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PICTURE OF FLAGS
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THE GABELLI
EQUITY TRUST INC.
FIRST QUARTER REPORT
MARCH 31, 2003
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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.
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PICTURE OF FLAGS
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.
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PICTURE OF MARIO GABELLI
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THE GABELLI
EQUITY TRUST INC.
TO OUR SHAREHOLDERS,
After rallying briefly in early January, stocks retreated through
mid-March as investors pondered the political and economic consequences of the
impending war with Iraq. When President Bush gave Saddam Hussein 48 hours to
"get out of Dodge" and then launched Operation Shock and Awe, the market posted
one of its most impressive one week gains in history, briefly putting the major
stock indices in positive territory for the year. However, as the pace of
military progress slowed, stocks pulled back again, finishing the first quarter
of 2003 with a loss. With technology stocks leading the way, growth stocks
materially outperformed value stocks for the second consecutive quarter. The
Gabelli Equity Trust (the "Trust") closed the quarter with a 6.66% decline
versus a 3.15% loss for the Standard & Poor's ("S&P") 500 Index.
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. The Trust distributed $0.27 per share on March 25, 2003. Additionally, the
Board of Directors declared a $0.14 per share cash distribution payable on June
24, 2003 to common stock shareholders of record on June 16, 2003.
Given the Trust's current net asset value, the Board of Directors
reconsidered the appropriate level of quarterly payments pursuant to the 10%
Distribution Policy. Accordingly, subsequent interim quarterly distributions
will be set at the $0.14 per share level in an effort to provide our common
stock shareholders consistent distributions throughout the year pursuant to our
10% Distribution Policy. Each quarter, the Board of Directors reviews the amount
of any potential distribution based on the income, capital gains or capital
available. Currently, the Trust has approximately $150 million ($1.11 per common
share) of gross unrealized appreciation on portfolio securities which could be
realized through their sale and distributed to shareholders.
Under the Trust's payout policy, the Trust will pay out a minimum annual
distribution of 10% of the average net asset value of the Trust. For the past
several years, the Trust paid $0.27 per share in each of the first three
quarters of the year and an adjusting distribution in the fourth quarter of an
amount sufficient to pay 10% of the average net asset value of the Trust, as of
the last day of the four preceding calendar quarters, or to satisfy the minimum
distribution requirements of the Internal Revenue Code, whichever is greater.
Considering the current net asset value, a $0.14 per share quarterly
distribution would provide a stable level of distributions.
A portion of this distribution may be treated as long-term capital gains.
This has the effect of providing individual shareholders with an ordinary income
tax equivalent yield that is higher than the current yield. Long-term capital
gains and ordinary income, if any, will be allocated on a pro-rata basis to all
distributions for the year. The final determination of the source of all
distributions in 2003 will be made after year-end.
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 547 publicly-traded closed-end funds in the U.S., approximately 33%
currently trade at premiums to NAV versus 26% five years ago and 60% ten years
ago. For general equity funds such as the Trust, approximately 21% currently
trade at premiums to NAV versus 25% five years ago and 38% 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 0.8% premium to NAV. Beginning in early 2001, the market price of
the Trust exceeded the NAV and this premium gradually increased through June
2002. 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.
PREMIUM/DISCOUNT SINCE INCEPTION
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PLOT POINTS FOLLOW:
-------------------------------------
MARCH 31, 2003
--------------
Net Asset Value $5.58
Market Price $6.90
Premium 23.66%
-------------------------------------
8/21/86 0
9/30/86 0.0067
10/31/86 0.0046
11/30/86 -0.0390
1986 -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 -0.2000
8/31/87 -0.2052
9/30/87 -0.2128
10/31/87 -0.2074
11/30/87 -0.2154
1987 -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
1988 -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
1989 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 -0.0180
9/30/90 -0.0348
10/31/90 -0.1187
11/30/90 -0.0327
1990 0.0290
1/31/91 -0.0091
2/28/91 0.0269
3/31/91 0.0150
4/30/91 -0.0257
5/31/91 -0.0100
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
1991 -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
1992 -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 0.0120
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
1993 0.0573
1/31/94 0.0797
2/28/94 0.0673
3/31/94 0.0733
4/30/94 -0.0270
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
1994 0.0121
1/31/95 0.0047
2/28/95 0.0300
3/31/95 0.0170
4/30/95 -0.0122
5/31/95 -0.0240
6/30/95 -0.0081
7/31/95 -0.0440
8/31/95 -0.0697
9/30/95 -0.0845
10/31/95 -0.1206
11/30/95 -0.0750
1995 -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 -0.0470
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
1996 -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
1997 0.0316
1/31/98 0.0119
2/28/98 -0.0088
3/31/98 -0.0220
4/30/98 -0.0788
5/31/98 -0.0885
6/30/98 -0.0400
7/31/98 -0.0420
8/31/98 -0.0814
9/30/98 -0.0091
10/31/98 0.0025
11/30/98 0.0216
1998 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 -0.0060
6/30/99 -0.0163
7/31/99 0.0070
8/31/99 0.0159
9/30/99 0.0126
10/31/99 -0.0045
11/30/99 -0.0178
1999 -0.0147
1/31/00 -0.0331
2/29/00 -0.0835
3/31/00 -0.0438
4/30/00 -0.0780
5/31/00 -0.0460
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
2000 0.0493
1/31/01 -0.0450
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
2001 0.2029
1/31/02 0.2497
2/28/02 0.2463
3/30/02 0.2311
4/30/02 0.2480
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
10/31/02 0.1400
11/30/02 0.1800
12/31/02 0.0908
1/31/03 0.1680
2/28/03 0.2076
3/31/03 0.2366
7.25% TAX ADVANTAGED CUMULATIVE PREFERRED STOCK
The Trust's 7.25% Tax Advantaged Cumulative Preferred Stock paid a cash
distribution on March 26, 2003 of $0.453125 per share. For the twelve months
ended March 31, 2003, Preferred Stock shareholders received distributions
totaling $1.8125, the annual dividend rate per share of Preferred Stock.
The Trust, as authorized by the Board of Directors, will redeem all
(5,367,900 Shares) of its outstanding 7.25% Cumulative Preferred Stock. The
redemption date is June 17, 2003 and the redemption price is $25.4078 per
Preferred Share, which consists of $25.00 per Preferred Share (the "liquidation
value") plus accrued dividends through the
2
redemption date of $0.4078 per Preferred Share. The Preferred Shares are
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.
From and after the redemption date, the Preferred Shares to be redeemed
will no longer be deemed outstanding, dividends will cease to accrue and all the
rights of the Preferred Shareholders with respect to the Preferred Shares to be
redeemed will cease, except the right to receive the redemption price.
Shareholders of record will be mailed a redemption notice and letter of
transmittal shortly. The redemption price will be paid only to shareholders of
record who complete and sign the letter of transmittal and submit certificates
for the number of Preferred Shares being redeemed. The paying agent for this
redemption is Equiserve Trust Company, N.A.
The Board has also authorized the Trust to issue additional preferred
stock in the future. The actual amount of capital to be raised, the dividend
rate and the timing of any new offering will be determined at a later date. Any
offering will be made only by means of a prospectus.
The Preferred Shares, which trade on the New York Stock Exchange under the
symbol "GAB Pr", are rated 'Aaa' by Moody's Investor Services and have an annual
dividend rate of $1.8125 per share. The Preferred Shares pay distributions
quarterly.
COMPARATIVE RESULTS
--------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH MARCH 31, 2003 (A)
-------------------------------------------------
SINCE
QUARTER INCEPTION (B) 10 YEAR 5 YEAR 3 YEAR 1 YEAR
------- ------------- ------- ------ ------ ------
Gabelli Equity Trust NAV Return (c) ......(6.66)% 9.45% 6.84% (2.52)% (12.12)% (28.25)%
Gabelli Equity Trust
Investment Return (d) ................. 4.76% 10.35% 8.52% 1.65% (5.10)% (28.74)%
S&P 500 Index ............................(3.15)% 10.31% 8.53% (3.76)% (16.09)% (24.75)%
Dow Jones Industrial Average .............(3.76)% 12.04% 11.10% (0.16)% (8.23)% (21.60)%
Nasdaq Composite Index ................... 0.42% 7.87% 6.87% (6.08)% (33.56)% (27.32)%
(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 at NAV on the ex-dividend
date, 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.
