl. A .................... 6,370,000 3,400 Greif Bros. Corp., Cl. B .................... 91,375 400,000 Honeywell International Inc. ................ 8,664,000 120,000 ITT Industries Inc. ......................... 7,479,600 400,600 Lamson & Sessions Co.+ ...................... 1,382,070 34,500 National Service Industries Inc. ............ 209,070 83,715 Park-Ohio Holdings Corp.+ ................... 334,860 213,800 Sensient Technologies Corp. ................. 4,517,594 10,000 Smiths Group plc ............................ 100,805 6,000 Sulzer AG+ .................................. 773,815 100,000 Thomas Industries Inc. ...................... 2,480,000 50,000 Trinity Industries Inc. ..................... 823,000 170,000 TRW Inc. .................................... 9,953,500 55,000 Tyco International Ltd. ..................... 775,500 -------------- 59,736,539 -------------- EQUIPMENT AND SUPPLIES -- 4.9% 120,000 AMETEK Inc. ................................. 3,494,400 2,000 Amphenol Corp., Cl. A+ ...................... 62,000 10,000 Caterpillar Inc. ............................ 372,200 95,000 CIRCOR International Inc. ................... 1,273,000 320,000 Deere & Co. ................................. 14,544,000 216,000 Donaldson Co. Inc. .......................... 7,415,280 135,000 Flowserve Corp.+ ............................ 1,350,000 13,000 Franklin Electric Co. Inc. .................. 555,750 100,000 Gerber Scientific Inc.+ ..................... 385,000 75,000 GrafTech International Ltd.+ ................ 543,750 211,300 IDEX Corp. .................................. 6,032,615 20,000 Ingersoll-Rand Co., Cl. A ................... 688,800 60,000 Lufkin Industries Inc. ...................... 1,476,000 1,000 Manitowoc Co. Inc. .......................... 27,350 425,000 Navistar International Corp.+ ............... 9,214,000 28,000 Olympus Optical Co. Ltd. .................... 410,087 30,000 PACCAR Inc. ................................. 1,013,700 170,000 SPS Technologies Inc.+ ...................... 4,238,100 60,000 Sybron Dental Specialties Inc.+ ............. 839,400 20,000 Terumo Corp. ................................ 295,712 250,000 Watts Industries Inc., Cl. A ................ 4,100,000 100,000 Weir Group plc .............................. 318,456 -------------- 58,649,600 -------------- CONSUMER PRODUCTS -- 4.0% 70,000 Altadis SA .................................. 1,563,411 43,000 Christian Dior SA ........................... 1,229,798 10,000 Church & Dwight Co. Inc. .................... 331,500 100,000 Compagnie Financiere Richemont AG, Cl. A ..................................... $ 1,483,146 MARKET SHARES VALUE ------ ------ 50,000 Department 56 Inc.+ ......................... 522,500 90,000 Fortune Brands Inc. ......................... 4,256,100 250,000 Gallaher Group plc, ADR ..................... 9,575,000 300,000 Gillette Co. ................................ 8,880,000 2,000 Givaudan SA ................................. 895,996 60,000 Harley-Davidson Inc. ........................ 2,787,000 15,000 Matsushita Electric Industrial Co. Ltd., ADR ............................... 155,550 100,000 Mattel Inc. ................................. 1,801,000 30,000 Maytag Corp. ................................ 695,400 50,000 National Presto Industries Inc. ............. 1,444,000 9,500 Nintendo Co. Ltd. ........................... 1,106,538 20,000 Philip Morris Companies Inc. ................ 776,000 100,000 Procter & Gamble Co. ........................ 8,938,000 32,000 Shimano Inc. ................................ 479,711 15,000 Swatch Group AG, Cl. B ...................... 1,119,996 -------------- 48,040,646 -------------- WIRELESS COMMUNICATIONS -- 3.4% 95,000 America Movil SA de CV, Cl. L, ADR .......... 