UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04700
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The Gabelli Equity Trust Inc.
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(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
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(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
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(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
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Date of fiscal year end: December 31, 2004
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Date of reporting period: June 30, 2004
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER
RYE, NY 10580-1422
(914) 921-5070
WWW.GABELLI.COM
SEMI-ANNUAL REPORT
JUNE 30, 2004
GAB PQ2/04
[LOGO]
THE GABELLI
EQUITY TRUST INC.
THE GABELLI EQUITY TRUST INC.
Semi-Annual Report
June 30, 2004
TO OUR SHAREHOLDERS,
During the second quarter of 2004, the Gabelli Equity Trust's (the "Equity
Trust") total return was 1.9% on a net asset value ("NAV") basis while the
Standard & Poor's ("S&P") 500 Index and the Dow Jones Industrial Average rose
1.7% and 1.3%, respectively. For the six-month period ended June 30, 2004, the
Equity Trust's NAV total return was 5.3% versus gains of 3.4% and 0.9% for the
S&P 500 Index and the Dow Jones Industrial Average, respectively. The Equity
Trust's market price on June 30, 2004 was $8.17, which equates to a 1.2% premium
to its NAV of $8.07. The Equity Trust's market price fell 3.6% during the second
quarter but has risen 5.7% for the six-month period ended June 30, 2004.
Enclosed are the financial statements and the investment portfolio as of
June 30, 2004.
COMPARATIVE RESULTS
--------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 2004 (a)
------------------------------------------------
YEAR TO SINCE
QUARTER DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR 15 YEAR INCEPTION (b)
------- ---- ------ ------ ------ ------- ------- -------------
Gabelli Equity Trust NAV Return (c) ......... 1.90% 5.29% 28.69% 4.51% 4.55% 10.73% 9.55% 11.61%
Gabelli Equity Trust Investment Return (d) .. (3.58) 5.72 17.32 (1.21) 4.40 9.76 10.04 11.18
S&P 500 Index ............................... 1.72 3.44 19.10 (0.69) (2.20) 11.82 11.31 11.52
Dow Jones Industrial Average ................ 1.26 0.87 18.68 1.92 0.92 13.43 12.89 13.00
Nasdaq Composite Index ...................... 2.69 2.22 26.19 (1.78) (5.28) 11.24 10.88 9.87
(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). Current
performance may be lower or higher than the data presented. Visit
www.gabelli.com for more recent performance information. Investors should
consider the investment objectives, risks and charges and expenses of the
Fund before investing. Performance for periods less than one year is 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.
--------------------------------------------------------------------------------
SHAREHOLDER MEETING -- MAY 10, 2004 -- FINAL RESULTS
The Annual Meeting of Shareholders was held on May 10, 2004 at the
Greenwich Public Library in Greenwich, Connecticut. At that meeting, common
shareholders and preferred shareholders voting as a single class elected Mario
J. Gabelli, Thomas E. Bratter and Arthur V. Ferrara as Directors of the Equity
Trust. A total of 136,717,747 votes, 136,548,475 votes and 136,373,588 were cast
in favor of each Director and 2,217,139 votes, 2,386,411 votes and 2,561,298
votes were withheld for each Director, respectively.
Anthony J. Colavita, James P. Conn, Frank J. Fahrenkopf, Jr., Karl Otto
Pohl, Anthony R. Pustorino and Salvatore J. Zizza continue to serve in their
capacities as Directors of the Equity Trust.
In addition, shareholders ratified an amendment to authorize the Board of
Directors from time to time to increase or decrease the number of authorized
shares of stock of any class or series without further action by the
shareholders. 76,183,246 were cast in favor of the approval of this proposal,
5,239,139 votes were cast against this proposal and 1,901,204 votes abstained.
We thank you for your participation and appreciate your continued support.
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, current and historical quarterly reports, closing prices and other
current news. We welcome your comments and questions via e-mail at
closedend@gabelli.com.
You may sign up for our e-mail alerts at www.gabelli.com and receive early
notice of quarterly report availability, news events, media sightings, mutual
fund prices and performance, and access to the Gabelli & Company, Inc. research
library.
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We have separated the portfolio manager's commentary from the financial
statements and investment portfolio due to new corporate governance regulations
stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that
the content of the portfolio manager's commentary is unrestricted. The financial
statements and investment portfolio are mailed separately. Both the commentary
and the financial statements, including the portfolio of investments, will be
available on our website at www.gabelli.com/funds.
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A description of the Trust's proxy voting policies and procedures and how the
Trust voted proxies relating to portfolio securities during the most recent
12-month period ended June 30, 2004 are available (i) without charge, upon
request, by calling 800-GABELLI (800-422-3554); (ii) by writing to The Gabelli
Funds at One Corporate Center, Rye, NY 10580-1422; and (iii) on the Securities
and Exchange Commission's website at www.sec.gov.
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2
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
QUARTER ENDED JUNE 30, 2004 (UNAUDITED)
OWNERSHIP AT
JUNE 30,
SHARES 2004
--------- ------------
NET PURCHASES
COMMON STOCKS
Agrium Inc. ................................. 5,000 5,000
Ajinomoto Co. Inc. .......................... 53,000 53,000
Allianz AG .................................. 3,000 7,000
AT&T Corp. .................................. 25,000 300,000
AT&T Wireless Services Inc. ................. 520,000 1,800,000
Aviva PLC ................................... 15,000 95,000
BorgWarner Inc. (a) ......................... 30,000 60,000
Burlington Resources Inc. (b) ............... 140,000 280,000
Caesars Entertainment Inc. .................. 20,000 450,000
Champion Enterprises Inc. ................... 50,000 50,000
Charter One Financial Inc. .................. 250,000 250,000
Cincinnati Bell Inc. ........................ 16,000 1,000,000
Coca-Cola Co. ............................... 5,000 40,000
Compania de Telecomunicaciones de
Chile SA, ADR ............................. 10,000 110,000
Corning Inc. ................................ 50,000 550,000
Dana Corp. .................................. 60,000 400,000
Fedders Corp. ............................... 5,000 75,000
Fleetwood Enterprises ....................... 50,000 50,000
Franklin Electric Co., Inc. (c) ............. 13,000 26,000
GATX Corp. .................................. 5,000 110,000
Gemstar-TV Guide International Inc. ......... 35,000 400,000
Groupe Danone (d) ........................... 40,000 40,000
Hershey Foods Corp. (e) ..................... 20,000 40,000
Hilton Group plc ............................ 15,000 2,525,000
Hilton Hotels Corp. ......................... 20,000 670,000
Hospira Inc. (f) ............................ 1,500 1,500
IDEX Corp. (g) .............................. 87,500 262,500
IMC Global Inc. ............................. 10,000 10,000
Invik & Co. AB, Cl. B (h) ................... 155,000 155,000
Janus Capital Group Inc. .................... 135,000 140,000
KDDI Corp. .................................. 25 233
Liberty Media International Inc.,
Cl. A (i) ................................. 110,817 110,817
Lloyds TSB Group PLC ........................ 10,000 95,000
Mandalay Resort Group ....................... 20,000 20,000
Manulife Financial Corp. (j) ................ 50,000 50,000
Midas Inc. .................................. 1,000 116,000
Nippon Television Network Corp. ............. 5,200 5,200
Nobel Biocare Holding AG. ................... 2,000 2,000
Nobility Homes Inc. ......................... 10,000 10,000
Northrop Grumman Corp. (k) .................. 129,000 265,000
Pearson plc ................................. 20,000 80,000
Procter & Gamble Co. (l) .................... 100,000 200,000
Secom Co. Ltd. .............................. 25,000 25,000
Sekisui House Ltd. .......................... 40,000 80,000
Sensient Technologies Corp. ................. 50,000 300,000
Skyline Corp. ............................... 3,000 3,000
Southern Energy Homes Inc. .................. 1,000 1,000
Sprint Corp. (m) ............................ 150,000 500,000
Straumann Holding AG. ....................... 3,000 3,000
Swedish Match AB ............................ 905,000 905,000
Synthes Inc. (n) ............................ 10,000 10,000
Takeda Chemical Industries Ltd. ............. 5,000 23,000
Telecom Argentina Stet France
Telecom SA, ADR ........................... 8000 50,000
Terra Industries Inc. ....................... 5,000 5,000
Texas Instruments Inc. ...................... 20,000 260,000
Titan Corp. ................................. 10,000 110,000
Tokyo Electron Ltd. ......................... 4,000 14,400
TRW Automotive Holdings Corp. ............... 38,700 250,000
United States Cellular Corp. ................ 3,700 23,700
Young Broadcasting Inc., Cl. A .............. 20,000 140,000
NET SALES
COMMON STOCKS
Abbott Laboratories ......................... (5,000) 15,000
Acuity Brands Inc. .......................... (9,300) 180,000
Albertson's Inc. ............................ (25,000) 170,000
Amadeus Global Travel
Distribution SA, Cl. A .................... (115,000) --
America Movil SA de CV, Cl. L, ADR .......... (2,000) 88,000
AMETEK Inc. ................................. (1,000) 235,000
Andrew Corp. ................................ (35,000) 75,000
Boots Group plc. ............................ (75,000) --
Cable & Wireless plc, ADR ................... (45,000) --
Cendant Corp. ............................... (10,000) 150,000
Citizens Communications Co. ................. (20,000) 100,000
Corn Products International Inc. ............ (10,000) 90,000
Delphi Corp. ................................ (10,000) 30,000
DTE Energy Co. .............................. (1,000) 16,000
Duke Energy Corp. ........................... (10,000) 375,000
Flowers Foods Inc. .......................... (2,400) 60,000
France Growth Fund, Inc. (o) ................ (20,000) --
Gaylord Entertainment Co. ................... (45,000) 200,000
Greif Inc., Cl. A ........................... (5,000) 245,000
Irish Life & Permanent plc, Dublin .......... (10,000) 90,000
John Hancock Financial
Services Inc. (j) ......................... (55,000) --
Kellogg Co. ................................. (5,000) 270,000
Lockheed Martin Corp. ....................... (5,000) 80,000
Maytag Corp. ................................ (15,000) 60,000
MeadWestvaco Corp. .......................... (25,000) --
Motorola Inc. ............................... (26,000) 114,000
Nakanishi Inc. .............................. (12,000) --
Nextel Communications Inc., Cl. A ........... (5,000) 85,000
See accompanying notes to financial statements.