--------------------------------------------------------------------------------
COMMENTARY
VI DAY
As we prepare this letter, U.S. coalition forces have achieved their
objective of regime change in Iraq and investor focus is shifting from the war
to the economy and corporate profits. It is still too early to tell whether
Federal Reserve Board ("Fed") Chairman Alan Greenspan and other economists are
correct in their assumption that uncertainty regarding Iraq has been the primary
restraint on economic growth. Recently released economic data has been
discouraging. Institute for Supply Management ("ISM") barometers show
manufacturing and services contracting in March. Consumer sentiment
3
readings remain near 10-year lows, and consumer spending has softened. We have
even seen signs of weakness in the robust housing market. Business investment
and capital spending, which had improved modestly in the fourth quarter of 2002,
has stalled.
Importantly, however, oil prices have come down significantly from their
peaks. If oil settles in the mid-$20 per barrel range (OPEC's price target) it
will be the equivalent of a giant tax cut for businesses and consumers, and
should provide a big boost for the economy. The swift victory in Iraq should
also increase President Bush's political capital and help the Administration
push accelerated tax cuts through Congress. With Senators from both parties
concerned about rising budget deficits, the tax-cut package will likely be
trimmed, but any tax relief should help jump-start the economy. Finally, the Fed
still has room for a little more monetary stimulus, which we believe it is ready
to provide if the economy fails to regain much traction in the months ahead.
Our longer-term outlook for the economy and stock market hasn't changed
much. We are still anticipating an extended period of modest economic and
corporate earnings growth and a more benign, but not very inspiring stock
market. Over the next five years, we believe stock selection will be critical to
producing satisfactory returns.
ELIMINATING THE DOUBLE TAXATION OF DIVIDENDS
Along with accelerated tax cuts for individuals and businesses, the Bush
Administration's economic stimulus package calls for the elimination of the
double taxation on dividends (dividends are taxed twice, first at the corporate
level and again when distributed to shareholders). The debate is whether this
would have any favorable short-term impact on the economy. In our opinion, it
would certainly have a significantly favorable long-term impact on the corporate
culture and promote a more efficient allocation of capital. In addition, the
impact on investor psychology and on the stock market will be immediate,
resulting in a favorable propensity to invest and consume.
In the momentum and mindless index-driven 1990s, speculators didn't focus
on dividends. They wanted growth. Corporate managements, seduced by baskets of
options, obliged by spending all their profits and borrowing more money to
finance "growth at all cost" strategies -- building and/or buying businesses
with economically questionable prospects. Instead of dividends, which didn't
boost stock prices in the short run, stock buybacks, especially at prices well
above intrinsic value, were rationalized as the tax efficient tool to return
capital to shareholders. The end result was deteriorating balance sheets and a
lot of non-productive assets weighing down earnings. Investors have been paying
the price for this for three years. Today, more investors are looking for
dividends. Given the incentive that would be provided by eliminating the double
taxation on dividends or perhaps just lowering the tax rate on dividends to the
same level as capital gains, we believe shareholders would force corporate
America to comply. Investors would be better compensated for the risk inherent
in stocks and corporate managements less inclined to repeat the mistakes of the
past, though we agree that dividends themselves could be prone to abuse.
SECULAR TRENDS
With the economic outlook still clouded by the effects of the war, it is
extremely difficult to determine the short and intermediate term prospects for
cyclical (economically sensitive) industries. However, there are a number of
industries that we believe are about to benefit from favorable secular trends.
So, rather than focusing on economic forecasts, let's look at a few industries
that should do relatively well irrespective of the level of Gross Domestic
Product ("GDP") growth in the year ahead.
There are approximately 200 million vehicles on the road in the U.S. They
are built a lot better than they were when I was a kid, when the average
passenger car was ready for the junkyard after only 50,000 miles. Fifteen years
ago, getting 100,000 miles out of the family sedan was a victory. Today, a new
car will last as much as 170,000 miles and the average
4
age of a passenger car is 9.3 years, up from 8.1 years in the early 1990s. Light
trucks and sports utility vehicles ("SUVs") are getting older too. Cars between
five and ten years old need the most replacement parts. Between 1996 and 2001,
cars in this maturity range declined 2.2%. Over the next five years, they should
increase by 15%. This is good news for auto parts manufacturers such as Standard
Motor Products and Modine Manufacturing, and leading distributors such as
Genuine Parts.
Utility companies are going back to the basics -- selling and/or exiting
extraneous businesses, and focusing on the monopoly-like business of
distributing electricity and/or natural gas to their local and regional customer
bases. This should result in stable 10%-11% annualized earnings growth and,
after shoring up balance sheets damaged by ill-advised forays into other
businesses, rising dividends. In a market environment where we think investors
will continue to appreciate yield, utility stocks should once again attract a
loyal following. Also, now that utility companies have largely given up on the
concept of growing through diversification, we believe they will focus on
growing through the acquisition of smaller competitors. Consequently, we favor
utility companies such as Southwest Gas and DQE, where we expect to earn
respectable returns until we are ultimately rewarded by a takeover.
Although consolidation in the television broadcast industry has slowed due
to flagging advertising revenues in the soft economy and regulatory
foot-dragging, things are about to change. We believe the Federal Communications
Commission ("FCC") is about to raise the cap on a single broadcast company's
national "footprint" from 35% to 50% of total households and allow duopolies
(the ownership of two TV stations) in smaller markets. This should reinvigorate
takeover activity as the bigger fish stalk smaller competitors such as Liberty
Corp. and Young Broadcasting. Also, while advertising spending is a function of
the relative strength of the economy, broadcast ad revenues should get a boost
from the Olympics and the elections in 2004.
Finally, we believe the supply/demand dynamics for stocks will improve as
under-funded defined benefit plan pension funds (among the many victims of a
three-year bear market) are forced to play catch-up to balance assets with
liabilities. The outsized equity returns of the late 1990s spared corporations
from having to put much money in the defined benefit plan pot. Now, they will
have to pony up a considerable amount of cash, and despite the fact that
equities have performed so poorly in recent years, historically low bond yields
make stocks more attractive. We think much of this money will initially go into
higher-yielding more defensive industry groups such as utilities, but that new
defined benefit plan investment will also gravitate to other industry groups
that perform relatively well in the year ahead.
INTERNATIONAL OUTLOOK
A portion of the Trust's portfolio continues to be managed by Caesar
Bryan. Caesar is the portfolio manager of the Gabelli International Growth Fund
and a member of the Global Portfolio Management Team. Caesar's thoughts on
international markets and global economies are provided below:
The Iraq situation dominated the news during the quarter and markets
actually rallied in response to the start of hostilities. It was almost a relief
that the endless back and forth between the U.S. and the United Nations had come
to an end, especially as most believed that a military conflict appeared to be
inevitable in the absence of a total Iraqi capitulation. In the run up to the
start of the hostilities, equity markets outside the U.S. fell to new bear
market lows.
In our year-end letter we spoke about equity valuations in Europe
highlighting that many leading companies trade at multiples of earnings in the
mid-teens or less and yield more than the prevailing ten-year Government bond
yield. In Japan, the equity market yields more than twice the ten-year Japanese
Government bond yield and the earnings yield of the stock market (the inverse of
the price/earnings multiple) is about five times the yield in the ten-year
Government bond. Of course, it helps that the ten-year Government bond yielded a
world record low 70 basis points (yes that's less than one
5
percent) at the end of March. Based on historic relationships, either the
Japanese equity market is massively undervalued or the bond market is way
over-priced. Probably it is both.
The economic backdrop is not particularly encouraging, but bull markets
generally do not start when the economic gurus are forecasting sunny skies and
warm temperatures. In Europe, forecasts for economic growth are continually
being nudged downwards and over recent months the larger economies such as
Germany and France probably did not grow at all. Germany is forecasted to grow
by 0.4% this year and the Euro zone by 1%. European economies are constrained by
the fiscal limits imposed by the Stability Pact, which means that governments
are restrained from undertaking any fiscal stimulus because of high budget
deficits. On the monetary side, there certainly remains scope for the European
Central Bank ("ECB") to cut rates, which currently stand at 2.5%. Indeed, the
recent strength of the euro is tantamount to a tightening of monetary policy. So
all things being equal, the ECB should reduce interest rates to counter the
effects of a rising euro. In the next few months, we expect the ECB to cut
interest rates sharply, perhaps by 1%. This, combined with lower oil prices,
should boost European economies.
The export-led growth spurt in Japan now appears to be wearing off. Higher
exports to the U.S. in 2002 resulted in higher industrial production, better
wage growth and a rise in business investment. These trends now appear to have
reversed. Exports to the U.S. fell noticeably in February and March, which has
resulted in a decline in industrial production. Similarly, overtime hours worked
is falling, as are private machinery orders. The fear is that if export demand
to the U.S. fails to recover, Japan will suffer a weak economy for the rest of
2003 as firms shed labor. Excess capacity has yet to be taken out of the
economy. Bad loans have been written off but not called. Early in the new year,
Mr. Fukui was appointed Governor of the Bank of Japan, but, as yet, he has
offered no new policy initiatives. The critical financial year-end period at the
end of March came and went without incident. However, those who expected a
bounce in the market in the new financial year were disappointed. Further
selling pressure from pension plans known as Daiko Henjo battered the market.