1,147,600 550,170 AT&T Wireless Services Inc.+ ................ 2,266,700 142,900 Leap Wireless International Inc.+ ........... 32,867 1,775,000 mm02 plc+ ................................... 1,116,562 125,600 mm02 plc, ADR+ .............................. 777,464 240,000 Nextel Communications Inc., Cl. A+ .......... 1,812,000 1,000 NTT DoCoMo Inc. ............................. 1,708,559 250,000 Rogers Wireless Communications Inc., Cl. B+ .................................... 1,365,000 230,000 Sprint Corp. - PCS Group+ ................... 450,800 16,700 Tele Celular Sul Participacoes SA, ADR ...... 110,220 55,666 Tele Centro Oeste Celular Participacoes SA, ADR ..................... 129,145 3,340 Tele Leste Celular Participacoes SA, ADR ....................................... 16,533 8,350 Tele Nordeste Celular Participacoes SA, ADR ................................... 106,880 3,340 Tele Norte Celular Participacoes SA, ADR+ .................................. 12,291 1,400,000 Telecom Italia Mobile SpA ................... 5,451,185 8,350 Telemig Celular Participacoes SA, ADR ....... 111,807 450,000 Telephone & Data Systems Inc. ............... 22,702,500 66,800 Telesp Celular Participacoes SA, ADR+ ....... 120,908 453,888 Vodafone Group plc .......................... 581,743 100,000 Vodafone Group plc, ADR ..................... 1,283,000 -------------- 41,303,764 -------------- AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.2% 20,000 ArvinMeritor Inc. ........................... 374,000 37,802 BorgWarner Inc. ............................. 1,876,491 100,000 CLARCOR Inc. ................................ 3,070,000 320,061 Dana Corp. .................................. 4,186,398 65,000 Delphi Corp. ................................ 555,750 15 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED) MARKET SHARES VALUE ------ ------ COMMON STOCKS (CONTINUED) AUTOMOTIVE: PARTS AND ACCESSORIES (CONTINUED) 260,000 GenCorp Inc. ................................ $ 2,615,600 210,000 Genuine Parts Co. ........................... 6,434,400 114,000 Johnson Controls Inc. ....................... 8,757,480 105,000 Midas Inc.+ ................................. 525,000 335,000 Modine Manufacturing Co. .................... 6,371,700 20,000 O'Reilly Automotive Inc.+ ................... 572,400 70,800 Scheib (Earl) Inc.+ ......................... 194,700 163,000 Standard Motor Products Inc. ................ 1,762,030 24,000 Superior Industries International Inc. ...... 1,129,920 105,000 TransPro Inc.+ .............................. 514,500 -------------- 38,940,369 -------------- HEALTH CARE -- 2.6% 20,000 Abbott Laboratories ......................... 808,000 60,000 Amgen Inc.+ ................................. 2,502,000 40,000 Apogent Technologies Inc.+ .................. 746,400 10,000 AstraZeneca plc, London ..................... 303,202 35,146 AstraZeneca plc, Stockholm .................. 1,046,139 15,000 Aventis SA .................................. 785,658 26,000 Biogen Inc.+ ................................ 761,020 110,000 Bristol-Myers Squibb Co. .................... 2,618,000 23,000 Centerpulse AG+ ............................. 3,465,877 75,036 GlaxoSmithKline plc ......................... 1,451,441 4,000 GlaxoSmithKline plc, ADR .................... 153,720 56,011 Invitrogen Corp.+ ........................... 1,908,295 40,000 Merck & Co. Inc. ............................ 1,828,400 41,000 Novartis AG ................................. 1,621,109 108,000 Novartis AG, Registered ..................... 4,290,840 65,000 Pfizer Inc. ................................. 1,886,300 17,900 Roche Holding AG ............................ 1,210,773 20,000 Sanofi-Synthelabo SA ........................ 