3
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES (CONTINUED)
QUARTER ENDED JUNE 30, 2004 (UNAUDITED)
OWNERSHIP AT
JUNE 30,
SHARES 2004
--------- ------------
NET SALES (CONTINUED)
COMMON STOCKS (CONTINUED)
Nippon Broadcasting Systems Inc. ............ (4,000) --
NIWS Co. Ltd. ............................... (160) --
Pactiv Corp. ................................ (10,000) 140,000
PepsiAmericas Inc. .......................... (10,000) 570,000
Rollins Inc. ................................ (1,000) 679,000
Royce Value Trust Inc. ...................... (790) 36,000
Sequa Corp., Cl. A .......................... (500) 84,000
Shin-Etsu Chemical Co. Ltd. ................. (10,000) --
SKY Perfect Communications Inc. ............. (420) --
St. Joe. Co. ................................ (2,000) 243,000
Superior Industries International Inc. ...... (4,000) 20,000
Telephone & Data Systems Inc. ............... (8,000) 406,000
Tootsie Roll Industries Inc. ................ (1,178) 109,000
Verizon Communications Inc. ................. (7,000) 305,000
Zimmer Holdings Inc. ........................ (27,000) 35
PREFERRED STOCKS
Hercules Trust I, 9.420% Pfd. (p) ........... (27,000) --
(a) 2 for 1 stock split
(b) 2 for 1 stock split
(c) 2 for 1 stock split
(d) 2 for 1 stock split
(e) 2 for 1 stock split
(f) Spinoff -- 1 share of Hospira Inc. for every 10 shares of Abbott
Laboratories
(g) 3 for 2 stock split
(h) 10 for 1 stock split
(i) Spinoff -- 0.05 shares of Liberty Media International Inc., Cl. A for
every 1 share of Liberty Media Corp., Ser. A
(j) Merger -- 1.1853 shares of Manulife Financial Corp. for every 1 share of
John Hancock Financial Services Inc.
(k) 2 for 1 stock split
(l) 2 for 1 stock split
(m) 0.50 for 1 stock split, name change from Sprint Corp (PCS Group) to Sprint
Corp.
(n) 10 for 1 stock split, name change from Synthes-Stratec Inc. to Synthes
Inc.
(o) Fund liquidation at $8.42 per share
(p) Full call at $25.00 per share
See accompanying notes to financial statements.
4
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS
JUNE 30, 2004 (UNAUDITED)
MARKET
SHARES COST VALUE
------------ -------------- --------------
COMMON STOCKS -- 92.5%
FINANCIAL SERVICES -- 8.8%
7,000 Allianz AG .............................................. $ 866,497 $ 758,228
55,000 Allstate Corp. .......................................... 2,299,704 2,560,250
550,000 American Express Co. .................................... 21,247,943 28,259,000
34,000 Argonaut Group Inc.+ .................................... 893,076 626,620
95,000 Aviva plc ............................................... 935,100 980,287
90,000 Banco Santander Central
Hispano SA, ADR ....................................... 322,130 945,000
110,000 Bank of Ireland ......................................... 635,101 1,469,468
77,000 Bank of New York Co. Inc. ............................... 2,834,050 2,269,960
275,000 Bankgesellschaft
Berlin AG+ ............................................ 5,495,399 672,502
260 Berkshire Hathaway Inc.,
Cl. A+ ................................................ 824,299 23,127,000
250,000 Charter One Financial Inc. .............................. 10,999,556 11,047,500
185,000 Commerzbank AG, ADR+ .................................... 3,747,342 3,263,659
157,000 Deutsche Bank AG, ADR ................................... 8,708,108 12,420,270
20,000 Dun and Bradstreet Corp.+ ............................... 333,130 1,078,200
5,000 H&R Block Inc. .......................................... 97,625 238,400
25,000 Hibernia Corp., Cl. A ................................... 198,750 607,500
155,000 Invik & Co. AB, Cl. B ................................... 728,053 1,455,771
90,000 Irish Life & Permanent plc .............................. 702,922 1,385,154
140,000 Janus Capital Group Inc. ................................ 2,177,430 2,308,600
45,000 JP Morgan Chase & Co. ................................... 1,251,002 1,744,650
60,000 Leucadia National Corp. ................................. 1,889,682 2,982,000
95,000 Lloyds TSB Group plc .................................... 775,666 743,829
50,000 Manulife Financial Corp. ................................ 1,424,537 2,025,000
100,000 Mellon Financial Corp. .................................. 3,140,094 2,933,000
190,000 Midland Co. ............................................. 1,070,105 5,633,500
65,000 Mitsubishi Securities Co. Ltd. .......................... 458,816 853,641
30,000 Moody's Corp. ........................................... 1,024,050 1,939,800
257,500 Nikko Cordial Corp. ..................................... 1,725,292 1,248,385
150,000 Phoenix Companies Inc. .................................. 2,179,395 1,837,500
2,500 Prudential Financial Inc. ............................... 68,750 116,175
46,002 RAS SpA ................................................. 576,832 834,487
60,000 Riggs National Corp. .................................... 552,538 1,267,200
45,000 Schwab (Charles) Corp. .................................. 657,562 432,450
80,000 State Street Corp. ...................................... 4,001,480 3,923,200
20,000 SunTrust Banks Inc. ..................................... 419,333 1,299,800
80,000 T. Rowe Price Group Inc. ................................ 2,689,800 4,032,000
20,000 UBS AG .................................................. 845,648 1,409,294
60,000 Unitrin Inc. ............................................ 2,098,724 2,556,000
60,000 Waddell & Reed Financial
Inc., Cl. A ........................................... 1,247,250 1,326,600
-------------- --------------
92,142,771 134,611,880
-------------- --------------
FOOD AND BEVERAGE -- 8.1%
53,000 Ajinomoto Co. Inc. ...................................... 644,030 638,244
30,000 Cadbury Schweppes
plc, ADR .............................................. 746,559 1,052,400
90,000 Campbell Soup Co. ....................................... 2,383,197 2,419,200
40,000 Coca-Cola Co. ........................................... 1,871,842 2,019,200
5,000 Coca-Cola Enterprises Inc. .............................. 77,195 144,950
40,000 Coca-Cola Hellenic
Bottling Co. SA ....................................... 519,295 934,386
90,000 Corn Products
International Inc. .................................... 2,584,915 4,189,500
73,592 Del Monte Foods Co.+ .................................... 623,741 747,695
10,108 Denny's Corp.+ .......................................... 14,358 21,631
100,000 Diageo plc .............................................. 1,037,393 1,348,337
224,000 Diageo plc, ADR ......................................... 8,642,745 12,264,000
120,000 Dreyer's Grand Ice Cream
Holdings Inc., Cl. A .................................. 9,303,375 9,490,800
60,000 Flowers Foods Inc. ...................................... 1,011,842 1,569,000
30,000 Fomento Economico
Mexicano SA de
CV, ADR ............................................... 1,094,322 1,375,200
90,000 General Mills Inc. ...................................... 4,162,848 4,277,700
40,000 Groupe Danone ........................................... 3,491,214 3,489,348
500,000 Grupo Bimbo SA de CV,
Cl. A ................................................. 1,052,379 1,053,065
20,000 Hain Celestial Group Inc.+ .............................. 267,663 362,000
130,000 Heinz (H.J.) Co. ........................................ 4,668,773 5,096,000
40,000 Hershey Foods Corp. ..................................... 1,333,128 1,850,800
270,000 Kellogg Co. ............................................. 8,513,258 11,299,500
75,000 Kerry Group plc, Cl. A .................................. 860,877 1,587,727
12,100 LVMH Moet Hennessy
Louis Vuitton SA ...................................... 419,053 875,190
42,000 Mondavi (Robert) Corp.,
Cl. A+ ................................................ 1,193,206 1,554,840
2,500 Nestle SA ............................................... 513,610 666,720
570,000 PepsiAmericas Inc. ...................................... 7,949,569 12,106,800
415,000 PepsiCo.Inc ............................................. 18,472,238 22,360,200
6,750 Pernod-Ricard SA ........................................ 470,174 863,121
60,000 Ralcorp Holdings Inc.+ .................................. 940,903 2,112,000
70,000 Sara Lee Corp. .......................................... 1,266,240 1,609,300
2,000 Smucker (J.M.) Co. ...................................... 52,993 91,820
109,000 Tootsie Roll Industries Inc. ............................ 1,566,039 3,542,500
180,000 Wrigley (Wm.) Jr. Co. ................................... 9,781,062 11,349,000
-------------- --------------
97,530,036 124,362,174
-------------- --------------
TELECOMMUNICATIONS -- 6.5%
7,000 Aliant Inc. ............................................. 62,390 143,942
25,000 ALLTEL Corp. ............................................ 534,554 1,265,500
300,000 AT&T Corp. .............................................. 9,593,820 4,389,000
90,540 ATX Communications Inc.+ ................................ 151,570 5,432
290,000 BCE Inc. ................................................ 7,665,817 5,811,600
33,400 Brasil Telecom
Participacoes SA, ADR ................................. 1,940,826 1,025,380
1,760,000 BT Group plc ............................................ 7,277,785 6,335,640
See accompanying notes to financial statements.
5
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2004 (UNAUDITED)
MARKET
SHARES COST VALUE
------------ -------------- --------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
4,440,836 Cable & Wireless
Jamaica Ltd. .......................................... $ 101,639 $ 72,620
117,000 CenturyTel Inc. ......................................... 2,733,061 3,514,680
1,000,000 Cincinnati Bell Inc.+ ................................... 8,212,133 4,440,000
100,000 Citizens Communications
Co.+ .................................................. 1,133,930 1,210,000
254,800 Commonwealth Telephone
Enterprises Inc.+ ..................................... 9,416,914 11,407,396
110,000 Compania de
Telecomunicaciones de
Chile SA, ADR ......................................... 1,634,847 1,340,900
170,000 Deutsche Telekom
AG, ADR+ .............................................. 2,827,195 3,010,700
15,000 Embratel Participacoes
SA, ADR ............................................... 266,400 207,450
5,000 France Telecom SA, ADR .................................. 146,305 131,400
233 KDDI Corp. .............................................. 830,434 1,332,466
100,000 KPN NV .................................................. 232,728 761,622
5,000 Manitoba Telecom
Services Inc. ......................................... 189,106 169,122
1,000,000 Qwest Communications
International Inc.+ ................................... 3,357,501 3,590,000
110,345 Rogers Communications
Inc., Cl. B, New York ................................. 1,537,198 2,000,555
9,655 Rogers Communications
Inc., Cl. B, Toronto .................................. 137,424 173,909
220,000 SBC Communications Inc. ................................. 7,272,156 5,335,000
500,000 Sprint Corp. ............................................ 11,848,577 8,800,000
186,554 Tele Norte Leste
Participacoes SA, ADR ................................. 2,554,387 2,374,832
50,000 Telecom Argentina Stet
France Telecom SA,
ADR+ .................................................. 423,451 452,000
1,320,480 Telecom Italia SpA ...................................... 3,059,314 4,104,761
495,130 Telecom Italia SpA, RNC ................................. 572,370 1,093,355
274,000 Telefonica SA, ADR ...................................... 13,264,644 12,228,620
17,595 Telefonica SA, BDR ...................................... 202,143 258,499
36,000 Telefonos de Mexico SA
de CV, Cl. L, ADR ..................................... 389,422 1,197,720
12,750 TELUS Corp. ............................................. 222,542 207,405
52,500 TELUS Corp., ADR ........................................ 950,397 854,018
4,250 TELUS Corp., Non-Voting ................................. 74,181 63,841
20,750 TELUS Corp.,
Non-Voting, ADR ....................................... 438,501 311,695
305,000 Verizon Communications
Inc. .................................................. 13,501,419 11,037,950
-------------- --------------
114,757,081 100,659,010
-------------- --------------
ENERGY AND UTILITIES -- 6.0%
75,000 AES Corp.+ .............................................. 424,572 744,750
50,000 AGL Resources Inc. ...................................... 891,012 1,452,500
120,000 Allegheny Energy Inc.+ .................................. 1,090,388 1,849,200
70,000 Apache Corp. ............................................ 2,728,670 3,048,500
247,000 BP plc, ADR ............................................. 10,018,320 13,231,790
280,000 Burlington Resources Inc. ............................... 5,902,202 10,130,400
115,000 CH Energy Group Inc. .................................... 4,749,282 5,340,600
20,000 Cinergy Corp. ........................................... 607,416 760,000
100,000 CMS Energy Corp.+ ....................................... 640,176 913,000
103,217 ConocoPhillips .......................................... 5,288,737 7,874,425
10,000 Constellation Energy
Group Inc. ............................................ 237,177 379,000
26,000 DPL Inc. ................................................ 524,093 504,920
16,000 DTE Energy Co. .......................................... 707,120 648,640
375,000 Duke Energy Corp. ....................................... 6,881,250 7,608,750
110,000 Duquesne Light
Holdings Inc. ......................................... 1,848,062 2,124,100
200,000 El Paso Corp. ........................................... 2,520,332 1,576,000
400,000 El Paso Electric Co.+ ................................... 3,236,625 6,176,000
50,000 Energy East Corp. ....................................... 1,065,733 1,212,500
50,000 Eni SpA ................................................. 732,789 992,785
80,000 Exxon Mobil Corp. ....................................... 2,750,108 3,552,800
10,000 FPL Group Inc. .......................................... 556,256 639,500
70,000 Halliburton Co. ......................................... 1,726,011 2,118,200
35,000 Kerr-McGee Corp. ........................................ 2,046,290 1,881,950
150,000 Mirant Corp.+ ........................................... 201,190 53,850
100,000 NiSource Inc. (SAILS)+ .................................. 200,000 252,000
300,000 Northeast Utilities ..................................... 5,660,050 5,841,000
100,000 Progress Energy Inc., CVO+ .............................. 52,000 36,000
30,000 SJW Corp. ............................................... 883,106 1,020,000
20,000 Southwest Gas Corp. ..................................... 415,025 482,600
7,907 Total SA ................................................ 1,114,624 1,507,461
95,000 TXU Corp. ............................................... 1,557,877 3,848,450
255,000 Westar Energy Inc. ...................................... 4,319,800 5,077,050
-------------- --------------
71,576,293 92,878,721
-------------- --------------
ENTERTAINMENT -- 5.9%
160,000 Canal Plus, ADR ......................................... 34,011 214,128
110,000 EMI Group plc ........................................... 292,543 486,244
80,000 EMI Group plc, ADR ...................................... 947,487 707,264
120,000 Fox Entertainment
Group Inc., Cl. A+ .................................... 2,783,871 3,204,000
50,000 GC Companies Inc.+ ...................................... 54,500 27,500
400,000 Gemstar-TV Guide
International Inc.+ ................................... 2,863,380 1,920,000
2,216,352 Liberty Media Corp., Cl. A+ ............................. 11,057,964 19,925,004
82,788 Metro-Goldwyn-
Mayer Inc.+ ........................................... 186,273 1,001,735
160,000 Publishing &
Broadcasting Ltd. ..................................... 893,720 1,432,214
See accompanying notes to financial statements.