Is the bear market over? Obviously we don't know but three observations
can be made. First, there has been a return of merger and acquisition activity,
especially in Europe. Second, valuations are attractive assuming a reasonable
economic outlook. Companies have cut costs which has helped earnings. Last, the
bear market in Europe is three years old and presumably much of the excess has
been purged. Time will tell whether there is a post-war economic bounce and how
sustainable it is. We primarily focus on bottom up stock ideas with a
concentration on companies that can show top line growth in the current
low-growth environment. However, in this context we remain fairly cautious in
our economic outlook. It will be nice to be proved wrong, in which case some of
our economically sensitive holdings should perform well.
INVESTMENT SCORECARD
During the first quarter, our top performing holdings were from a variety
of sectors including pest control (Rollins Inc.), consumer services (USA
Interactive), oil and gas (Burlington Resources) and health products
(Centerpulse). Our cable television investments, most notably Comcast and
Cablevision Systems, also posted good gains. Biotech giant Amgen performed
strongly during the quarter, as did travel services oriented conglomerate
Cendant.
Auto parts manufacturers Dana Corp., GenCorp and TransPro, appliance
producer Maytag and investment manager Charles Schwab were among our biggest
disappointments. Aerospace leader Boeing was hit hard due to the troubles of the
commercial airlines and defense contractor Lockheed Martin faded as investors
aggressively took profits in this sector.
6
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.
CABLEVISION SYSTEMS CORP. (CVC - $18.99 - 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, professional sports teams and
national cable television networks. Headquartered in Bethpage, N.Y., Cablevision
serves 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.
In addition, Cablevision's Rainbow Media unit owns high-growth cable networks,
including AMC, Women's Entertainment, IFC, and several Fox Regional Sports
Networks.
DQE INC. (DQE - $12.19 - NYSE) is a consolidation play whose stock price fell
sharply in mid-2002 when the company came to market with a very large equity
offering. The Trust made additional purchases of DQE stock in the fourth quarter
of 2002 and again in early 2003. DQE is the holding company for the electric
utility in Pittsburgh called Duquesne Light. The company sold off nearly all of
its power plants when the state of Pennsylvania moved toward utility
deregulation a few years ago. DQE's back-to-basics strategy involves divesting
non-utility businesses. DQE has an agreement to sell off its water utility
business and plans to use the proceeds to pay down debt. DQE closed on the sale
of its propane business in December 2002. The company is surrounded by several
utilities that are much larger and we think that its relatively low stock price
makes it an attractive takeover target.
FLOWSERVE CORP. (FLS - $11.65 - 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 valve
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.
KELLOGG CO. (K - $30.65 - 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. Kellogg remains 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.
MGM MIRAGE (MGG - $29.25 - NYSE) owns and/or operates fifteen hotel-casino
report properties, twelve of which are located in Nevada. Among those located on
the Las Vegas Strip are Bellagio, the MGM Grand Hotel and Casino, The Mirage,
Treasure Island, New York-New York Hotel and Casino, the Boardwalk Hotel and
Casino, and Monte Carlo, a 50-50 joint venture with Mandalay Resort Group (MBG -
$27.56 - NYSE). MGM Mirage also owns and operates hotel-casino resort properties
in Michigan, Mississippi and Australia. In November 2000, a limited liability
company, which MGG owns 50-50 with Boyd Gaming (BYD - $12.75 - NYSE), began
construction of the Borgata, a 2,000-guestroom hotel-casino resort in Atlantic
City, New Jersey, which is scheduled to open in the summer of 2003.
7
SBC COMMUNICATIONS INC. (SBC - $20.06 - NYSE) is the second largest incumbent
local exchange carrier in US with over 60 million access lines. SBC recently
merged its wireless operations with those of BellSouth (BLS - $21.67 - NYSE)
forming the second largest U.S. mobile wireless provider, Cingular Wireless,
currently servicing about 22 million customers. SBC owns 60% of Cingular. SBC
has strong presence around the globe with ownership interests in Telefonos de
Mexico, as well as various minority investments in Denmark, Norway, Belgium, and
other European countries.
STANDARD MOTOR PRODUCTS INC. (SMP - $11.10 - NYSE), headquartered in Long Island
City, New York, supplies functional replacement parts for the engine management,
electrical and climate control systems of cars, trucks and buses. The company
services all makes and models, both new and old cars, imported and domestic. SMP
has two primary divisions -- engine management and temperature control -- and
believes it is the number one supplier to the North American aftermarket in each
of these lines.
T. ROWE PRICE GROUP INC. (TROW - $27.12 - NASDAQ) is an investment management
company with $140 billion in assets under management. The company has a strong
investment performance track record and a well-balanced business as equity
securities represent approximately 60% of assets under management and bond and
money market securities represent approximately 40%. T. Rowe's retirement
investment focus, 529 college savings plan product offerings, international
investment management business, and expanding third-party distribution should
enable the company to capitalize on most of the major future growth
opportunities in the asset management industry.
TRIBUNE CO. (TRB - $45.01 - NYSE), headquartered in Chicago, is a leading
national media company with operations in major U.S. markets. With its 2000
acquisition of The Times Mirror Company, it now has television and/or newspaper
properties in 18 of the nation's top 30 markets. It is the only media company
with television, newspaper and Internet properties in the nation's top three
markets -- New York, Los Angeles and Chicago. Flagship properties include:
WPIX-TV (New York), WGN-TV (Chicago), NEWSDAY, LOS ANGELES TIMES, and CHICAGO
TRIBUNE. Additionally, Tribune owns the Chicago Cubs and has a stake in the WB
Television Network. The company is focused on growing and strengthening its
major market cross-media positions.
VIACOM INC. (VIA - $36.50 - NYSE) is a diversified media company with businesses
across many media platforms. The firm operates cable networks (including BET,
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 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.
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 March 26, 2003 of $0.45 per share. For the twelve months
ended, March 31, 2003, Series B Preferred Stock shareholders received
distributions totaling $1.80, the annual dividend rate per share of Series B
Preferred Stock. The next distribution is scheduled for June 2003.
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 1.28% to 1.45%
during the first 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.
8
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at 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.
MAY JUNE JULY
--- ---- ----
1st Tuesday Howard Ward Howard Ward Howard Ward
1st Wednesday Henry Van der Eb Susan Byrne Caesar Bryan
2nd Wednesday Caesar Bryan Walter Walsh Charles Minter & Martin Weiner
3rd Wednesday Elizabeth Lilly Ivan Arteaga Hartswell Woodson
4th Wednesday Barbara Marcin Barbara Marcin Ivan Arteaga
5th Wednesday Barbara Marcin
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 U.S.-led coalition has achieved its mission of liberating the people
of Iraq. Our mission remains to identify quality companies trading at
significant discounts to real world economic value. Through rigorous research we
are confident our Trust can continue to produce superior long-term returns.
Sincerely,
/S/ MARIO J. GABELLI
MARIO J. GABELLI, CFA
Portfolio Manager and Chief Investment Officer
May 5, 2003
--------------------------------------------------------------------------------
SELECTED HOLDINGS
MARCH 31, 2003
--------------
Cablevision Systems Corp. SBC Communications Inc.
DQE Inc. Standard Motor Products Inc.
Flowserve Corp. T. Rowe Price Group Inc.
Kellogg Co. Tribune Co.
MGM Mirage Viacom Inc.