1,127,593 10,000 Schering-Plough Corp. ....................... 213,200 14,000 Takeda Chemical Industries Ltd. ............. 564,646 55,000 Wyeth ....................................... 1,749,000 -------------- 31,041,613 -------------- HOTELS AND GAMING -- 2.3% 110,000 Aztar Corp.+ ................................ 1,453,100 90,000 Boca Resorts Inc., Cl. A+ ................... 918,000 240,000 Gaylord Entertainment Co.+ .................. 4,540,800 30,000 Greek Organization of Football Prognostics ............................... 286,988 8,000 GTECH Holdings Corp.+ ....................... 198,560 2,460,000 Hilton Group plc ............................ 6,189,844 650,000 Hilton Hotels Corp. ......................... 7,397,000 60,000 MGM Mirage+ ................................. 2,238,000 430,000 Park Place Entertainment Corp.+ ............. 3,418,500 50,000 Starwood Hotels & Resorts Worldwide Inc. ............................ 1,115,000 -------------- 27,755,792 -------------- RETAIL -- 2.0% 200,000 Albertson's Inc. ............................ $ 4,832,000 300,000 AutoNation Inc.+ ............................ 3,456,000 75,000 Boots Co. plc ............................... 623,348 10,000 Coldwater Creek Inc.+ ....................... 131,800 16,000 Delhaize Le Lion SA, ADR .................... 259,040 10,000 Fast Retailing Co. Ltd. ..................... 257,927 33,000 Gucci Group NV, ADR ......................... 2,785,530 8,000 Ito-Yokado Co. Ltd. ......................... 314,112 100,000 Lillian Vernon Corp. ........................ 549,000 90,000 Neiman Marcus Group Inc., Cl. A+ ............ 2,362,500 320,000 Neiman Marcus Group Inc., Cl. B+ ............ 7,840,000 7,750 Tod's SpA ................................... 193,388 25,000 Winn-Dixie Stores Inc. ...................... 328,000 -------------- 23,932,645 -------------- AEROSPACE -- 1.8% 125,000 BAE Systems plc ............................. 377,430 115,000 Boeing Co. .................................. 3,924,950 100,000 Lockheed Martin Corp. ....................... 6,467,000 91,000 Northrop Grumman Corp. ...................... 11,287,640 -------------- 22,057,020 -------------- CONSUMER SERVICES -- 1.6% 40,000 Loewen Group Inc.+ .......................... 1,200 505,000 Rollins Inc. ................................ 9,797,000 490,000 USA Interactive Inc.+ ....................... 9,496,200 -------------- 19,294,400 -------------- REAL ESTATE -- 1.6% 450,000 Catellus Development Corp.+ ................. 8,302,500 75,000 Cheung Kong (Holdings) Ltd. ................. 473,104 44,000 Florida East Coast Industries Inc., Cl. A ... 1,038,400 58,451 Florida East Coast Industries Inc., Cl. B ... 1,282,999 55,000 Griffin Land & Nurseries Inc.+ .............. 737,000 4,753 HomeFed Corp.+ .............................. 4,706 253,000 St. Joe Co. ................................. 6,982,800 -------------- 18,821,509 -------------- CABLE -- 1.5% 100,000 Adelphia Communications Corp., Cl. A+ .................................... 12,500 1,551,443 Cablevision Systems Corp., Cl. A+ ........... 14,056,074 30,000 Charter Communications Inc., Cl. A+ ......... 55,800 40,000 Comcast Corp., Cl. A+ ....................... 853,200 85,000 Comcast Corp., Cl. A, Special+ .............. 1,773,100 20,000 NTL Inc.+ ................................... 260 20,000 Shaw Communications Inc., Cl. B ............. 164,290 80,000 Shaw Communications Inc., Cl. B, Non-Voting ................................ 665,600 370,000 UnitedGlobalCom Inc., Cl. A+ ................ 606,800 -------------- 18,187,624 -------------- 16 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED) MARKET SHARES VALUE ------ ------ COMMON STOCKS (CONTINUED) AVIATION: PARTS AND SERVICES -- 1.4% 101,320 Curtiss-Wright Corp., Cl. B ................. $ 5,952,550 90,000 Fairchild Corp., Cl. A+ ..................... 