6
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2004 (UNAUDITED)
MARKET
SHARES COST VALUE
------------ -------------- --------------
COMMON STOCKS (CONTINUED)
ENTERTAINMENT (CONTINUED)
15,000 Regal Entertainment
Group, Cl. A .......................................... $ 285,000 $ 271,500
210,000 Six Flags Inc.+ ......................................... 1,752,972 1,524,600
260,000 The Walt Disney Co. ..................................... 5,453,387 6,627,400
750,000 Time Warner Inc.+ ....................................... 16,797,691 13,185,000
840,000 Viacom Inc., Cl. A ...................................... 35,321,393 30,534,000
43,900 Vivendi Universal SA+ ................................... 2,247,329 1,217,768
330,000 Vivendi Universal SA, ADR+ .............................. 8,718,814 9,207,000
-------------- --------------
89,690,335 91,485,357
-------------- --------------
WIRELESS COMMUNICATIONS -- 5.7%
88,000 America Movil SA de CV,
Cl. L, ADR ............................................ 2,291,502 3,200,560
1,800,000 AT&T Wireless
Services Inc.+ ........................................ 24,174,789 25,776,000
27,900 Leap Wireless
International Inc.+ ................................... 8,252 502
1,760,000 mm02 plc+ ............................................... 1,963,847 2,960,356
100,000 mm02 plc, ADR+ .......................................... 1,149,772 1,680,000
85,000 Nextel Communications
Inc., Cl. A+ .......................................... 2,165,953 2,266,100
1,500 NTT DoCoMo Inc. ......................................... 3,553,937 2,680,658
177,000 Rogers Wireless
Communications Inc.,
Cl. B+ ................................................ 1,998,679 4,787,850
16,700 Tele Celular Sul
Participacoes SA, ADR ................................. 266,992 215,430
55,666 Tele Centro Oeste Celular
Participacoes SA, ADR ................................. 166,868 510,457
3,340 Tele Leste Celular
Participacoes SA, ADR+ ................................ 89,340 44,021
8,350 Tele Nordeste Celular
Participacoes SA, ADR ................................. 123,227 192,050
3,340 Tele Norte Celular
Participacoes SA, ADR ................................. 51,601 30,227
1,400,000 Telecom Italia Mobile SpA ............................... 7,521,308 7,937,416
90,000 Telefonica Moviles SA ................................... 660,946 939,496
8,350 Telemig Celular
Participacoes SA, ADR ................................. 241,320 246,325
406,000 Telephone & Data
Systems Inc. .......................................... 34,363,203 28,907,200
66,800 Telesp Celular
Participacoes SA, ADR+ ................................ 2,135,935 526,384
23,700 United States
Cellular Corp.+ ....................................... 750,774 913,635
553,888 Vodafone Group plc ...................................... 975,799 1,212,904
100,000 Vodafone Group plc, ADR ................................. 2,378,590 2,210,000
-------------- --------------
87,032,634 87,237,571
-------------- --------------
PUBLISHING -- 5.0%
20,000 Dow Jones & Co. Inc. .................................... 1,030,036 902,000
248,266 Independent News &
Media plc ............................................. 358,456 592,023
20,000 Knight-Ridder Inc. ...................................... 1,345,264 1,440,000
5,000 McClatchy Co., Cl. A .................................... 240,250 350,750
100,000 McGraw-Hill
Companies Inc. ........................................ 6,052,805 7,657,000
339,000 Media General Inc., Cl. A ............................... 20,169,846 21,770,580
125,000 Meredith Corp. .......................................... 2,091,313 6,870,000
115,000 New York Times Co., Cl. A ............................... 5,259,249 5,141,650
120,000 News Corp. Ltd. ......................................... 696,029 1,059,950
10,000 News Corp. Ltd., ADR .................................... 186,274 354,200
80,000 Pearson plc ............................................. 911,889 972,035
324,500 Penton Media Inc.+ ...................................... 2,731,742 133,045
400,000 PRIMEDIA Inc.+ .......................................... 1,948,569 1,112,000
90,000 Pulitzer Inc. ........................................... 4,340,327 4,401,000
175,000 Reader's Digest
Association Inc. ...................................... 3,181,221 2,798,250
261,319 SCMP Group Ltd. ......................................... 191,790 103,860
70,000 Scripps (E.W.) Co., Cl. A ............................... 4,559,387 7,350,000
66,585 Seat Pagine Gialle SpA .................................. 177,139 27,949
80,000 Thomas Nelson Inc. ...................................... 951,267 1,819,200
280,000 Tribune Co. ............................................. 12,804,576 12,751,200
-------------- --------------
69,227,429 77,606,692
-------------- --------------
DIVERSIFIED INDUSTRIAL -- 4.7%
180,000 Acuity Brands Inc. ...................................... 3,041,387 4,860,000
195,000 Ampco-Pittsburgh Corp. .................................. 2,627,873 2,507,700
125,000 Cooper Industries Ltd.,
Cl. A ................................................. 6,152,755 7,426,250
250,000 Crane Co. ............................................... 4,841,093 7,847,500
110,000 GATX Corp. .............................................. 1,824,909 2,992,000
245,000 Greif Inc., Cl. A ....................................... 4,598,189 10,351,250
3,400 Greif Inc., Cl. B ....................................... 69,824 144,500
420,000 Honeywell International Inc. ............................ 14,054,610 15,384,600
118,000 ITT Industries Inc. ..................................... 3,585,603 9,794,000
400,600 Lamson & Sessions Co.+ .................................. 2,458,185 3,220,824
110,000 Park-Ohio Holdings Corp.+ ............................... 1,072,210 1,298,000
10,000 Smiths Group plc ........................................ 171,257 135,378
4,000 Sulzer AG ............................................... 850,053 1,137,017
7,500 Technip SA .............................................. 721,269 1,017,422
100,000 Thomas Industries Inc. .................................. 1,388,525 3,320,000
50,000 Trinity Industries Inc. ................................. 945,000 1,589,500
-------------- --------------
48,402,742 73,025,941
-------------- --------------
CONSUMER PRODUCTS -- 4.2%
60,000 Altadis SA .............................................. 885,677 1,854,173
43,000 Christian Dior SA ....................................... 1,514,055 2,780,590
10,000 Church & Dwight Co. Inc. ................................ 99,535 457,800
See accompanying notes to financial statements.