--------------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
9
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
QUARTER ENDED MARCH 31, 2003 (UNAUDITED)
OWNERSHIP AT
MARCH 31,
SHARES 2003
------ ------------
NET PURCHASES
COMMON STOCKS
Altria Group Inc.+ ............................ 20,000 20,000
Apache Corp. (a) .............................. 1,870 39,270
ATX Communications Inc. ....................... 20,000 60,540
BAE Systems plc ............................... 50,000 150,000
Boots Group plc++ ............................. 75,000 75,000
Cable & Wireless Jamaica Ltd. ................. 12 4,194,123
Carlsberg AS, Cl. B ........................... 3,000 16,000
Compania de Telecomunicaciones
de Chile SA, ADR ........................... 2,000 47,000
CMS Energy Corp. .............................. 100,000 100,000
Coldwater Creek Inc. (b) ...................... 5,000 15,000
Cypress Semiconductor Corp. ................... 185,000 500,000
DQE Inc. ...................................... 10,000 110,000
El Paso Corp. ................................. 50,000 200,000
Energizer Holdings Inc. ....................... 40,000 40,000
Eni SpA ....................................... 35,000 35,000
Fomento Economico Mexicano SA
de CV, ADR ................................. 7,000 7,000
Gallaher Group plc ............................ 30,000 30,000
Harmony Gold Mining
Co. Ltd., ADR .............................. 15,000 30,000
Henry Schein Inc. ............................. 5,000 20,000
Hilton Group plc .............................. 50,000 2,510,000
Ito-Yokado Co. Ltd. ........................... 8,000 16,000
Janus Capital Group Inc. ...................... 30,000 30,000
Knight-Ridder Inc. ............................ 1,100 17,000
Maytag Corp. .................................. 10,000 45,000
Metro-Goldwyn-Mayer Inc. ...................... 100,000 400,000
Molex Inc., Cl. A ............................. 2,000 20,000
Mondavi (Robert) Corp., Cl. A ................. 8,700 50,000
Nestle SA ..................................... 1,000 2,000
Newmont Mining Corp. .......................... 5,000 130,000
Pernod-Ricard SA (c) .......................... 1,750 8,750
Rollins Inc. (d) .............................. 224,800 697,800
Telecom Italia SpA, RNC ....................... 15,000 150,000
Telefonica Moviles SA ......................... 75,000 75,000
Telefonica SA, ADR (e) ........................ 10,711 275,850
Telefonica SA, BDR (f) ........................ 683 17,595
Texas Instruments Inc. ........................ 5,000 205,000
Tootsie Roll Industries Inc. (g) .............. 3,116 106,970
UBS AG ........................................ 6,000 20,000
NET SALES
COMMON STOCKS
Altadis SA .................................... (10,000) 60,000
Bankgesellschaft Berlin AG .................... (2,000) 280,000
OWNERSHIP AT
MARCH 31,
SHARES 2003
------ ------------
Blockbuster Inc., Cl. A ....................... (50,000) --
Boots Co. plc ................................. (75,000) --
BT Group plc, ADR ............................. (14,000) 22,300
Cable & Wireless plc, ADR ..................... (10,000) 170,000
Catellus Development Corp. .................... (300) 449,700
Cheung Kong (Holdings) Ltd. ................... (5,000) 70,000
Clear Channel Communications Inc. ............. (5,015) 10,000
Coca-Cola Enterprises Inc. .................... (5,000) 45,000
Delphi Corp. .................................. (5,000) 60,000
Deutsche Telekom AG, ADR ...................... (10,278) 230,000
Fast Retailing Co. Ltd. ....................... (10,000) --
FPL Group Inc. ................................ (1,100) 8,300
France Growth Fund Inc. ....................... (592) 18,000
France Telecom SA, ADR ........................ (1,000) 23,000
Gas Natural SDG SA ............................ (30,000) --
Genuity Inc., Cl. A ........................... (20,000) --
GrafTech International Ltd. ................... (5,000) 70,000
Gucci Group NV, ADR ........................... (12,500) 22,000
Halliburton Co. ............................... (47,000) 142,000
Hewlett-Packard Co. ........................... (1,000) 25,000
Interbrew ..................................... (18,000) --
Italy Fund Inc. (h) ........................... (54,150) --
Leap Wireless International Inc. .............. (20,000) 80,000
Lucent Technologies Inc. ...................... (5,000) 125,000
mm02 plc, ADR ................................. (1,600) 124,000
Murata Manufacturing Co. Ltd. ................. (1,000) 10,500
New Germany Fund Inc. ......................... (1,000) 67,000
Nortek Holdings Inc. (i) ...................... (137,800) --
Nortek Holdings Inc.,
Special Common (j) ......................... (5,000) --
Northrop Grumman Corp. ........................ (2,069) 179,000
Parmalat Finanziaria SpA ...................... (150,000) --
Penton Media Inc. ............................. (40,000) 360,000
Philip Morris Companies Inc. .................. (20,000) --
Precision Castparts Corp. ..................... (3,000) 52,000
RAS SpA (k) ................................... (28,998) 31,002
RCN Corp. ..................................... (20,000) 70,000
Shimano Inc. .................................. (32,000) --
Stilwell Financial Inc. ....................... (30,000) --
Sulzer AG ..................................... (500) 5,500
Swatch Group AG, Cl. B ........................ (5,000) 10,000
TELUS Corp., Non-Voting, ADR .................. (2,750) 24,750
Tokyo Electron Ltd. ........................... (3,000) 10,400
USA Interactive Inc. .......................... (5,000) 485,000
Vivendi Universal SA, ADR ..................... (5,000) 320,000
Wachovia Corp. ................................ (5,000) 125,000
10
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES (CONTINUED)
QUARTER ENDED MARCH 31, 2003 (UNAUDITED)
OWNERSHIP AT
MARCH 31,
SHARES 2003
------ ------------
NET SALES (Continued)
PREFERRED STOCKS
Allen Telecom Inc.,
7.750% Cv. Pfd., Ser. D .................... (46,000) 6,500
News Corp. Ltd., Pfd., ADR .................... (5,494) 765,000
CORPORATE BONDS
Agere Systems Inc., Sub. Dev. Cv.,
6.500%, 12/15/09 ........................... (200,000) 3,300,000
Charter Communications Inc., Cv.,
4.750%, 06/01/06 ........................... (100,000) 1,200,000
Kaman Corp., Sub. Deb. Cv.,
6.000%, 03/15/12 ........................... (65,000) 868,000
Standard Motor Products Inc.,
Sub. Deb. Cv., 6.750%, 07/15/09 ............ (150,000) 1,250,000
--------------------
(a) 5.000% stock dividend
(b) 3 for 2 stock split
(c) 1 for 4 bonus issue
(d) 3 for 2 stock split
(e) Two 2.000% stock dividends
(f) Two 1 for 50 bonus issues
(g) 3.000% stock dividend
(h) Tender Offer at $6.65 per share
(i) Tender Offer at $46.00 per share
(j) Tender Offer at $46.00 per share
(k) Tender Offer at $14.00 per share
+ Formerly Philip Morris Co.
++ Formerly Boots Co. plc
11
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS -- 86.4%
TELECOMMUNICATIONS -- 7.6%
8,132 Aliant Inc. ..................$ 154,796
6,000 Allegiance Telecom Inc.+ ..... 1,800
30,000 ALLTEL Corp. ................. 1,342,800
300,000 AT&T Corp. ................... 4,860,000
60,540 ATX Communications Inc.+ ..... 26,940
3,333 Avaya Inc.+ .................. 6,799
320,000 BCE Inc. ..................... 5,862,400
33,400 Brasil Telecom
Participacoes SA, ADR ...... 933,530
900,000 Broadwing Inc.+ .............. 3,600,000
1,775,000 BT Group plc ................. 4,404,882
22,300 BT Group plc, ADR ............ 567,312
4,194,123 Cable & Wireless Jamaica Ltd. 84,782