467,100 60,000 Precision Castparts Corp. ................... 1,300,800 84,500 Sequa Corp., Cl. A+ ......................... 4,402,450 78,000 Sequa Corp., Cl. B+ ......................... 4,485,000 -------------- 16,607,900 -------------- BROADCASTING -- 1.4% 15,015 Clear Channel Communications Inc.+ .......... 521,771 16,666 Corus Entertainment Inc., Cl. B+ ............ 199,523 25,000 Gray Television Inc. ........................ 273,750 28,000 Gray Television Inc., Cl. A ................. 376,600 195,000 Grupo Televisa SA, ADR+ ..................... 4,970,550 200,000 Liberty Corp. ............................... 7,160,000 5,000 LIN TV Corp., Cl. A+ ........................ 123,750 4,000 Nippon Broadcasting System Inc. ............. 118,285 40,375 NRJ Group ................................... 570,578 131,000 Paxson Communications Corp.+ ................ 288,200 14,700 RTL Group, Brussels ......................... 377,709 3,000 RTL Group, New York ......................... 81,234 100,000 Television Broadcasts Ltd. .................. 307,710 110,000 Young Broadcasting Inc., Cl. A+ ............. 953,700 -------------- 16,323,360 -------------- AGRICULTURE -- 1.1% 1,050,000 Archer-Daniels-Midland Co. .................. 13,135,500 5,000 Delta & Pine Land Co. ....................... 93,700 -------------- 13,229,200 -------------- SPECIALTY CHEMICALS -- 1.0% 5,400 Ciba Specialty Chemicals, ADR (b) ........... 177,930 10,000 du Pont de Nemours (E.I.) and Co. ........... 360,700 330,000 Ferro Corp. ................................. 7,623,000 40,000 Fuller (H.B.) Co. ........................... 1,064,000 120,000 Hercules Inc.+ .............................. 1,105,200 15,000 IVAX Corp.+ ................................. 184,050 210,000 Omnova Solutions Inc.+ ...................... 963,900 15,000 Rohm and Haas Co. ........................... 465,000 11,697 Syngenta AG, ADR ............................ 126,328 -------------- 12,070,108 -------------- ELECTRONICS -- 0.9% 134,393 Agere Systems Inc., Cl. B+ .................. 133,049 3,000 Hitachi Ltd., ADR ........................... 148,680 16,000 Molex Inc., Cl. A ........................... 335,984 7,500 NEC Corp., ADR .............................. 35,625 6,000 Rohm Co. Ltd. ............................... 704,287 38,800 Royal Philips Electronics NV, ADR ........... 563,764 47,000 Sony Corp., ADR ............................. 1,931,700 200,000 Texas Instruments Inc. ...................... 2,954,000 250,000 Thomas & Betts Corp.+ ....................... 3,522,500 8,400 Tokyo Electron Ltd. ......................... 321,538 -------------- 10,651,127 -------------- MARKET SHARES VALUE ------ ------ ENVIRONMENTAL SERVICES -- 0.7% 65,000 Republic Services Inc.+ ..................... $ 1,222,000 300,000 Waste Management Inc. ....................... 6,996,000 -------------- 8,218,000 -------------- BUILDING AND CONSTRUCTION -- 0.7% 92,500 CRH plc ..................................... 1,037,539 32,222 Huttig Building Products Inc.+ .............. 109,232 15,000 Martin Marietta Materials Inc. .............. 488,550 137,800 Nortek Inc.+ ................................ 5,962,606 5,000 Nortek Inc., Special Common+ (a) ............ 216,350 -------------- 7,814,277 -------------- AUTOMOTIVE -- 0.6% 20,000 Ford Motor Co. .............................. 196,000 167,942 General Motors Corp. ........................ 6,532,944 -------------- 6,728,944 -------------- BUSINESS SERVICES -- 0.5% 60,000 ANC Rental Corp.+ ........................... 6,000 180,000 Cendant Corp.+ .............................. 1,936,800 1,000 CheckFree Corp.+ ............................ 11,380 98,000 Landauer Inc. ............................... 