7
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2004 (UNAUDITED)
MARKET
SHARES COST VALUE
------------ -------------- --------------
COMMON STOCKS (CONTINUED)
CONSUMER PRODUCTS (CONTINUED)
90,000 Compagnie Financiere
Richemont AG, Cl. A ................................... $ 1,264,406 $ 2,349,888
50,000 Department 56 Inc.+ ..................................... 524,317 770,000
35,000 Energizer Holdings Inc.+ ................................ 821,306 1,575,000
35,000 Fortune Brands Inc. ..................................... 2,451,519 2,640,050
30,000 Gallaher Group plc ...................................... 274,164 362,609
235,000 Gallaher Group plc, ADR ................................. 9,106,250 11,374,000
190,000 Gillette Co. ............................................ 6,027,025 8,056,000
2,000 Givaudan SA ............................................. 550,742 1,157,777
50,000 Harley-Davidson Inc. .................................... 2,322,820 3,097,000
15,000 Matsushita Electric
Industrial Co. Ltd., ADR .............................. 178,325 215,400
100,000 Mattel Inc. ............................................. 1,549,565 1,825,000
60,000 Maytag Corp. ............................................ 1,389,460 1,470,600
50,000 National Presto
Industries Inc. ....................................... 1,766,002 2,061,500
10,700 Nintendo Co. Ltd. ....................................... 919,164 1,240,480
200,000 Procter & Gamble Co. .................................... 8,770,000 10,888,000
10,000 Swatch Group AG, Cl. B .................................. 584,263 1,301,501
905,000 Swedish Match AB ........................................ 9,409,522 9,250,692
-------------- --------------
50,408,117 64,728,060
-------------- --------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.6%
60,000 BorgWarner Inc. ......................................... 1,326,210 2,626,200
100,000 CLARCOR Inc. ............................................ 1,266,455 4,580,000
400,000 Dana Corp. .............................................. 6,377,042 7,840,000
30,000 Delphi Corp. ............................................ 522,082 320,400
260,000 GenCorp.Inc ............................................. 2,470,673 3,481,400
250,000 Genuine Parts Co. ....................................... 6,819,120 9,920,000
190,000 Johnson Controls Inc. ................................... 7,685,500 10,142,200
116,000 Midas Inc.+ ............................................. 1,508,953 2,018,400
331,500 Modine Manufacturing Co. ................................ 8,839,590 10,558,275
75,000 Scheib (Earl) Inc.+ ..................................... 619,805 238,500
163,000 Standard Motor
Products Inc. ......................................... 1,748,388 2,400,990
20,000 Superior Industries
International Inc. .................................... 510,238 669,000
105,000 TransPro Inc.+ .......................................... 936,807 604,800
-------------- --------------
40,630,863 55,400,165
-------------- --------------
CABLE AND SATELLITE -- 3.5%
1,510,000 Cablevision Systems Corp.,
Cl. A+ ................................................ 22,399,669 29,671,500
30,000 Charter Communications
Inc., Cl. A+ .......................................... 138,876 117,600
370,000 Comcast Corp., Cl. A+ ................................... 12,428,605 10,371,100
85,000 Comcast Corp., Cl. A,
Special+ .............................................. 756,584 2,346,850
148,444 DIRECTV Group Inc.+ ..................................... 2,127,257 2,538,392
110,817 Liberty Media International
Inc., Cl. A+ .......................................... 2,264,884 4,111,311
50,000 Loral Space &
Communications Ltd.+ .................................. 11,250 7,250
20,000 Shaw Communications Inc.,
Cl. B ................................................. 52,983 333,694
80,000 Shaw Communications Inc.,
Cl. B, Non-Voting ..................................... 329,198 1,344,800
461,472 UnitedGlobalCom Inc.,
Cl. A+ ................................................ 2,911,835 3,350,287
-------------- --------------
43,421,141 54,192,784
-------------- --------------
HOTELS AND GAMING -- 3.3%
110,000 Aztar Corp.+ ............................................ 772,707 3,080,000
100,000 Boca Resorts Inc., Cl. A+ ............................... 921,500 1,982,000
450,000 Caesars Entertainment Inc.+ ............................. 2,686,763 6,750,000
200,000 Gaylord Entertainment Co.+ .............................. 4,949,319 6,278,000
55,000 Greek Organization of
Football Prognostics .................................. 630,177 1,038,531
8,000 GTECH Holdings Corp. .................................... 69,219 370,480
2,525,000 Hilton Group plc ........................................ 8,483,893 12,638,275
670,000 Hilton Hotels Corp. ..................................... 6,924,016 12,502,200
20,000 Mandalay Resort Group ................................... 1,354,880 1,372,800
70,000 MGM Mirage+ ............................................. 2,156,508 3,285,800
45,000 Starwood Hotels &
Resorts Worldwide Inc. ................................ 963,234 2,018,250
-------------- --------------
29,912,216 51,316,336
-------------- --------------
HEALTH CARE -- 3.1%
15,000 Abbott Laboratories ..................................... 573,453 611,400
55,000 Amgen Inc.+ ............................................. 3,215,239 3,001,350
5,000 AstraZeneca plc, London ................................. 198,161 224,330
35,146 AstraZeneca plc, Stockholm .............................. 1,255,532 1,595,647
15,000 Aventis SA .............................................. 1,056,288 1,132,396
29,900 Biogen Idec Inc.+ ....................................... 181,025 1,891,175
150,000 Bristol-Myers Squibb Co. ................................ 3,911,965 3,675,000
75,036 GlaxoSmithKline plc ..................................... 1,817,378 1,518,627
4,000 GlaxoSmithKline plc, ADR ................................ 216,096 165,840
18,000 Henry Schein Inc.+ ...................................... 775,800 1,136,520
1,500 Hospira Inc.+ ........................................... 36,603 41,400
16,000 INAMED Corp.+ ........................................... 698,771 1,005,600
47,000 Invitrogen Corp.+ ....................................... 2,339,924 3,383,530
80,000 Merck & Co. Inc. ........................................ 4,009,501 3,800,000
2,000 Nobel Biocare Holding AG ................................ 286,712 312,999
41,000 Novartis AG ............................................. 1,292,180 1,808,727
108,000 Novartis AG, Registered ................................. 3,905,280 4,806,000
120,000 Pfizer Inc. ............................................. 3,556,135 4,113,600
18,100 Roche Holding AG ........................................ 1,644,615 1,792,079
20,000 Sanofi-Synthelabo SA .................................... 967,750 1,267,748
See accompanying notes to financial statements.
8
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2004 (UNAUDITED)
MARKET
SHARES COST VALUE
------------ -------------- --------------
COMMON STOCKS (CONTINUED)
HEALTH CARE (CONTINUED)
100,000 Schering-Plough Corp. ................................... $ 1,917,839 $ 1,848,000
3,000 Straumann Holding AG .................................... 619,226 602,443
60,000 Sybron Dental
Specialties Inc.+ ..................................... 1,140,669 1,791,000
10,000 Synthes Inc. ............................................ 677,094 1,139,812
23,000 Takeda Chemical
Industries Ltd. ....................................... 1,140,219 1,009,669
100,000 Wyeth ................................................... 4,105,470 3,616,000
-------------- --------------
41,538,925 47,290,892
-------------- --------------
EQUIPMENT AND SUPPLIES -- 2.6%
235,000 AMETEK Inc. ............................................. 5,503,474 7,261,500
2,000 Amphenol Corp., Cl. A+ .................................. 14,775 66,640
95,000 CIRCOR International Inc. ............................... 981,440 1,937,050
220,000 Donaldson Co. Inc. ...................................... 970,341 6,446,000
75,000 Fedders Corp. ........................................... 466,126 326,250
115,000 Flowserve Corp.+ ........................................ 1,995,044 2,868,100
26,000 Franklin Electric Co. Inc. .............................. 210,022 981,760
100,000 Gerber Scientific Inc.+ ................................. 1,060,701 706,000
70,000 GrafTech International
Ltd.+ ................................................. 850,486 732,200
262,500 IDEX Corp. .............................................. 5,657,750 9,016,875
20,000 Ingersoll-Rand Co., Cl. A ............................... 836,200 1,366,200
60,000 Lufkin Industries Inc. .................................. 1,105,223 1,918,800
1,000 Manitowoc Co. Inc. ...................................... 25,450 33,850
1,000 Sealed Air Corp.+ ....................................... 17,404 53,270
235,000 Watts Water Technologies
Inc., Cl. A ........................................... 3,107,523 6,333,250
100,000 Weir Group plc .......................................... 420,789 524,101
-------------- --------------
23,222,748 40,571,846
-------------- --------------
AUTOMOTIVE -- 2.0%
15,000 Ford Motor Co. .......................................... 334,700 234,750
150,000 General Motors Corp. .................................... 4,903,032 6,988,500
405,000 Navistar International
Corp.+ ................................................ 13,980,822 15,697,800
45,000 PACCAR Inc. ............................................. 450,000 2,609,550
250,000 TRW Automotive
Holdings Corp.+ ....................................... 6,695,120 4,712,500
-------------- --------------
26,363,674 30,243,100
-------------- --------------
CONSUMER SERVICES -- 1.9%
475,000 InterActiveCorp.+ ....................................... 11,476,194 14,316,500
40,000 Loewen Group Inc.+ ...................................... 48,700 0
679,000 Rollins Inc. ............................................ 14,170,774 15,623,790
-------------- --------------
25,695,668 29,940,290
-------------- --------------
RETAIL -- 1.9%
170,000 Albertson's Inc. ........................................ 4,524,789 4,511,800
300,000 AutoNation Inc.+ ........................................ 3,354,597 5,130,000
22,500 Coldwater Creek Inc.+ ................................... 181,518 595,575
22,000 Ito-Yokado Co. Ltd. ..................................... 749,555 941,575
30,000 Matsumotokiyoshi Co. Ltd. ............................... 835,350 907,300
323,500 Neiman Marcus Group
Inc., Cl. B ........................................... 7,874,064 16,786,415
-------------- --------------
17,519,873 28,872,665
-------------- --------------
BROADCASTING -- 1.8%
16,666 Corus Entertainment Inc.,
Cl. B ................................................. 62,036 322,568
120,000 Gray Television Inc. .................................... 1,204,736 1,666,800
27,500 Gray Television Inc.,
Cl. A ................................................. 370,755 343,750
185,100 Grupo Televisa SA, ADR .................................. 6,385,024 8,379,477
200,000 Liberty Corp. ........................................... 8,528,905 9,390,000
15,000 Lin TV Corp., Cl. A+ .................................... 344,736 318,000
165,000 Mediaset SpA ............................................ 1,326,670 1,881,000
5,200 Nippon Television
Network Corp. ......................................... 859,664 853,045
40,375 NRJ Group ............................................... 384,806 884,199
140,000 Paxson Communications
Corp.+ ................................................ 1,323,628 455,000
17,700 RTL Group ............................................... 775,136 1,036,033
100,000 Television Broadcasts Ltd. .............................. 396,239 428,216
140,000 Young Broadcasting Inc.,
Cl. A+ ................................................ 3,217,910 1,841,000
-------------- --------------
25,180,245 27,799,088
-------------- --------------
AVIATION: PARTS AND SERVICES -- 1.7%
204,640 Curtiss-Wright Corp.,
Cl. B ................................................. 5,637,891 11,003,493
120,400 Fairchild Corp., Cl. A+ ................................. 1,027,407 515,312
90,000 Precision Castparts Corp. ............................... 2,330,982 4,922,100
84,000 Sequa Corp., Cl. A+ ..................................... 3,347,991 4,911,480
74,600 Sequa Corp., Cl. B+ ..................................... 3,852,672 4,457,350
-------------- --------------
16,196,943 25,809,735
-------------- --------------
AEROSPACE -- 1.7%
110,000 Boeing Co. .............................................. 3,680,633 5,619,900
80,000 Lockheed Martin Corp. ................................... 4,434,820 4,166,400
265,000 Northrop Grumman Corp. .................................. 12,594,609 14,230,500
110,000 Titan Corp.+ ............................................ 2,301,580 1,427,800
-------------- --------------
23,011,642 25,444,600
-------------- --------------
See accompanying notes to financial statements.