170,000 Cable & Wireless plc, ADR .... 562,700
130,000 CenturyTel Inc. .............. 3,588,000
100,000 Citizens Communications Co.+ . 998,000
255,466 Commonwealth Telephone
Enterprises Inc.+ .......... 9,917,190
20,000 Commonwealth Telephone
Enterprises Inc., Cl. B+ ... 783,600
47,000 Compania de Telecomunicaciones
de Chile SA, ADR ........... 442,740
230,000 Deutsche Telekom AG, ADR ..... 2,534,600
200,000 Embratel Participacoes
SA, ADR+ ................... 202,000
23,000 France Telecom SA, ADR ....... 524,630
230 Japan Telecom Holdings
Co. Ltd. ................... 622,618
143 KDDI Corp. ................... 422,078
100,000 KPN NV+ ...................... 641,627
700,000 Qwest Communications
International Inc.+ ........ 2,443,000
70,000 RCN Corp.+ ................... 50,400
9,655 Rogers Communications
Inc., Cl. B+ ............... 102,724
110,345 Rogers Communications Inc.,
Cl. B, ADR+ ................ 1,176,278
225,000 SBC Communications Inc. ...... 4,513,500
350,000 Sprint Corp. - FON Group ..... 4,112,500
186,554 Tele Norte Leste
Participacoes SA, ADR ...... 1,539,071
40,000 Telecom Argentina Stet France
Telecom SA, ADR+ ........... 149,600
400,040 Telecom Italia SpA ........... 2,758,836
123,000 Telecom Italia SpA, ADR ...... 8,487,000
150,000 Telecom Italia SpA, RNC ...... 631,806
275,850 Telefonica SA, ADR+ .......... 7,737,593
17,595 Telefonica SA, BDR+ .......... 163,503
36,000 Telefonos de Mexico SA de CV,
Cl. L, ADR ................. 1,069,920
12,750 TELUS Corp. .................. 142,934
52,500 TELUS Corp., ADR ............. 588,552
4,250 TELUS Corp., Non-Voting ...... 45,189
24,750 TELUS Corp., Non-Voting, ADR . 263,158
340,000 Verizon Communications Inc. .. 12,019,000
--------------
91,080,388
--------------
MARKET
SHARES VALUE
------ ------
FOOD AND BEVERAGE-- 7.5%
15,000 Cadbury Schweppes plc, ADR ...$ 325,950
100,000 Campbell Soup Co. ............ 2,100,000
16,000 Carlsberg AS, Cl. B .......... 540,733
35,000 Coca-Cola Co. ................ 1,416,800
45,000 Coca-Cola Enterprises Inc. ... 841,050
40,000 Coca-Cola Hellenic
Bottling Co. SA ............ 508,937
100,000 Corn Products
International Inc. ......... 2,916,000
53,592 Del Monte Foods Co.+ ......... 399,796
10,108 Denny's Corp.+ ............... 5,458
100,000 Diageo plc ................... 1,025,843
224,000 Diageo plc, ADR .............. 9,210,880
20,000 Dreyer's Grand Ice Cream Inc. 1,386,400
41,600 Flowers Foods Inc. ........... 1,139,424
7,000 Fomento Economico Mexicano
SA de CV, ADR .............. 232,890
90,000 General Mills Inc. ........... 4,099,500
440,000 Grupo Bimbo SA de CV, Ser. A . 604,496
20,000 Hain Celestial Group Inc.+ ... 302,200
120,000 Heinz (H.J.) Co. ............. 3,504,000
20,000 Hershey Foods Corp. .......... 1,253,200
350,000 Kellogg Co. .................. 10,727,500
75,000 Kerry Group plc, Cl. A ....... 998,775
12,100 LVMH Moet Hennessy Louis
Vuitton SA ................. 477,441
50,000 Mondavi (Robert) Corp., Cl. A+ 1,002,500
2,000 Nestle SA .................... 395,868
30,000 Panamerican Beverages
Inc., Cl. A ................ 650,400
600,595 PepsiAmericas Inc. ........... 7,062,997
500,000 PepsiCo Inc. ................. 20,000,000
8,750 Pernod-Ricard SA ............. 745,701
60,000 Ralcorp Holdings Inc.+ ....... 1,562,400
15,000 Sara Lee Corp. ............... 280,500
2,000 Smucker (J.M.) Co. ........... 69,940
106,970 Tootsie Roll Industries Inc. . 3,051,843
179,100 Wrigley (Wm.) Jr. Co. ........ 10,119,150
--------------
88,958,572
--------------
FINANCIAL SERVICES -- 7.3%
90,000 Allstate Corp. ............... 2,985,300
550,000 American Express Co. ......... 18,276,500
36,400 Argonaut Group Inc. .......... 311,220
90,000 Banco Santander Central
Hispano SA, ADR ............ 572,400
110,000 Bank of Ireland .............. 1,165,514
80,000 Bank of New York Co. Inc. .... 1,640,000
85,000 Bank One Corp. ............... 2,942,700
280,000 Bankgesellschaft Berlin AG+ .. 400,253
260 Berkshire Hathaway
Inc., Cl. A+ ............... 16,588,000
5,000 Block (H&R) Inc. ............. 213,450
190,000 Commerzbank AG, ADR .......... 1,295,781
160,000 Deutsche Bank AG, ADR ........ 6,737,600
12
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 2003 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
20,000 Dun and Bradstreet Corp.+ ....$ 765,000
50,000 FleetBoston Financial Corp. .. 1,194,000
25,000 Hibernia Corp., Cl. A ........ 424,000
20,000 Invik & Co. AB, Cl. B ........ 648,666
100,000 Irish Life & Permanent plc ... 1,036,642
30,000 Janus Capital Group Inc. ..... 341,700
75,000 John Hancock Financial
Services Inc. .............. 2,083,500
50,000 JP Morgan Chase & Co. ........ 1,185,500
64,000 Leucadia National Corp. ...... 2,287,360
100,000 Mellon Financial Corp. ....... 2,126,000
199,400 Midland Co. .................. 3,569,260
30,000 Moody's Corp. ................ 1,386,900
207,500 Nikko Cordial Corp. .......... 568,709
185,000 Phoenix Companies Inc. ....... 1,339,400
2,500 Prudential Financial Inc. .... 73,125
31,002 RAS SpA ...................... 385,318
60,000 Riggs National Corp. ......... 861,000
50,000 Schwab (Charles) Corp. ....... 361,000
80,000 State Street Corp. ........... 2,530,400
20,000 SunTrust Banks Inc. .......... 1,053,000
100,000 T. Rowe Price Group Inc. ..... 2,711,900
7,000 Travelers Property Casualty Corp.,
Cl. A ...................... 98,630
20,000 UBS AG+ ...................... 850,932
58,500 Unitrin Inc. ................. 1,355,445
125,000 Wachovia Corp. ............... 4,258,750
55,100 Waddell & Reed
Financial Inc., Cl. A ...... 968,107
--------------
87,592,962
--------------
ENTERTAINMENT -- 6.5%
620,000 AOL Time Warner Inc.+ ........ 6,733,200
24,000 Ascent Media Group
Inc., Cl. A+ ............... 27,840
160,000 Canal Plus, ADR .............. 151,552
110,000 EMI Group plc ................ 155,180
100,000 EMI Group plc, ADR ........... 282,150
120,000 Fox Entertainment
Group Inc., Cl. A+ ......... 3,200,400
50,000 GC Companies Inc.+ ........... 9,000
350,432 Gemstar-TV Guide
International Inc.+ ........ 1,285,735
1,913,600 Liberty Media Corp., Cl. A+ .. 18,619,328
400,000 Metro-Goldwyn-Mayer Inc.+ .... 4,200,000
160,000 Publishing & Broadcasting Ltd. 811,206
15,000 Regal Entertainment
Group, Cl. A ............... 269,250
225,000 Six Flags Inc.+ .............. 1,260,000
260,000 The Walt Disney Co. .......... 4,425,200
840,000 Viacom Inc., Cl. A+ .......... 30,660,000
40,900 Vivendi Universal SA ......... 543,596
320,000 Vivendi Universal SA, ADR .... 4,288,000
--------------
76,921,637
--------------
MARKET
SHARES VALUE
------ ------
ENERGY AND UTILITIES -- 5.9%
60,000 AES Corp.+ ...................$ 217,200
70,000 AGL Resources Inc. ........... 1,654,100
39,270 Apache Corp. ................. 2,424,530
120,000 BP plc ....................... 761,084
248,800 BP plc, ADR .................. 9,601,192
150,000 Burlington Resources Inc. .... 7,156,500
115,000 CH Energy Group Inc. ......... 4,795,500
23,000 Cinergy Corp. ................ 773,950
100,000 CMS Energy Corp. ............. 441,000
103,217 ConocoPhillips ............... 5,532,431
10,000 Constellation Energy
Group Inc. ................. 277,300
2,500 Dominion Resources Inc. ...... 138,425
26,000 DPL Inc. ..................... 323,960
110,000 DQE Inc. ..................... 1,340,900
27,000 DTE Energy Co. ............... 1,043,550
580,000 Duke Energy Corp. ............ 8,433,200
200,000 El Paso Corp. ................ 1,210,000
400,000 El Paso Electric Co.+ ........ 4,320,000
30,000 Energy East Corp. ............ 534,000
35,000 Eni SpA ...................... 467,471