3,248,700 70,000 Nashua Corp.+ ............................... 485,800 7,000 Secom Co. Ltd. .............................. 280,023 250,000 Securicor plc ............................... 397,087 3,500 SYNAVANT Inc.+ .............................. 2,835 -------------- 6,368,625 -------------- METALS AND MINING -- 0.4% 72,500 Harmony Gold Mining Co. Ltd. ................ 1,148,727 15,000 Harmony Gold Mining Co. Ltd., ADR ........... 234,750 125,000 Newmont Mining Corp. ........................ 3,438,750 50,000 Placer Dome Inc. ............................ 456,500 -------------- 5,278,727 -------------- PAPER AND FOREST PRODUCTS -- 0.4% 100,000 MeadWestvaco Corp. .......................... 1,921,000 170,000 Pactiv Corp.+ ............................... 2,796,500 10,000 Rayonier Inc. ............................... 419,100 -------------- 5,136,600 -------------- COMMUNICATIONS EQUIPMENT -- 0.3% 60,000 Acterna Corp.+ .............................. 24,000 290,000 Allen Telecom Inc.+ ......................... 1,548,600 510,000 Corning Inc.+ ............................... 816,000 130,000 Lucent Technologies Inc.+ ................... 98,800 110,000 Motorola Inc. ............................... 1,119,800 100,000 Nortel Networks Corp.+ ...................... 54,000 44,000 Scientific-Atlanta Inc. ..................... 550,440 -------------- 4,211,640 -------------- 17 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED) MARKET SHARES VALUE ------ ------ COMMON STOCKS (CONTINUED) CLOSED END FUNDS -- 0.2% 59,000 Central European Equity Fund Inc. ........... $ 737,500 18,592 France Growth Fund Inc.+ .................... 98,352 54,150 Italy Fund Inc. ............................. 305,947 68,000 New Germany Fund Inc.+ ...................... 218,960 70,000 Pimco RCM Europe Fund Inc. .................. 411,600 40,000 Royce Value Trust Inc. ...................... 503,600 -------------- 2,275,959 -------------- SATELLITE -- 0.1% 180,323 General Motors Corp., Cl. H+ ................ 1,649,955 34,000 Liberty Satellite & Technology Inc., Cl. A+ ...................................... 76,500 190,000 Loral Space & Communications Ltd.+ .......... 51,300 -------------- 1,777,755 -------------- COMPUTER SOFTWARE AND SERVICES -- 0.1% 20,000 Capcom Co. Ltd. ............................. 456,711 10,000 Computer Associates International Inc. ...... 96,000 160,000 EMC Corp.+ .................................. 731,200 30,000 Genuity Inc., Cl. A+ ........................ 8,400 -------------- 1,292,311 -------------- TRANSPORTATION -- 0.1% 100,000 AMR Corp.+ .................................. 418,000 20,000 Grupo TMM SA de CV, Cl. A, ADR+ ............. 122,200 7,500 Kansas City Southern+ ....................... 93,000 29,273 Tsakos Energy Navigation Ltd.+ .............. 319,076 -------------- 952,276 -------------- COMPUTER HARDWARE -- 0.0% 26,000 Hewlett-Packard Co. ......................... 303,420 10,000 Xerox Corp.+ ................................ 49,500 -------------- 352,920 -------------- TOTAL COMMON STOCKS ......................... 1,011,289,975 -------------- PREFERRED STOCKS -- 2.2% PUBLISHING -- 1.1% 770,499 News Corp. Ltd., Pfd., ADR .................. 12,790,281 -------------- SPECIALTY CHEMICALS -- 0.5% 273,500 Hercules Trust I, 9.420% Pfd. 5,757,175 ------------ TELECOMMUNICATIONS -- 0.3% 60,000 Allen Telecom Inc., 7.750% Cv. Pfd., Ser. D ................... 2,460,000 31,000 Broadwing Inc., 6.750% Cv. Pfd., Ser. B ................... 350,300 21,000 Citizens Communications Co., 5.000% Cv. Pfd. ........................... 686,910 500 Lucent Technologies Capital Trust I, 7.750% Cv. Pfd.+ (b) ...................... 