9
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2004 (UNAUDITED)
MARKET
SHARES COST VALUE
------------ -------------- --------------
COMMON STOCKS (CONTINUED)
MACHINERY -- 1.5%
20,000 AGCO Corp.+ ............................................. $ 350,026 $ 407,400
10,000 Caterpillar Inc. ........................................ 136,559 794,400
320,000 Deere & Co. ............................................. 15,328,000 22,444,800
-------------- --------------
15,814,585 23,646,600
-------------- --------------
COMMUNICATIONS EQUIPMENT -- 1.4%
125,000 Agere Systems Inc., Cl. B+ .............................. 362,157 268,750
75,000 Andrew Corp.+ ........................................... 819,577 1,500,750
550,000 Corning Inc.+ ........................................... 5,012,562 7,183,000
130,000 Lucent Technologies Inc.+ ............................... 800,828 491,400
114,000 Motorola Inc. ........................................... 1,613,938 2,080,500
100,000 Nortel Networks Corp.+ .................................. 686,285 499,000
44,000 Scientific-Atlanta Inc. ................................. 355,750 1,518,000
300,000 Thomas & Betts Corp. .................................... 5,741,098 8,169,000
-------------- --------------
15,392,195 21,710,400
-------------- --------------
SPECIALTY CHEMICALS -- 1.4%
5,400 Ciba Specialty Chemicals,
ADR ................................................... 8,652 195,156
20,000 du Pont de Nemours (E.I.)
and Co. ............................................... 802,600 888,400
330,000 Ferro Corp. ............................................. 6,975,503 8,804,400
40,000 Fuller (H.B.) Co. ....................................... 968,437 1,136,000
120,000 Hercules Inc.+ .......................................... 1,543,119 1,462,800
10,000 IMC Global Inc. ......................................... 139,584 134,000
15,000 IVAX Corp.+ ............................................. 170,441 359,850
232,300 Omnova Solutions Inc.+ .................................. 1,879,165 1,417,030
300,000 Sensient Technologies
Corp. ................................................. 5,529,921 6,444,000
10,000 Syngenta AG, ADR ........................................ 18,940 167,900
-------------- --------------
18,036,362 21,009,536
-------------- --------------
REAL ESTATE -- 1.1%
80,000 Catellus Development
Corp. ................................................. 1,535,534 1,972,000
70,000 Cheung Kong
(Holdings) Ltd. ....................................... 815,521 516,039
100,000 Florida East Coast
Industries Inc. ....................................... 1,458,643 3,865,000
55,000 Griffin Land &
Nurseries Inc.+ ....................................... 513,143 1,398,100
243,000 St. Joe Co. ............................................. 1,804,074 9,647,100
-------------- --------------
6,126,915 17,398,239
-------------- --------------
AGRICULTURE -- 1.1%
5,000 Agrium Inc. ............................................. 68,444 72,750
1,000,000 Archer-Daniels-
Midland Co. ........................................... 13,091,460 16,780,000
5,000 Delta & Pine Land Co. ................................... 84,396 109,750
5,000 Terra Industries Inc.+ .................................. 29,304 28,150
-------------- --------------
13,273,604 16,990,650
-------------- --------------
ENVIRONMENTAL SERVICES -- 0.9%
65,000 Republic Services Inc. .................................. 875,761 1,881,100
400,000 Waste Management Inc. ................................... 9,495,206 12,260,000
-------------- --------------
10,370,967 14,141,100
-------------- --------------
ELECTRONICS -- 0.8%
3,000 Hitachi Ltd., ADR ....................................... 218,796 208,770
20,000 Molex Inc., Cl. A ....................................... 519,697 545,600
7,500 NEC Corp., ADR .......................................... 43,625 53,850
9,500 Rohm Co. Ltd. ........................................... 1,408,684 1,137,057
38,800 Royal Philips Electronics
NV, ADR ............................................... 53,456 1,055,360
45,000 Sony Corp., ADR ......................................... 1,340,589 1,712,250
260,000 Texas Instruments Inc. .................................. 6,343,035 6,286,800
14,400 Tokyo Electron Ltd. ..................................... 783,746 807,662
-------------- --------------
10,711,628 11,807,349
-------------- --------------
BUSINESS SERVICES -- 0.7%
60,000 ANC Rental Corp.+ ....................................... 578,273 42
150,000 Cendant Corp. ........................................... 2,981,441 3,672,000
1,000 CheckFree Corp.+ ........................................ 9,040 30,000
98,000 Landauer Inc. ........................................... 2,494,473 4,376,680
70,000 Nashua Corp.+ ........................................... 634,028 678,300
25,000 Secom Co. Ltd. .......................................... 1,095,891 1,060,807
212,500 Securicor plc ........................................... 0 491,345
-------------- --------------
7,793,146 10,309,174
-------------- --------------
METALS AND MINING -- 0.5%
72,500 Harmony Gold Mining
Co. Ltd. .............................................. 347,738 761,499
35,000 Harmony Gold Mining
Co. Ltd., ADR ......................................... 282,733 370,650
130,000 Newmont Mining Corp. .................................... 2,977,871 5,038,800
50,000 Placer Dome Inc. ........................................ 487,169 832,000
-------------- --------------
4,095,511 7,002,949
-------------- --------------
PAPER AND FOREST PRODUCTS -- 0.3%
140,000 Pactiv Corp.+ ........................................... 1,465,973 3,491,600
16,656 Rayonier Inc. ........................................... 531,510 740,359
-------------- --------------
1,997,483 4,231,959
-------------- --------------
See accompanying notes to financial statements.
10
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2004 (UNAUDITED)
MARKET
SHARES COST VALUE
------------ -------------- --------------
COMMON STOCKS (CONTINUED)
MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 0.2%
50,000 Champion Enterprises Inc.+ .............................. $ 466,465 $ 459,000
50,000 Fleetwood Enterprises Inc.+ ............................. 642,160 727,500
32,222 Huttig Building
Products Inc.+ ........................................ 81,163 247,465
15,000 Martin Marietta
Materials Inc. ........................................ 322,688 664,950
10,000 Nobility Homes Inc. ..................................... 195,123 205,100
80,000 Sekisui House Ltd. ...................................... 846,007 887,871
3,000 Skyline Corp. ........................................... 118,554 121,950
1,000 Southern Energy
Homes Inc.+ ........................................... 3,900 4,100
-------------- --------------
2,676,060 3,317,936
-------------- --------------
BUILDING AND CONSTRUCTION -- 0.2%
25,000 Bouygues SA ............................................. 724,706 837,054
100,500 CRH plc ................................................. 1,259,457 2,122,663
-------------- --------------
1,984,163 2,959,717
-------------- --------------
CLOSED-END FUNDS -- 0.2%
77,333 Central Europe and
Russia Fund Inc. ...................................... 1,125,498 1,651,833
70,000 New Germany Fund Inc. ................................... 754,518 546,000
36,000 Royce Value Trust Inc. .................................. 439,826 633,960
-------------- --------------
2,319,842 2,831,793
-------------- --------------
TRANSPORTATION -- 0.1%
100,000 AMR Corp.+ .............................................. 1,924,248 1,211,000
15,000 Grupo TMM SA de CV,
Cl. A, ADR+ ........................................... 80,460 36,750
-------------- --------------
2,004,708 1,247,750
-------------- --------------
COMPUTER SOFTWARE AND SERVICES -- 0.1%
5,000 Electronic Data
Systems Corp. ......................................... 69,661 95,750
100,000 EMC Corp.+ .............................................. 1,395,320 1,140,000
25,256 Telecom Italia Media SpA+ ............................... 26,868 10,386
-------------- --------------
1,491,849 1,246,136
-------------- --------------
TOTAL COMMON
STOCKS .................................................. 1,147,550,394 1,423,328,195
-------------- --------------
PREFERRED STOCKS -- 2.0%
PUBLISHING -- 1.7%
771,603 News Corp. Ltd.,
Pfd., ADR ............................................. 20,984,228 25,370,307
-------------- --------------
TELECOMMUNICATIONS -- 0.1%
26,000 Cincinnati Bell Inc.,
6.750% Cv. Pfd.,
Ser. B ................................................ 820,367 1,091,480
20,400 Citizens Communications Co.,
5.000% Cv. Pfd. ....................................... 992,655 1,020,000
-------------- --------------
1,813,022 2,111,480
-------------- --------------
AEROSPACE -- 0.1%
14,021 Northrop Grumman Corp.,
7.000% Cv. Pfd., Ser. B ............................... 1,633,727 1,843,761
-------------- --------------
BROADCASTING -- 0.1%
90 Gray Television Inc.,
8.000% Cv. Pfd.,
Ser. C (a) ............................................ 900,000 909,000
-------------- --------------
AVIATION: PARTS AND SERVICES -- 0.0%
3,000 Sequa Corp.,
$5.00 Cv. Pfd. ........................................ 239,700 291,750
-------------- --------------
WIRELESS COMMUNICATIONS -- 0.0%
10,760,547 Telesp Celular
Participacoes SA, Pfd.+ ............................... 82,623 33,772
-------------- --------------
TOTAL PREFERRED
STOCKS ................................................ 25,653,300 30,560,070
-------------- --------------
PRINCIPAL
AMOUNT
------------
CORPORATE BONDS -- 0.2%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1%
$1,000,000 Standard Motor Products Inc., Sub. Deb. Cv.,
6.750%, 07/15/09 ...................................... 946,771 990,000
-------------- --------------
CABLE AND SATELLITE -- 0.1%
1,000,000 Charter Communications Inc., Cv.,
4.750%, 06/01/06 ...................................... 727,303 927,500
-------------- --------------
AVIATION: PARTS AND SERVICES -- 0.0%
803,000 Kaman Corp., Sub. Deb. Cv.,
6.000%, 03/15/12 ...................................... 764,944 797,981
-------------- --------------
ENERGY AND UTILITIES -- 0.0%
900,000 Mirant Corp., Sub. Deb. Cv.,
2.500%, 06/15/21+ (c) ................................. 685,613 507,938
-------------- --------------
TOTAL CORPORATE
BONDS ................................................. 3,124,631 3,223,419
-------------- --------------
See accompanying notes to financial statements.
11
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2004 (UNAUDITED)
MARKET
SHARES COST VALUE
------------ -------------- --------------
WARRANTS -- 0.0%
FOOD AND BEVERAGE -- 0.0%
62,463 Denny's Corp.,
expires 01/07/05+ ..................................... $ 105,604 $ 0
-------------- --------------
PRINCIPAL
AMOUNT
------------
REPURCHASE AGREEMENTS -- 5.2%
$80,562,000 Agreement with State Street
Bank and Trust Co.,
1.180%, dated 06/30/04,
due 07/01/04, proceeds at
maturity, $80,564,641 (b) ............................. 80,562,000 80,562,000
-------------- --------------
SHORT TERM OBLIGATIONS -- 0.1%
U.S. GOVERNMENT OBLIGATIONS -- 0.1%
1,500,000 U.S. Treasury Bill,
0.994%++, 07/08/04 .................................... 1,499,714 1,499,714
-------------- --------------
TOTAL INVESTMENTS -- 100.0% ............................................ $1,258,495,643 $1,539,173,398
==============
LIABILITIES IN EXCESS OF OTHER ASSETS ..................................................... (3,157,531)
PREFERRED STOCK
(9,556,900 preferred shares outstanding) ................................................ (418,742,500)
--------------
NET ASSETS -- COMMON STOCK
(138,506,691 common shares outstanding) ................................................. 1,117,273,367
==============
NET ASSET VALUE PER COMMON SHARE
($1,117,273,367 / 138,506,691 shares outstanding) ....................................... $8.07
=====
----------
For Federal tax purposes:
Aggregate Cost ............................................................. $1,258,495,643
==============
Gross unrealized appreciation .............................................. $ 350,989,503
Gross unrealized depreciation .............................................. (70,311,748)
--------------
Net unrealized appreciation ................................................ $ 280,677,755
==============
----------
(a) Security fair valued under procedures established by the Board of
Directors. At June 30, 2004, the market value of fair valued securities
amounted to $909,000 or 0.1% of total investments.
(b) Collateralized by U.S. Treasury Note, 1.75%, due 12/31/04, market value
$82,177,178.
(c) 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.
SAILS - Stock Appreciation Income Linked Securities.
USD - U.S. Dollars.