40,000 Exxon Mobil Corp. ............ 1,398,000
8,300 FPL Group Inc. ............... 489,119
142,000 Halliburton Co. .............. 2,943,660
38,632 Kerr-McGee Corp. ............. 1,568,846
90,000 Mirant Corp.+ ................ 144,000
100,000 NiSource Inc.+ ............... 211,000
250,000 Northeast Utilities .......... 3,480,000
100,000 Progress Energy Inc., CVO+ ... 13,000
7,500 Royal Dutch Petroleum Co. .... 305,625
10,400 SJW Corp. .................... 795,600
14,000 Southwest Gas Corp. .......... 284,900
7,907 Total Fina Elf SA ............ 1,000,864
100,000 TXU Corp. .................... 1,785,000
260,000 Westar Energy Inc. ........... 3,151,200
60,000 Xcel Energy Inc. ............. 768,600
--------------
69,785,707
--------------
PUBLISHING -- 5.0%
20,000 Dow Jones & Co. Inc. ......... 708,800
196,000 Independent News & Media plc . 288,732
17,000 Knight-Ridder Inc. ........... 994,500
5,000 McClatchy Co., Cl. A ......... 267,950
105,000 McGraw-Hill Companies Inc. ... 5,836,950
400,000 Media General Inc., Cl. A .... 19,696,000
125,000 Meredith Corp. ............... 4,772,500
115,000 New York Times Co., Cl. A .... 4,962,250
120,000 News Corp. Ltd. .............. 780,991
11,016 News Corp. Ltd., ADR ......... 285,314
360,000 Penton Media Inc.+ ........... 198,000
350,000 PRIMEDIA Inc.+ ............... 857,500
33,000 Pulitzer Inc. ................ 1,437,810
13
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 2003 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
PUBLISHING (CONTINUED)
170,800 Reader's Digest
Association Inc. ...........$ 1,743,868
261,319 SCMP Group Ltd. .............. 94,651
70,000 Scripps (E.W.) Co., Cl. A .... 5,301,800
91,842 Seat-Pagine Gialle SpA+ ...... 59,029
75,000 Thomas Nelson Inc.+ .......... 638,250
250,000 Tribune Co. .................. 11,252,500
--------------
60,177,395
--------------
EQUIPMENT AND SUPPLIES -- 5.0%
120,000 AMETEK Inc. .................. 3,961,200
2,000 Amphenol Corp., Cl. A+ ....... 81,500
10,000 Caterpillar Inc. ............. 492,000
95,000 CIRCOR International Inc. .... 1,291,050
320,000 Deere & Co. .................. 12,563,200
216,000 Donaldson Co. Inc. ........... 7,901,280
135,000 Flowserve Corp.+ ............. 1,572,750
13,000 Franklin Electric Co. Inc. ... 610,740
100,000 Gerber Scientific Inc.+ ...... 658,000
70,000 GrafTech International Ltd.+ . 199,500
211,300 IDEX Corp. ................... 6,127,700
20,000 Ingersoll-Rand Co., Cl. A .... 771,800
60,000 Lufkin Industries Inc. ....... 1,149,000
1,000 Manitowoc Co. Inc. ........... 16,810
425,000 Navistar International Corp.+ 10,459,250
30,000 PACCAR Inc. .................. 1,508,100
5,000 Sealed Air Corp.+ ............ 200,650
170,000 SPS Technologies Inc.+ ....... 4,148,000
60,000 Sybron Dental
Specialties Inc.+ .......... 1,047,000
20,000 Terumo Corp. ................. 288,244
250,000 Watts Industries Inc., Cl. A . 3,895,000
100,000 Weir Group plc ............... 315,340
--------------
59,258,114
--------------
CABLE -- 4.1%
100,000 Adelphia Communications Corp.,
Cl. A+ ..................... 17,500
1,551,443 Cablevision Systems
Corp., Cl. A+ .............. 29,461,903
30,000 Charter Communications
Inc., Cl. A+ ............... 24,900
525,250 Comcast Corp., Cl. A+ ........ 15,016,897
85,000 Comcast Corp., Cl. A, Special+ 2,336,650
20,000 Shaw Communications
Inc., Cl. B ................ 210,070
80,000 Shaw Communications Inc., Cl. B,
Non-Voting ................. 840,800
370,000 UnitedGlobalCom Inc., Cl. A+ . 1,128,500
--------------
49,037,220
--------------
DIVERSIFIED INDUSTRIAL -- 4.0%
220,000 Acuity Brands Inc. ........... 2,959,000
195,000 Ampco-Pittsburgh Corp. ....... 2,531,100
120,000 Cooper Industries Ltd., Cl. A 4,285,200
MARKET
SHARES VALUE
------ ------
270,000 Crane Co. ....................$ 4,703,400
110,000 GATX Corp. ................... 1,592,800
200,000 GenTek Inc.+ ................. 2,000
260,000 Greif Bros. Corp., Cl. A ..... 4,674,800
3,400 Greif Bros. Corp., Cl. B ..... 80,614
420,000 Honeywell International Inc. . 8,971,200
120,000 ITT Industries Inc. .......... 6,409,200
400,600 Lamson & Sessions Co.+ ....... 2,047,066
34,500 National Service
Industries Inc. ............ 178,020
83,715 Park-Ohio Holdings Corp.+ .... 289,654
213,800 Sensient Technologies Corp. .. 4,280,276
10,000 Smiths Group plc ............. 101,162
5,500 Sulzer AG+ ................... 674,548
100,000 Thomas Industries Inc. ....... 2,480,000
50,000 Trinity Industries Inc. ...... 861,000
55,000 Tyco International Ltd. ...... 707,300
--------------
47,828,340
--------------
CONSUMER PRODUCTS -- 4.0%
60,000 Altadis SA ................... 1,462,648
20,000 Altria Group Inc. ............ 599,200
43,000 Christian Dior SA ............ 1,412,344
10,000 Church & Dwight Co. Inc. ..... 303,600
100,000 Compagnie Financiere Richemont
AG, Cl. A .................. 1,365,190
50,000 Department 56 Inc.+ .......... 491,000
40,000 Energizer Holdings Inc.+ ..... 1,019,600
90,000 Fortune Brands Inc. .......... 3,858,300
30,000 Gallaher Group plc ........... 289,259
250,000 Gallaher Group plc, ADR ...... 9,577,500
300,000 Gillette Co. ................. 9,282,000
2,000 Givaudan SA .................. 763,619
60,000 Harley-Davidson Inc. ......... 2,382,600
15,000 Matsushita Electric Industrial
Co. Ltd., ADR .............. 127,950
100,000 Mattel Inc. .................. 2,250,000
45,000 Maytag Corp. ................. 856,350
50,000 National Presto
Industries Inc. ............ 1,307,500
8,200 Nintendo Co. Ltd. ............ 663,856
100,000 Procter & Gamble Co. ......... 8,905,000
10,000 Swatch Group AG, Cl. B ....... 828,733
--------------
47,746,249
--------------
WIRELESS COMMUNICATIONS -- 3.7%
95,000 America Movil SA de
CV, Cl. L, ADR ............. 1,270,150
550,170 AT&T Wireless Services Inc.+ . 3,631,122
80,000 Leap Wireless
International Inc.+ ........ 10,800
1,775,000 mm02 plc+ .................... 1,255,532
124,000 mm02 plc, ADR+ ............... 871,720
240,000 Nextel Communications
Inc., Cl. A+ ............... 3,213,600
1,000 NTT DoCoMo Inc. .............. 1,863,721
14
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 2003 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
WIRELESS COMMUNICATIONS (CONTINUED)
250,000 Rogers Wireless Communications
Inc., Cl. B+ ...............$ 2,675,000
230,000 Sprint Corp. - PCS Group+ .... 1,002,800
16,700 Tele Celular Sul Participacoes
SA, ADR .................... 118,570
55,666 Tele Centro Oeste Celular
Participacoes SA, ADR ...... 263,857
3,340 Tele Leste Celular Participacoes
SA, ADR .................... 20,875
8,350 Tele Nordeste Celular Participacoes
SA, ADR .................... 118,570
3,340 Tele Norte Celular Participacoes
SA, ADR+ ................... 16,499
1,400,000 Telecom Italia Mobile SpA .... 5,713,537
75,000 Telefonica Moviles SA+ ....... 491,041
8,350 Telemig Celular Participacoes
SA, ADR .................... 144,455
450,000 Telephone & Data Systems Inc. 18,409,500
66,800 Telesp Celular Participacoes
SA, ADR+ ................... 216,432
553,888 Vodafone Group plc ........... 989,320
100,000 Vodafone Group plc, ADR ...... 1,822,000
--------------
44,119,101
--------------
HEALTH CARE -- 2.9%
20,000 Abbott Laboratories .......... 752,200
60,000 Amgen Inc.+ .................. 3,453,000
40,000 Apogent Technologies Inc.+ ... 583,200
10,000 AstraZeneca plc, London ...... 340,947
35,146 AstraZeneca plc, Stockholm ... 1,197,932
15,000 Aventis SA ................... 658,486
26,000 Biogen Inc.+ ................. 778,960
110,000 Bristol-Myers Squibb Co. ..... 2,324,300