112,500 ------------ 3,609,710 ------------ MARKET SHARES VALUE ------ ------ AEROSPACE -- 0.2% 14,021 Northrop Grumman Corp., 7.000% Cv. Pfd., Ser. B ................... $ 2,005,003 -------------- BROADCASTING -- 0.1% 90 Gray Television Inc., 8.000% Cv. Pfd., Ser. C (b) ............... 900,000 100,000 ProSieben Sat.1 Media AG, Pfd. .............. 637,421 -------------- 1,537,421 -------------- AVIATION: PARTS AND SERVICES -- 0.0% 3,000 Sequa Corp., $5.00 Cv. Pfd. ................. 256,800 -------------- WIRELESS COMMUNICATIONS -- 0.0% 10,760,547 Telesp Celular Participacoes SA, Pfd.+ ...... 7,440 -------------- TOTAL PREFERRED STOCKS ...................... 25,963,830 -------------- PRINCIPAL AMOUNT ------ CORPORATE BONDS -- 0.5% ELECTRONICS -- 0.2% $ 3,500,000 Agere Systems Inc., Sub. Deb. Cv., 6.500%, 12/15/09 .......................... 1,925,000 -------------- AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1% 1,400,000 Standard Motor Products Inc., Sub. Deb. Cv., 6.750%, 07/15/09 .......................... 1,078,000 -------------- AVIATION: PARTS AND SERVICES -- 0.1% 933,000 Kaman Corp., Sub. Deb. Cv., 6.000%, 03/15/12 .......................... 856,028 -------------- CABLE -- 0.1% 1,300,000 Charter Communications Inc., Cv., 4.750%, 06/01/06 .......................... 563,875 -------------- ENERGY AND UTILITIES -- 0.0% 1,000,000 Mirant Corp., Sub. Deb. Cv., 2.500%, 06/15/21 .......................... 441,250 -------------- WIRELESS COMMUNICATIONS -- 0.0% 500,000 Nextel Communications Inc., 9.500%, 02/01/11 .......................... 376,250 -------------- HOTELS AND GAMING -- 0.0% 400,000 Hilton Hotels Corp., Sub. Deb. Cv., 5.000%, 05/15/06 .......................... 368,000 -------------- CONSUMER PRODUCTS -- 0.0% 1,000,000 Pillowtex Corp., Sub. Deb., 6.000%, 03/15/12+ (e) ..................... 0 -------------- TOTAL CORPORATE BONDS ....................... 5,608,403 -------------- 18 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 2002 (UNAUDITED) MARKET SHARES VALUE ------ ------ RIGHTS -- 0.0% CABLE -- 0.0% 298 NTL Inc.+ ................................. $ 0 -------------- WARRANTS -- 0.0% FOOD AND BEVERAGE -- 0.0% 62,463 Denny's Corp., expires 01/07/05+ .......... 1,031 -------------- METALS AND MINING -- 0.0% 5,000 Harmony Gold Mining Co. Ltd., ADR, expires 06/29/03+ ....................... 57,450 -------------- TOTAL WARRANTS ............................ 58,481 -------------- PRINCIPAL AMOUNT ------ U.S. GOVERNMENT OBLIGATIONS -- 4.1% $ 50,000,000 U.S. Treasury Bills, 1.645%++, 10/24/02 ...................... 49,947,451 -------------- REPURCHASE AGREEMENTS -- 10.6% 100,000,000 Agreement with ABN AMRO, 1.850%, dated 09/30/02, due 10/01/02, proceeds at maturity, $100,000,000 (c) ........................ 100,000,000 27,467,000 Agreement with State Street Bank and Trust Co., 1.800%, dated 09/30/02, due 10/01/02, proceeds at maturity, $27,467,000 (c) ......................... 27,467,000 -------------- TOTAL REPURCHASE AGREEMENTS .............................. 127,467,000 -------------- TOTAL INVESTMENTS -- 101.6% (Cost $1,193,141,051) ................................. $1,220,335,140 OTHER ASSETS, LIABILITIES AND LIQUIDATION VALUE OF CUMULATIVE PREFERRED STOCK -- (37.4)% ................. (448,884,260) -------------- NET ASSETS -- COMMON STOCK -- 64.2% (133,308,858 common shares outstanding) ............... 771,450,880 -------------- NET ASSETS -- PREFERRED STOCK -- 35.8% (11,973,100 preferred shares outstanding) ............. 429,197,500 -------------- TOTAL NET ASSETS -- 100.0% .............................. $1,200,648,380 ============== NET ASSET VALUE PER COMMON SHARE (771,450,880 / 133,308,858 shares outstanding) ........ $5.79 ===== PRINCIPAL SETTLEMENT NET UNREALIZED AMOUNT DATE APRECIATION -------- ---------- -------------- FORWARD FOREIGN EXCHANGE CONTRACTS -- 0.0% $ 7,790,000(d) Deliver Hong Kong Dollars in exchange for USD 2,627,026 .............. 