W/I - When Issued.
% OF
MARKET MARKET
VALUE VALUE
------ --------------
GEOGRAPHIC DIVERSIFICATION
United States ............................. 81.2% $1,249,518,373
Europe .................................... 12.9 198,206,143
Asia/Pacific .............................. 1.9 29,264,785
Latin America ............................. 1.5 23,880,821
Canada .................................... 1.3 19,381,997
Japan ..................................... 1.1 17,789,129
South Africa .............................. 0.1 1,132,149
----- --------------
Total Investments ......................... 100.0% $1,539,173,398
===== ==============
See accompanying notes to financial statements.
12
THE GABELLI EQUITY TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)
ASSETS:
Investments, at value (cost $1,258,495,643) ............. $ 1,539,173,398
Cash and foreign currency, at value (cost $383,243) ..... 380,701
Dividends and interest receivable ....................... 2,192,925
Receivable for investments sold ......................... 5,878,412
Other assets ............................................ 147,210
---------------
TOTAL ASSETS ............................................ 1,547,772,646
---------------
LIABILITIES:
Payable for investments purchased ....................... 6,313,086
Dividends payable ....................................... 152,698
Unrealized depreciation on swap contracts ............... 3,464,828
Unrealized depreciation on forward foreign
exchange contracts .................................... 2,643
Payable for investment advisory fees .................... 1,140,325
Interest payable on swap contract ....................... 354,380
Payable for shareholder communication fees .............. 143,791
Payable to custodian .................................... 27,128
Payable for offering expenses ........................... 79,786
Other accrued expenses and liabilities .................. 78,114
---------------
TOTAL LIABILITIES ....................................... 11,756,779
---------------
PREFERRED STOCK:
Series B Cumulative Preferred Stock (7.20%, $25
liquidation value, $0.001 par value, 6,600,000
shares authorized with 6,600,000 shares issued
and outstanding) ...................................... 165,000,000
Series C Cumulative Preferred Stock (Auction Rate,
$25,000 liquidation value, $0.001 par value,
5,200 shares authorized with 5,200 shares issued
and outstanding) ...................................... 130,000,000
Series D Cumulative Preferred Stock (5.875%, $25
liquidation value, $0.001 par value, 3,000,000
shares authorized with 2,949,700 shares issued
and outstanding) ...................................... 73,742,500
Series E Cumulative Preferred Stock (Auction Rate,
$25,000 liquidation value, $0.001 par value,
2,000 shares authorized with 2,000 shares issued
and outstanding) ...................................... 50,000,000
---------------
TOTAL PREFERRED STOCK ................................... 418,742,500
---------------
NET ASSETS ATTRIBUTABLE TO COMMON
STOCK SHAREHOLDERS .................................... $ 1,117,273,367
===============
NET ASSETS ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS CONSIST OF:
Capital stock, at par value ............................. $ 138,507
Additional paid-in capital .............................. 889,699,337
Accumulated distributions in excess of net
investment income ..................................... (40,710,186)
Accumulated net realized gain (loss) on investments,
futures contracts and foreign currency transactions ... (9,081,369)
Net unrealized appreciation on investments, swap
contracts and foreign currency transactions ........... 277,227,078
---------------
TOTAL NET ASSETS ........................................ $ 1,117,273,367
===============
NET ASSET VALUE PER COMMON SHARE
($1,117,273,367 / 138,506,691 shares outstanding;
183,998,000 shares authorized of $0.001 par value) ...... $8.07
=====
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of foreign taxes of $430,459) ............... $ 12,212,766
Interest ................................................... 1,050,194
------------
TOTAL INVESTMENT INCOME .................................... 13,262,960
------------
EXPENSES:
Investment advisory fees ................................... 5,730,080
Shareholder communications expenses ........................ 289,410
Payroll .................................................... 110,194
Custodian fees ............................................. 94,033
Shareholder services fees .................................. 82,308
Directors' fees ............................................ 68,343
Legal and audit fees ....................................... 50,889
Miscellaneous expenses ..................................... 344,593
------------
TOTAL EXPENSES ............................................. 6,769,850
LESS: CUSTODIAN FEE CREDIT ................................. (1,221)
------------
NET EXPENSES ............................................... 6,768,629
------------
NET INVESTMENT INCOME ...................................... 6,494,331
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FUTURES CONTRACTS, SWAP CONTRACTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments ........................... 5,946,757
Net realized gain on foreign currency transactions ......... 84,995
Net realized loss on swap contracts ........................ (2,228,432)
Net realized gain on futures contracts ..................... 166,217
------------
Net realized gain on investments, futures contracts,
swap contracts and foreign currency transactions ......... 3,969,537
------------
Net change in unrealized appreciation/depreciation
on investments, swap contracts and foreign
currency transactions .................................... 54,715,932
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS,
FUTURES CONTRACTS, SWAP CONTRACTS AND
FOREIGN CURRENCY TRANSACTIONS ............................ 58,685,469
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .......................................... 65,179,800
------------
Total Distributions to Preferred Stock Shareholders ........ (9,049,834)
------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO COMMON
STOCK SHAREHOLDERS RESULTING FROM OPERATIONS ............. $ 56,129,966
============
See accompanying notes to financial statements.
13
THE GABELLI EQUITY TRUST INC.
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS
SIX MONTHS ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
---------------- -----------------
OPERATIONS:
Net investment income .................................................................. $ 6,494,331 $ 6,138,026*
Net realized gain on investments, futures contracts and foreign currency transactions .. 3,969,537 105,127,056*
Net change in unrealized appreciation/depreciation on investments, swap contracts
and foreign currency transactions .................................................... 54,715,932 234,044,532
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................... 65,179,800 345,309,614
--------------- ---------------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income .................................................................. (9,049,834) (320,420)
Net realized short-term gain on investments, futures contracts and foreign
currency transactions ................................................................ -- (1,248,028)
Net realized long-term gains on investments, futures contracts and foreign
currency transactions ................................................................ -- (17,605,267)
--------------- ---------------
TOTAL DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS .................................... (9,049,834) (19,173,715)
--------------- ---------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS
RESULTING FROM OPERATIONS ............................................................ 56,129,966 326,135,899
--------------- ---------------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income .................................................................. (3,297,065) (1,408,135)
Net realized short-term gain on investments, futures contracts and foreign
currency transactions ................................................................ -- (6,188,838)
Net realized long-term gains on investments, futures contracts and foreign
currency transactions ................................................................ -- (85,161,394)
Return of capital ...................................................................... (40,710,186)** (558,040)
--------------- ---------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ....................................... (44,007,251) (93,316,407)
--------------- ---------------
TRUST SHARE TRANSACTIONS:
Net increase in net assets from common shares issued upon reinvestment of
dividends and distributions .......................................................... 10,553,133 22,608,759
Net increase in net assets from repurchase of preferred shares ......................... 72,307 --
Offering costs for preferred shares charged to paid-in capital ......................... -- (3,305,944)
--------------- ---------------
NET INCREASE IN NET ASSETS FROM TRUST SHARE TRANSACTIONS ............................... 10,625,440 19,302,815
--------------- ---------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS ................... 22,748,155 252,122,307
NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS:
Beginning of period .................................................................... 1,094,525,212 842,402,905
--------------- ---------------
End of period .......................................................................... $ 1,117,273,367 $ 1,094,525,212
=============== ===============
----------
* As a result of recent changes in generally accepted accounting principles,
the Fund has reclassified periodic payments made under interest rate swap
agreements, previously included within interest income, as a component of
realized gain (loss) in the statement of operations. The effect of this
reclassification was to increase net investment income and decrease
realized gain by $4,302,270.
** Based on current earnings and subject to change and recharacterization at
fiscal year end.
See accompanying notes to financial statements.
14
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION. The Gabelli Equity Trust Inc. (the "Equity Trust") is a
closed-end, non-diversified management investment company organized as a
Maryland corporation on May 20, 1986 and registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), whose primary objective is long-term
growth of capital. The Equity Trust had no operations until August 11, 1986,
when it sold 10,696 shares of common stock to Gabelli Funds, LLC (the "Adviser")
for $100,008. Investment operations commenced on August 21, 1986.
Effective August 1, 2002, the Equity Trust modified its non-fundamental
investment policy to increase, from 65% to 80%, the portion of its assets that
it will invest, under normal market conditions in equity securities (the "80%
Policy"). The 80% Policy may be changed without shareholder approval. However,
the Equity Trust has adopted a policy to provide shareholders with at least 60
days' notice of the implementation of any change in the 80% Policy.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board of Directors (the "Board") so determines, by such other method as the
Board shall determine in good faith, to reflect its fair market value. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by the Adviser.
Portfolio securities primarily traded on foreign markets are generally
valued at the preceding closing values of such securities on their respective
exchanges or if after the close, market conditions change significantly, certain
foreign securities may be fair valued pursuant to procedures established by the
Board. Debt instruments that are not credit impaired with remaining maturities
of 60 days or less are valued at amortized cost, unless the Board determines
such does not reflect the securities' fair value, in which case these securities
will be valued at their fair value as determined by the Board. Debt instruments
having a maturity greater than 60 days for which market quotations are readily
available are valued at the latest average of the bid and asked prices. If there
were no asked prices quoted on such day, the security is valued using the
closing bid price. Futures contracts are valued at the official closing
settlement price of the exchange or board of trade on which the applicable
contract is traded.
Securities and assets for which market quotations are not readily
available are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Board. Fair
valuation methodologies and procedures may include, but are not limited to:
analysis and review of available financial and non-financial information about
the company; comparisons to the valuation and changes in valuation of similar
securities, including a comparison of foreign securities to the equivalent U.S.
dollar value ADR securities at the close of the U.S. exchange; and evaluation of
any other information that could be indicative of the value of the security.
REPURCHASE AGREEMENTS. The Equity Trust may enter into repurchase
agreements with primary government securities dealers recognized by the Federal
Reserve Bank of New York, with member banks of the Federal Reserve System or
with other brokers or dealers that meet credit guidelines established by the
Adviser and reviewed by the Board of Directors. Under the terms of a typical
repurchase agreement, the Equity Trust takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the Equity
Trust to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Equity Trust's holding period. The Equity Trust
will always receive and maintain securities
15
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
as collateral whose market value, including accrued interest, will be at least
equal to 102% of the dollar amount invested by the Equity Trust in each
agreement. The Equity Trust will make payment for such securities only upon
physical delivery or upon evidence of book entry transfer of the collateral to
the account of the custodian. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to maintain the adequacy of the collateral. If the seller defaults
and the value of the collateral declines or if bankruptcy proceedings are
commenced with respect to the seller of the security, realization of the
collateral by the Equity Trust may be delayed or limited.