23,000 Centerpulse AG+ .............. 4,918,385
75,036 GlaxoSmithKline plc .......... 1,320,083
4,000 GlaxoSmithKline plc, ADR ..... 140,760
20,000 Henry Schein Inc.+ ........... 902,000
56,011 Invitrogen Corp.+ ............ 1,715,617
50,000 Merck & Co. Inc. ............. 2,739,000
41,000 Novartis AG .................. 1,518,395
108,000 Novartis AG, Registered ...... 4,002,480
65,000 Pfizer Inc. .................. 2,025,400
17,900 Roche Holding AG ............. 1,071,515
20,000 Sanofi-Synthelabo SA+ ........ 1,006,307
20,000 Schering-Plough Corp. ........ 356,600
14,000 Takeda Chemical
Industries Ltd. ............ 523,022
60,000 Wyeth ........................ 2,269,200
--------------
34,597,789
--------------
MARKET
SHARES VALUE
------ ------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.9%
20,000 ArvinMeritor Inc. ............$ 279,800
37,802 BorgWarner Inc. .............. 1,808,448
100,000 CLARCOR Inc. ................. 3,620,000
320,061 Dana Corp. ................... 2,259,630
60,000 Delphi Corp. ................. 409,800
260,000 GenCorp Inc. ................. 1,625,000
210,000 Genuine Parts Co. ............ 6,407,100
114,000 Johnson Controls Inc. ........ 8,258,160
105,000 Midas Inc.+ .................. 766,500
335,000 Modine Manufacturing Co. ..... 5,021,650
20,000 O'Reilly Automotive Inc.+ .... 542,000
70,800 Scheib (Earl) Inc.+ .......... 148,680
163,000 Standard Motor Products Inc. . 1,809,300
24,000 Superior Industries
International Inc. ......... 874,320
105,000 TransPro Inc.+ ............... 430,500
--------------
34,260,888
--------------
CONSUMER SERVICES -- 2.4%
40,000 Loewen Group Inc.+ ........... 0
697,800 Rollins Inc. ................. 16,070,334
485,000 USA Interactive Inc.+ ........ 12,993,150
--------------
29,063,484
--------------
HOTELS AND GAMING -- 2.2%
110,000 Aztar Corp.+ ................. 1,477,300
90,000 Boca Resorts Inc., Cl. A+ .... 990,900
240,000 Gaylord Entertainment Co.+ ... 4,308,000
30,000 Greek Organization of
Football Prognostics ....... 250,103
8,000 GTECH Holdings Corp.+ ........ 261,280
2,510,000 Hilton Group plc ............. 5,465,144
650,000 Hilton Hotels Corp. .......... 7,546,500
60,000 MGM Mirage+ .................. 1,755,000
430,000 Park Place
Entertainment Corp.+ ....... 3,061,600
50,000 Starwood Hotels & Resorts
Worldwide Inc. ............. 1,189,500
--------------
26,305,327
--------------
AEROSPACE -- 2.0%
150,000 BAE Systems plc .............. 265,550
115,000 Boeing Co. ................... 2,881,900
100,000 Lockheed Martin Corp. ........ 4,755,000
179,000 Northrop Grumman Corp. ....... 15,358,200
--------------
23,260,650
--------------
RETAIL -- 1.9%
200,000 Albertson's Inc. ............. 3,770,000
300,000 AutoNation Inc.+ ............. 3,825,000
75,000 Boots Group plc .............. 628,902
15,000 Coldwater Creek Inc.+ ........ 142,350
22,000 Gucci Group NV, ADR .......... 2,096,820
15
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 2003 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
16,000 Ito-Yokado Co. Ltd. ..........$ 431,776
100,000 Lillian Vernon Corp.+ ........ 421,000
90,000 Neiman Marcus Group
Inc., Cl. A+ ............... 2,609,100
320,000 Neiman Marcus Group
Inc., Cl. B+ ............... 8,604,800
7,750 Tod's SpA .................... 192,816
20,000 Winn-Dixie Stores Inc. ....... 264,400
--------------
22,986,964
--------------
REAL ESTATE -- 1.7%
449,700 Catellus Development Corp.+ .. 9,443,700
70,000 Cheung Kong (Holdings) Ltd. .. 387,720
44,000 Florida East Coast
Industries Inc., Cl. A ..... 1,075,800
58,451 Florida East Coast
Industries Inc., Cl. B ..... 1,408,669
55,000 Griffin Land & Nurseries Inc.+ 644,600
4,753 HomeFed Corp.+ ............... 6,464
253,000 St. Joe Co. .................. 6,881,600
--------------
19,848,553
--------------
BROADCASTING -- 1.6%
10,000 Clear Channel
Communications Inc.+ ....... 339,200
16,666 Corus Entertainment
Inc., Cl. B+ ............... 226,603
100,000 Gray Television Inc. ......... 900,000
28,000 Gray Television Inc., Cl. A .. 296,800
195,000 Grupo Televisa SA, ADR+ ...... 4,904,250
200,000 Liberty Corp. ................ 8,720,000
5,000 LIN TV Corp., Cl. A+ ......... 102,550
120,000 Mediaset SpA ................. 911,373
4,000 Nippon Broadcasting
System Inc. ................ 92,090
40,375 NRJ Group .................... 496,085
131,000 Paxson Communications Corp.+ . 285,580
17,700 RTL Group .................... 608,400
100,000 Television Broadcasts Ltd. ... 306,432
110,000 Young Broadcasting
Inc., Cl. A+ ............... 1,345,300
--------------
19,534,663
--------------
ELECTRONICS -- 1.2%
150,393 Agere Systems Inc., Cl. B+ ... 225,590
500,000 Cypress Semiconductor Corp.+ . 3,450,000
3,000 Hitachi Ltd., ADR ............ 105,450
20,000 Molex Inc., Cl. A ............ 367,800
10,500 Murata Manufacturing Co. Ltd. 407,320
7,500 NEC Corp., ADR ............... 24,825
6,000 Rohm Co. Ltd. ................ 650,194
38,800 Royal Philips
Electronics NV, ADR ........ 604,892
47,000 Sony Corp., ADR .............. 1,651,110
205,000 Texas Instruments Inc. ....... 3,355,850
250,000 Thomas & Betts Corp.+ ........ 3,545,000
10,400 Tokyo Electron Ltd. .......... 406,949
--------------
14,794,980
--------------
MARKET
SHARES VALUE
------ ------
AVIATION: PARTS AND SERVICES -- 1.1%
101,320 Curtiss-Wright Corp., Cl. B ..$ 5,947,484
90,000 Fairchild Corp., Cl. A+ ...... 396,000
52,000 Precision Castparts Corp. .... 1,239,160
84,500 Sequa Corp., Cl. A+ .......... 2,894,125
78,000 Sequa Corp., Cl. B+ .......... 3,151,200
--------------
13,627,969
--------------
AGRICULTURE -- 1.0%
1,050,000 Archer-Daniels-Midland Co. ... 11,340,000
5,000 Delta & Pine Land Co. ........ 113,050
--------------
11,453,050
--------------
SPECIALTY CHEMICALS -- 0.9%
5,400 Ciba Specialty
Chemicals, ADR ............. 175,284
10,000 du Pont de Nemours
(E.I.) and Co. ............. 388,600
330,000 Ferro Corp. .................. 7,052,100
40,000 Fuller (H.B.) Co. ............ 924,800
120,000 Hercules Inc.+ ............... 1,044,000
15,000 IVAX Corp.+ .................. 183,750
210,000 Omnova Solutions Inc.+ ....... 619,500
5,000 Rohm and Haas Co. ............ 148,900
11,697 Syngenta AG, ADR ............. 107,028
--------------
10,643,962
--------------
COMMUNICATIONS EQUIPMENT -- 0.7%
60,000 Acterna Corp.+ ............... 3,660
290,000 Allen Telecom Inc.+ .......... 2,827,500
525,000 Corning Inc.+ ................ 3,066,000
125,000 Lucent Technologies Inc.+ .... 183,750
120,000 Motorola Inc. ................ 991,200
100,000 Nortel Networks Corp.+ ....... 208,000
44,000 Scientific-Atlanta Inc. ...... 604,560
--------------
7,884,670
--------------
ENVIRONMENTAL SERVICES -- 0.6%
65,000 Republic Services Inc.+ ...... 1,289,600
300,000 Waste Management Inc. ........ 6,354,000
--------------
7,643,600
--------------
BUSINESS SERVICES -- 0.6%
60,000 ANC Rental Corp.+ ............ 1,800
180,000 Cendant Corp.+ ............... 2,286,000
1,000 CheckFree Corp.+ ............. 22,480
98,000 Landauer Inc. ................ 3,596,600
70,000 Nashua Corp.+ ................ 623,000
250,000 Securicor plc ................ 338,852
3,500 SYNAVANT Inc.+ ............... 5,600
--------------
6,874,332
--------------
16
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 2003 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
PAPER AND FOREST PRODUCTS -- 0.5%
100,000 MeadWestvaco Corp. ...........$ 2,278,000
170,000 Pactiv Corp.+ ................ 3,451,000
10,000 Rayonier Inc. ................ 440,600
--------------
6,169,600
--------------