08/01/03 $863 ==== NOTIONAL UNREALIZED AMOUNT DEPRECIATION -------- ------------ INTEREST RATE SWAP AGREEMENT -- (0.7)% 130,000,000 Receive floating rate from Citibank, NA based on the 1-month LIBOR and pay a fixed rate equal to 4.494% Terminates 07/01/07 ..................... $ (8,490,559) ============== ----------------- For Federal tax purposes: Aggregate cost ................................ $1,193,141,051 ============== Gross unrealized appreciation ................. $ 251,792,242 Gross unrealized depreciation ................. (224,597,290) -------------- Net unrealized appreciation ................... $ 27,194,952 ============== ----------------- (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, 2002, the market value of Rule 144A securities amounted to $1,190,430 or 0.1% of total net assets. (c) Collateralized by U.S. Treasury Notes, 7.50% to 8.50%, due 02/15/20 to 11/15/24, market value $128,026,139. (d) Principal amount denoted in Hong Kong Dollars. (e) Bond in default. + Non-income producing security. ++ Represents annualized yield at date of purchase. ADR - American Depository Receipt. BDR - Brazilian Depository Receipt. CVO - Contingent Value Obligation. RNC - Non-Convertible Savings Shares. USD - U.S. Dollars. % OF MARKET MARKET VALUE VALUE ------ -------------- GEOGRAPHIC DIVERSIFICATION United States .............. 85.17% $1,039,302,143 Europe ..................... 10.66 130,130,097 Asia/Pacific Rim ........... 2.21 26,994,148 Latin America .............. 1.01 12,349,807 Canada ..................... 0.83 10,175,468 South Africa ............... 0.12 1,383,477 ------ -------------- Total Investments .......... 100.0% $1,220,335,140 ====== ============== 19 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 EquiServe Trust Company ("EquiServe") 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 EquiServe P.O. Box 43011 Providence, RI 02940-3011 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 EquiServe at 1 (800) 336-6983. SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at EquiServe 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, EquiServe will buy Common Stock in the open market, or on the New York Stock Exchange or elsewhere, for the participants' accounts, except that EquiServe 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. 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 EquiServe 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 EquiServe for investments in the Equity Trust's shares at the then current market price. Shareholders may send an amount from $250 to $10,000. EquiServe will use these funds to purchase shares in the open market on or about the 1st and 15th of each month. EquiServe 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 EquiServe, P.O. Box 43011, Providence, RI02940-3011 such that EquiServe receives such payments approximately 10 days before the investment date. 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 EquiServe 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. 20 DIRECTORS AND OFFICERS THE GABELLI EQUITY TRUST INC. ONE CORPORATE CENTER, RYE, NY 10580-1422 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 ADVISER Gabelli Funds, LLC One Corporate Center Rye, New York 10580-1422 CUSTODIAN Boston Safe Deposit and Trust Company COUNSEL Willkie Farr & Gallagher TRANSFER AGENT AND REGISTRAR EquiServe Trust Company STOCK EXCHANGE LISTING 7.25% 7.20% COMMON PREFERRED PREFERRED ------ --------- --------- NYSE- Symbol: GAB GAB Pr GAB PrB Shares Outstanding: 133,308,858 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 10580-1422 (914) 921-5070 HTTP://WWW.GABELLI.COM THIRD QUARTER REPORT SEPTEMBER 30, 2002 GBFCM 09/02