SWAP AGREEMENTS. The Equity Trust may enter into interest rate swap or cap
transactions. The use of interest rate swaps and caps is a highly specialized
activity that involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. In an interest rate
swap, the Equity Trust would agree to pay to the other party to the interest
rate swap (which is known as the "counterparty") periodically a fixed rate
payment in exchange for the counterparty agreeing to pay to the Equity Trust
periodically a variable rate payment that is intended to approximate the Equity
Trust's variable rate payment obligation on the Series C Preferred Stock. In an
interest rate cap, the Equity Trust would pay a premium to the interest rate cap
to the counterparty and, to the extent that a specified variable rate index
exceeds a predetermined fixed rate, would receive from the counterparty payments
of the difference based on the notional amount of such cap. Interest rate swap
and cap transactions introduce additional risk because the Equity Trust would
remain obligated to pay preferred stock dividends when due in accordance with
the Articles Supplementary even if the counterparty defaulted. Depending on the
general state of short-term interest rates and the returns on the Equity Trust's
portfolio securities at that point in time, such a default could negatively
affect the Equity Trust's ability to make dividend payments for the Series C
Preferred Stock. In addition, at the time an interest rate swap or cap
transaction reaches its scheduled termination date, there is a risk that the
Equity Trust will not be able to obtain a replacement transaction or that the
terms of the replacement will not be as favorable as on the expiring
transaction. If this occurs, it could have a negative impact on the Equity
Trust's ability to make dividend payments on the Series C Preferred Stock.
The Trust has entered into one interest rate swap agreement with Citibank
N.A. Under the agreement the Trust receives a floating rate of interest and pays
a respective fixed rate of interest on the nominal value of the swap. Details of
the swap at June 30, 2004 are as follows:
NOTIONAL FLOATING RATE* TERMINATION UNREALIZED
AMOUNT FIXED RATE (RATE RESET MONTHLY) DATE DEPRECIATION
------------ ---------- -------------------- ------------ ------------
$130,000,000 4.494% 1.11% July 2, 2007 $ (3,464,828)
----------
* Based on Libor (London Interbank Offered Rate).
As a result of recent FASB Emerging Issues Task Force consensus (and
subsequent related SEC staff guidance), the Equity Trust has reclassified
periodic payments made under interest rate swap agreement, previously included
within interest income, as a component of realized gain (loss) in the statement
of operations. For consistency, similar reclassifications have been made to
amounts appearing in the previous year's statement of changes in net assets and
the per share amounts in prior years financial highlights. Prior years net
investment income ratios in the financial highlights have also been modified
accordingly.
This reclassification increased net investment income and decreased net
realized gains by $4,302,270 and $1,813,999 for the years ended December 31,
2003 and December 31, 2002, respectively, but had no effect on the Equity
Trust's net asset value, either in total or per share, or its total increase
(decrease) in net assets from operations during any period.
For the years ended December 31, 2003 and December 31, 2002, financial
highlights reclassifications were as follows: net investment income per share
increased by $0.03 and $0.01, respectively, ratios of net investment income to
average net assets attributable to common shares increased by 0.47% and 0.18%,
respectively, ratios of operating expenses to average net assets attributable to
common shares decreased by 0.47% and 0.18%, respectively, and ratios of
operating expenses to average total net assets including liquidation value of
preferred shares decreased by 0.33% and 0.13%, respectively.
FUTURES CONTRACTS. The Equity Trust may engage in futures contracts for
the purpose of hedging against changes in the value of its portfolio securities
and in the value of securities it intends to purchase. Such investments will
only be made if they are
16
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
economically appropriate to the reduction of risks involved in the management of
the Equity Trust's investments. Upon entering into a futures contract, the
Equity Trust is required to deposit with the broker an amount of cash or cash
equivalents equal to a certain percentage of the contract amount. This is known
as the "initial margin." Subsequent payments ("variation margin") are made or
received by the Equity Trust each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the contract are included in
unrealized appreciation/depreciation on investments and futures contracts. The
Equity Trust recognizes a realized gain or loss when the contract is closed.
There were no open futures contracts at June 30, 2004.
There are several risks in connection with the use of futures contracts as
a hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk the
Equity Trust may not be able to enter into a closing transaction because of an
illiquid secondary market.
FOREIGN CURRENCY TRANSACTIONS. The books and records of the Equity Trust
are maintained in United States (U.S.) dollars. Foreign currencies, investments
and other assets and liabilities are translated into U.S. dollars at the
exchange rates prevailing at the end of the period, and purchases and sales of
investment securities, income and expenses are translated at the exchange rate
prevailing on the respective dates of such transactions. Unrealized gains and
losses, which result from changes in foreign exchange rates and/or changes in
market prices of securities, have been included in unrealized
appreciation/depreciation on investments and foreign currency transactions. Net
realized foreign currency gains and losses resulting from changes in exchange
rates include foreign currency gains and losses between trade date and
settlement date on investment securities transactions, foreign currency
transactions and the difference between the amounts of interest and dividends
recorded on the books of the Equity Trust and the amounts actually received. The
portion of foreign currency gains and losses related to fluctuation in exchange
rates between the initial trade date and subsequent sale trade date is included
in realized gain/(loss) on investments.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for as of the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders
are recorded on the ex-dividend date. Distributions to shareholders of the
Equity Trust's 7.20% Tax Advantaged Series B Cumulative Preferred Stock, Series
C Auction Rate Cumulative Preferred Stock, 5.875% Series D Cumulative Preferred
Stock, and Series E Auction Rate Cumulative Preferred Stock ("Cumulative
Preferred Stock") are accrued on a daily basis and are determined as described
in Note 5.
Income dividends and capital gain distributions are determined in
accordance with Federal income tax regulations which may differ from accounting
principles generally accepted in the United States. These differences are
primarily due to differing treatments of income and gains on various investment
securities held by the Equity Trust, timing differences and differing
characterization of distributions made by the Equity Trust.
For the year ended December 31, 2003, reclassifications were made to
increase accumulated distributions in excess of net investment income for
$35,924 and decrease accumulated distributions in excess of net realized gain on
investments, options, future contracts and foreign currency transactions for
$35,924 with an offsetting adjustment to additional paid-in capital.
The tax character of distributions paid during the fiscal year ended
December 31, 2003 was as follows:
YEAR ENDED
DECEMBER 31, 2003
----------------------------
COMMON PREFERRED
----------- -----------
DISTRIBUTIONS PAID FROM:
Ordinary income
(Inclusive of short term capital gain) ... $ 7,596,973 $ 1,568,448
Net long term capital gain ................. 85,161,394 17,605,267
Non-taxable return of capital .............. 558,040 --
----------- -----------
Total distributions paid ................... $93,316,407 $19,173,715
=========== ===========
17
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
The tax character of amounts distributed in 2004 which exceed the ordinary
income of the Fund will be treated as a non-taxable return of capital. Such
determination can only be made upon completion of the taxable year.
PROVISION FOR INCOME TAXES. The Equity Trust intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). It is the Trust's policy to
comply with the requirements of the Code applicable to regulated investment
companies and to distribute substantially all of its net investment company
taxable income and net capital gains. Therefore, no provision for Federal income
taxes is required.
As of December 31, 2003, the components of accumulated earnings/(losses)
on a tax basis were as follows:
Net unrealized appreciation on investments ....... $ 222,707,582
Net unrealized depreciation on foreign currency
transactions and interest rate swaps ........... (7,102,989)
Other ............................................ (291,785)
-------------
Total accumulated gain ........................... $ 215,312,808
=============
Other is primarily due to dividends payable on preferred stock at December
31, 2003.
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES. The Equity Trust has entered
into an investment advisory agreement (the "Advisory Agreement") with the
Adviser which provides that the Equity Trust will pay the Adviser a fee,
computed weekly and paid monthly, equal on an annual basis to 1.00% of the value
of the Equity Trust's average weekly net assets plus liquidation value of
preferred stock. In accordance with the Advisory Agreement, the Adviser provides
a continuous investment program for the Equity Trust's portfolio and oversees
the administration of all aspects of the Equity Trust's business and affairs.
The Adviser has agreed to reduce the management fee on the incremental assets
attributable to the Cumulative Preferred Stock if the total return of the net
asset value of the common shares of the Equity Trust, including distributions
and advisory fee subject to reduction, does not exceed the stated dividend rate
or corresponding swap rate of the Cumulative Preferred Stock.
The Equity Trust's total return on the net asset value of the common
shares is monitored on a monthly basis to assess whether the total return on the
net asset value of the common shares exceeds the stated dividend rate of the
Cumulative Preferred Stock for the period. For the six months ended June 30,
2004, the Equity Trust's total return on the net asset value of the common
shares exceeded the stated dividend rate of the Series E Auction Rate Cumulative
Preferred Stock. Thus, management fees were accrued on these assets, but not on
the assets of the Series B, Series C Auction Rate, and Series D Cumulative
Preferred Stock. Management fees were reduced by the amount of $1,838,314.
During the six months ended June 30, 2004, Gabelli & Company, Inc.
received $171,054 in brokerage commissions as a result of executing agency
transactions in portfolio securities on behalf of the Equity Trust.
The cost of calculating the Equity Trust's net asset value per share is an
Equity Trust expense pursuant to the Investment Advisory Agreement between the
Equity Trust and the Adviser. During the six months ended June 30, 2004, the
Equity Trust reimbursed the Adviser $17,400 in connection with the cost of
computing the Equity Trust's net asset value.
4. PORTFOLIO SECURITIES. Cost of purchases and proceeds from sales of
securities, other than short-term securities, for the six months ended June 30,
2004 aggregated $121,094,964 and $56,678,127, respectively.
5. CAPITAL. The charter permits the Equity Trust to issue 182,000,000 shares of
common stock (par value $0.001). The Board of Directors of the Equity Trust has
authorized the repurchase of its shares on the open market when the shares are
trading at a discount of 10% or more (or such other percentage as the Board of
Directors may determine from time to time)
18
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
from the net asset value of the shares. During the six months ended June 30,
2004, the Equity Trust did not repurchase any shares of its common stock in the
open market.
Transactions in common stock were as follows:
SIX MONTHS ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
Shares issued upon reinvestment
of dividends and distributions ... 1,316,807 $10,553,133 3,129,917 $22,608,759
=========== =========== =========== ===========
Net increase ....................... 1,316,807 $10,553,133 3,129,917 $22,608,759
=========== =========== =========== ===========
The holders of Cumulative Preferred Stock have voting rights equivalent to
those of the holders of common stock (one vote per share) and will vote together
with holders of shares of common stock as a single class. In addition, the 1940
Act requires that along with approval of a majority of the holders of common
stock, approval of a majority of the holders of any outstanding shares of
Cumulative Preferred Stock, voting separately as a class, would be required to
(a) adopt any plan of reorganization that would adversely affect the Cumulative
Preferred Stock, and (b) take any action requiring a vote of security holders,
including, among other things, changes in the Equity Trust's subclassification
as a closed-end investment company or changes in its fundamental investment
restrictions. The Equity Trust's Articles of Incorporation, as amended,
authorize the issuance of up to 16,006,000 shares of $0.001 par value Cumulative
Preferred Stock. The Cumulative Preferred Stock is senior to the common stock
and results in the financial leveraging of the common stock. Such leveraging
tends to magnify both the risks and opportunities to common shareholders.
Dividends on shares of the Cumulative Preferred Stock are cumulative. The Equity
Trust is required to meet certain asset coverage tests as required by the 1940
Act and by the Shares' Articles Supplementary with respect to the Cumulative
Preferred Stock. If the Equity Trust fails to meet these requirements and does
not correct such failure, the Equity Trust may be required to redeem, in part or
in full, the 7.20% Series B, Series C Auction Rate, 5.875% Series D, and Series
E Auction Rate Cumulative Preferred Stock at a redemption price of $25, $25,000,
$25, and $25,000, respectively, per share plus an amount equal to the
accumulated and unpaid dividends whether or not declared on such shares in order
to meet these requirements. Additionally, failure to meet the foregoing asset
requirements could restrict the Equity Trust's ability to pay dividends to
common shareholders and could lead to sales of portfolio securities at
inopportune times. The income received on the Equity Trust's assets may vary in
a manner unrelated to the fixed and variable rates, which could have either a
beneficial or detrimental impact on net investment income and gains available to
common shareholders.