AUTOMOTIVE -- 0.5%
20,000 Ford Motor Co. ............... 150,400
167,942 General Motors Corp. ......... 5,646,210
--------------
5,796,610
--------------
METALS AND MINING -- 0.4%
72,500 Harmony Gold Mining Co. Ltd. . 898,996
30,000 Harmony Gold Mining
Co. Ltd., ADR .............. 366,900
130,000 Newmont Mining Corp. ......... 3,399,500
50,000 Placer Dome Inc. ............. 490,000
--------------
5,155,396
--------------
SATELLITE -- 0.2%
180,323 General Motors Corp., Cl. H+ . 2,019,618
34,000 Liberty Satellite &
Technology Inc.,
Cl. A+ ..................... 74,460
190,000 Loral Space &
Communications Ltd.+ ....... 62,700
--------------
2,156,778
--------------
CLOSED END FUNDS -- 0.2%
59,000 Central European
Equity Fund Inc.+ .......... 781,750
18,000 France Growth Fund Inc.+ ..... 89,820
67,000 New Germany Fund Inc.+ ....... 237,180
70,000 Pimco RCM Europe Fund Inc.+ .. 401,800
40,000 Royce Value Trust Inc. ....... 488,000
--------------
1,998,550
--------------
BUILDING AND CONSTRUCTION -- 0.2%
100,500 CRH plc ...................... 1,436,623
32,222 Huttig Building
Products Inc.+ ............. 65,733
15,000 Martin Marietta
Materials Inc. ............. 414,150
--------------
1,916,506
--------------
COMPUTER SOFTWARE AND SERVICES -- 0.1%
20,000 Capcom Co. Ltd. .............. 174,228
10,000 Computer Associates
International Inc. ......... 136,600
5,000 Electronic Data Systems Corp. 88,000
160,000 EMC Corp.+ ................... 1,156,800
--------------
1,555,628
--------------
COMPUTER HARDWARE -- 0.0%
25,000 Hewlett-Packard Co. .......... 388,750
10,000 Xerox Corp.+ ................. 87,000
--------------
475,750
--------------
MARKET
SHARES VALUE
------ ------
TRANSPORTATION -- 0.0%
100,000 AMR Corp.+ ...................$ 210,000
20,000 Grupo TMM SA de CV,
Cl. A, ADR+ ................ 78,600
7,500 Kansas City Southern+ ........ 84,225
--------------
372,825
--------------
TOTAL COMMON STOCKS .......... 1,030,884,209
--------------
PREFERRED STOCKS -- 2.4%
PUBLISHING -- 1.4%
765,000 News Corp. Ltd., Pfd., ADR ... 16,363,350
--------------
SPECIALTY CHEMICALS -- 0.5%
280,500 Hercules Trust I,
9.420% Pfd. ................ 5,610,000
--------------
TELECOMMUNICATIONS -- 0.2%
6,500 Allen Telecom Inc.,
7.750% Cv. Pfd., Ser. D .... 482,430
31,000 Broadwing Inc.,
6.750% Cv. Pfd., Ser. B .... 1,007,500
21,000 Citizens Communications Co.,
5.000% Cv. Pfd. ............ 1,008,000
500 Lucent Technologies
Capital Trust I,
7.750% Cv. Pfd. ............ 283,125
--------------
2,781,055
--------------
AEROSPACE -- 0.2%
14,021 Northrop Grumman Corp.,
7.000% Cv. Pfd., Ser. B .... 1,731,594
--------------
BROADCASTING -- 0.1%
90 Gray Television Inc.,
8.000% Cv. Pfd.,
Ser. C (a)(b) .............. 918,000
100,000 ProSieben Sat.1 Media AG, Pfd. 595,797
--------------
1,513,797
--------------
AVIATION: PARTS AND SERVICES -- 0.0%
3,000 Sequa Corp.,
$5.00 Cv. Pfd. ............. 228,000
--------------
WIRELESS COMMUNICATIONS -- 0.0%
10,760,547 Telesp Celular
Participacoes SA, Pfd.+ .... 13,805
--------------
TOTAL PREFERRED STOCKS ....... 28,241,601
--------------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS -- 0.5%
ELECTRONICS -- 0.2%
$ 3,300,000 Agere Systems Inc., Sub. Deb. Cv.,
6.500%, 12/15/09 ........... 2,937,000
--------------
17
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 2003 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
CORPORATE BONDS (CONTINUED)
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1%
$ 1,250,000 Standard Motor Products Inc.,
Sub. Deb. Cv.,
6.750%, 07/15/09 ...........$ 981,250
--------------
AVIATION: PARTS AND SERVICES -- 0.1%
868,000 Kaman Corp., Sub. Deb. Cv.,
6.000%, 03/15/12 ........... 817,005
--------------
ENERGY AND UTILITIES -- 0.1%
1,000,000 Mirant Corp., Sub. Deb. Cv.,
2.500%, 06/15/21 ........... 637,500
--------------
WIRELESS COMMUNICATIONS -- 0.0%
500,000 Nextel Communications Inc.,
9.500%, 02/01/11 ........... 531,250
--------------
HOTELS AND GAMING -- 0.0%
400,000 Hilton Hotels Corp., Sub. Deb. Cv.,
5.000%, 05/15/06 ........... 385,500
--------------
CABLE -- 0.0%
1,200,000 Charter Communications Inc., Cv.,
4.750%, 06/01/06 ........... 210,000
--------------
TOTAL CORPORATE BONDS ........ 6,499,505
--------------
SHARES
------
WARRANTS -- 0.0%
FOOD AND BEVERAGE -- 0.0%
62,463 Denny's Corp.,
expires 01/07/05+ .......... 640
--------------
METALS AND MINING -- 0.0%
5,000 Harmony Gold Mining Co. Ltd.,
ADR, expires 06/29/03+ ..... 35,000
--------------
TOTAL WARRANTS ............... 35,640
--------------
PRINCIPAL
AMOUNT
---------
REPURCHASE AGREEMENTS -- 10.7%
$100,000,000 Agreement with ABN Amro,
1.320%, dated 03/31/03, due
04/01/03, proceeds at maturity,
$100,003,667 (c) ........... 100,000,000
27,394,000 Agreement with State Street Bank &
Trust Co., 1.260%, dated
03/31/03, due 04/01/03,
proceeds at maturity,
$27,394,959 (c) ............ 27,394,000
--------------
TOTAL REPURCHASE
AGREEMENTS ................. 127,394,000
--------------
TOTAL INVESTMENTS -- 100.0%
(Cost $1,252,590,155) ..................$1,193,054,955
OTHER LIABILITIES IN EXCESS OF ASSETS .... (8,813,251)
PREFERRED STOCK
(11,973,100 preferred
shares outstanding) .................... (429,197,500)
--------------
NET ASSETS -- COMMON STOCK
(135,391,931 common shares outstanding) 755,044,204
==============
NET ASSET VALUE PER COMMON SHARE
($755,044,204 (DIVIDE) 135,391,931
shares outstanding) .................... $5.58
=====
-----------------
For Federal tax purposes:
Aggregate cost $1,252,590,155
==============
Gross unrealized appreciation $ 158,234,868
Gross unrealized depreciation (217,770,068)
--------------
Net unrealized appreciation $ (59,535,200)
==============
---------------
(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 March
31, 2003, the market value of Rule 144A securities amounted to $918,000 or
0.1% of total investments.
(c) Collateralized by U.S. Treasury Notes, 1.750% to 6.250%, due 12/31/04 to
08/15/23, market value $127,655,000.
+ Non-income producing security.
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 ................. 84.1% $1,003,166,485
Europe ........................ 11.1 133,115,372
Asia/Pacific .................. 2.4 28,616,505
Latin America ................. 1.2 13,904,192
Canada ........................ 1.1 12,986,505
South Africa .................. 0.1 1,265,896
------ --------------
Total Investments ............. 100.0% $1,193,054,955
====== ==============
18
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
19
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,
RI 02940-3011 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 & CHIEF INVESTMENT OFFICER,
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
Frank J. Fahrenkopf, Jr.
PRESIDENT & CHIEF EXECUTIVE OFFICER,
AMERICAN GAMING ASSOCIATION
Arthur V. Ferrara
FORMER CHAIRMAN & 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
Bruce N. Alpert
PRESIDENT
Gus Coutsouros
VICE PRESIDENT & TREASURER
Carter W. Austin
VICE PRESIDENT
James E. McKee
SECRETARY
INVESTMENT ADVISOR
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: 135,391,931 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 800-GABELLI
(800-422-3554), fax us at 914-921-5118, visit Gabelli Funds' Internet homepage
at: WWW.GABELLI.COM or e-mail us at: closedend@gabelli.com
--------------------------------------------------------------------------------
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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
WWW.GABELLI.COM
FIRST QUARTER REPORT
MARCH 31, 2003
GBFCM 03/03