Under Emerging Issues Task Force (EITF) promulgating Topic D-98,
CLASSIFICATION AND MEASUREMENT OF REDEEMABLE SECURITIES, which was issued on
July 19, 2001, preferred securities that are redeemable for cash or other assets
are to be classified outside of permanent equity to the extent that the
redemption is at a fixed or determinable price and at the option of the holder
or upon the occurrence of an event that is not solely within the control of the
issuer. In accordance with the guidance of the EITF, the Equity Trust's
Cumulative Preferred Stock is classified outside of permanent equity (net assets
attributable to common stock shareholders) in the accompanying financial
statements.
The Equity Trust, as authorized by the Board of Directors, redeemed all
(5,367,900 shares) of its outstanding 7.25% Series A Cumulative Preferred Stock.
The redemption date was June 17, 2003 and the redemption price was $25.4078 per
Preferred Share, which consisted of $25.00 per Preferred Share (the "liquidation
value") plus accrued dividends through the redemption date of $0.4078 per
Preferred Share. The Preferred Shares were 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.
19
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
On June 27, 2002, the Equity Trust received net proceeds of $128,246,557
(after underwriting discounts of $1,300,000 and offering expenses of $453,443)
from the public offering of 5,200 shares of Series C Auction Rate Cumulative
Preferred Stock. The dividend rate, as set by the auction process, which is
generally held every 7 days, is expected to vary with short-term interest rates.
The Rates of Series C Auction Rate Cumulative Preferred Stock ranged from 1.02%
to 1.53% for the six months ended June 30, 2004. Existing shareholders may
submit an order to hold, bid or sell such shares on each auction date. Series C
Auction Rate Cumulative Preferred Stock shareholders may also trade shares in
the secondary market. The Equity Trust, at its option, may redeem the Series C
Auction Rate Cumulative Preferred Stock in whole or in part at the liquidation
value price at any time. During the six months ended June 30, 2004, the Equity
Trust did not repurchase any shares of Series C Auction Rate Cumulative
Preferred Stock. At June 30, 2004, 5,200 shares of the Series C Auction Rate
Cumulative Preferred Stock were outstanding with an annualized dividend rate of
1.48 percent and accrued dividends amounted to $5,344.
On October 7, 2003, the Equity Trust received net proceeds of $72,387,500
(after underwriting discounts of $2,362,500 and estimated offering expenses of
$250,000) from the public offering of 3,000,000 shares of 5.875% Series D
Cumulative Preferred Stock. Commencing October 7, 2008 and thereafter, the
Equity Trust, at its option, may redeem the 5.875% Series D Cumulative Preferred
Stock in whole or in part at the liquidation value price. During the six months
ended June 30, 2004, the Equity Trust repurchased 50,300 shares of 5.875% Series
D Cumulative Preferred Stock in the open market at a cost of $1,185,193 and an
average discount of approximately 5.83% from its liquidation value of $25.00 per
share. All repurchased shares of 5.875% Series D Cumulative Preferred Stock have
been retired. At June 30, 2004, 2,949,700 shares of the 5.875% Series D
Cumulative Preferred Stock were outstanding and accrued dividends amounted to
$36,103.
On October 7, 2003, the Equity Trust received net proceeds of $49,260,000
(after underwriting discounts of $500,000 and estimated offering expenses of
$240,000) from the public offering of 2,000 shares of Series E Auction Rate
Cumulative Preferred Stock. The dividend rate, as set by the auction process,
which is generally held every 7 days, is expected to vary with short-term
interest rates. The Rates of Series E Auction Rate Cumulative Preferred Stock
ranged from 1.02% to 1.47% for the six months ended June 30, 2004. Existing
shareholders may submit an order to hold, bid or sell such shares on each
auction date. Series E Auction Rate Cumulative Preferred Stock shareholders may
also trade shares in the secondary market. The Equity Trust, at its option, may
redeem the Series E Auction Rate Cumulative Preferred Stock in whole or in part
at the liquidation value price at any time. During the six months ended June 30,
2004, the Equity Trust did not repurchase any shares of Series E Auction Rate
Cumulative Preferred Stock. At June 30, 2004, 2,000 shares of the Series E
Auction Rate Cumulative Preferred Stock were outstanding with an annualized
dividend rate of 1.47 percent and accrued dividends amounted to $12,250.
6. OTHER MATTERS. On October 7, 2003, the Equity Trust's Adviser received a
subpoena from the Attorney General of the State of New York requesting
information on mutual fund shares trading practices. The Adviser has also
received requests for information from the SEC regarding mutual fund trading
practices and valuation of portfolio securities. The Adviser has responded to
the requests. The Equity Trust does not believe that these matters will have a
material adverse effect on the Equity Trust's financial position or the results
of its operations.
7. INDEMNIFICATIONS. The Equity Trust enters into contracts that contain a
variety of indemnifications. The Equity Trust's maximum exposure under these
arrangements is unknown. However, the Equity Trust has not had prior claims or
losses pursuant to these contracts and expect the risk of loss to be remote.
20
THE GABELLI EQUITY TRUST INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR AN EQUITY TRUST COMMON SHARE SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
OUTSTANDING THROUGHOUT EACH PERIOD: JUNE 30, 2004(a) ------------------------------------
(UNAUDITED) 2003(a)(g) 2002(a)(g) 2001(a)
---------------- ---------- ---------- -------
OPERATING PERFORMANCE:
Net asset value, beginning of period .................... $ 7.98 $ 6.28 $ 8.97 $10.89
------ ------ ------ ------
Net investment income ................................... 0.09 0.04 0.07 0.08
Net realized and unrealized gain (loss) on investments .. 0.39 2.50 (1.65) (0.16)
------ ------ ------ ------
Total from investment operations ........................ 0.48 2.54 (1.58) (0.08)
------ ------ ------ ------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ................................... (0.07) (0.00)(c) (0.01) (0.01)
Net realized gain on investments ........................ -- (0.14) (0.16) (0.11)
------ ------ ------ ------
Total distributions to preferred stock shareholders ..... (0.07) (0.14) (0.17) (0.12)
------ ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE
TO COMMON STOCK SHAREHOLDERS RESULTING
FROM OPERATIONS ....................................... 0.40 2.40 (1.75) (0.20)
------ ------ ------ ------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income ................................... (0.02) (0.01) (0.05) (0.06)
Net realized gain on investments ........................ -- (0.68) (0.90) (1.02)
Return of capital ....................................... (0.30)* (0.00)(c) (0.00)(c) --
------ ------ ------ ------
Total distributions to common stock shareholders ........ (0.32) (0.69) (0.95) (1.08)
------ ------ ------ ------
CAPITAL SHARE TRANSACTIONS:
Increase in net asset value from common
stock share transactions .............................. 0.00(c) 0.01 0.02 0.03
Decrease in net asset value from shares
issued in rights offering ............................. -- -- -- (0.62)
Increase in net asset value from repurchase of
preferred shares ...................................... 0.00(c) -- -- --
Offering costs for preferred shares charged
to paid-in capital .................................... -- (0.02) (0.01) (0.05)
------ ------ ------ ------
Total capital share transactions ........................ 0.00 (0.01) 0.01 (0.64)
------ ------ ------ ------
NET ASSET VALUE ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS, END OF PERIOD ........................... $ 8.07 $ 7.98 $ 6.28 $ 8.97
====== ====== ====== ======
Net asset value total return + .......................... 5.29% 39.90% (21.00)% (3.68)%
====== ====== ====== ======
Market value, end of period ............................. $ 8.17 $ 8.00 $ 6.85 $10.79
====== ====== ====== ======
Total investment return ++ .............................. 6.24% 28.58% (28.36)% 10.32%
====== ====== ====== ======
SELECTED DATA FOR AN EQUITY TRUST COMMON SHARE YEAR ENDED DECEMBER 31,
OUTSTANDING THROUGHOUT EACH PERIOD: -----------------------
2000(a) 1999(a)
------- -------
OPERATING PERFORMANCE:
Net asset value, beginning of period .................... $12.75 $11.47
------ ------
Net investment income ................................... 0.05 0.04
Net realized and unrealized gain (loss) on investments .. (0.51) 3.25
------ ------
Total from investment operations ........................ (0.46) 3.29
------ ------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ................................... (0.00)(c) (0.00)(c)
Net realized gain on investments ........................ (0.09) (0.09)
------ ------
Total distributions to preferred stock shareholders ..... (0.09) (0.09)
------ ------
NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE
TO COMMON STOCK SHAREHOLDERS RESULTING
FROM OPERATIONS ....................................... (0.55) 3.20
------ ------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income ................................... (0.04) (0.03)(b)
Net realized gain on investments ........................ (1.27) (1.21)(b)
Return of capital ....................................... -- (0.68)(b)
------ ------
Total distributions to common stock shareholders ........ (1.31) (1.92)
------ ------
CAPITAL SHARE TRANSACTIONS:
Increase in net asset value from common
stock share transactions .............................. -- --
Decrease in net asset value from shares
issued in rights offering ............................. -- --
Increase in net asset value from repurchase of
preferred shares ...................................... -- --
Offering costs for preferred shares charged
to paid-in capital .................................... -- --
------ ------
Total capital share transactions ........................ -- --
------ ------
NET ASSET VALUE ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS, END OF PERIOD ........................... $10.89 $12.75
====== ======
Net asset value total return + .......................... (4.39)% 29.49%
====== ======
Market value, end of period ............................. $11.44 $12.56
====== ======
Total investment return ++ .............................. 1.91% 26.57%
====== ======
----------
+ Based on net asset value per share, adjusted for reinvestment of
distributions, including the effect of shares issued pursuant to rights
offering, assuming full subscription by shareholder. Total return for the
period of less than one year is not annualized.
++ Based on market value per share, adjusted for reinvestment of
distributions, including the effect of shares issued pursuant to rights
offering, assuming full subscription by shareholder. Total return for the
period of less than one year is not annualized.
(a) Per share amounts have been calculated using the monthly average shares
outstanding method.
(b) A distribution equivalent to $0.75 per share for The Gabelli Utility Trust
spin-off from net investment income, realized short-term gains, realized
long-term gains, and paid-in-capital were $0.01029, $0.07453, $0.34218 and
$0.32300, respectively.
(c) Amount represents less than $0.005 per share.
(d) Based on weekly prices.
(e) The ratios do not include a reduction of expenses for custodian fee
credits on cash balances maintained with the custodian. Including such
custodian fee credits for the years ended December 31, 2002, 2001 and
2000, the ratios of operating expenses to average net assets attributable
to common stock would be 1.19%, 1.11%, and 1.14%, respectively, and the
ratios of operating expenses to average total net assets including
liquidation value of preferred shares would be 0.88%, 1.00%, 0.94% and
1.03%, respectively.
(f) Asset coverage is calculated by combining all series of preferred stock.
(g) See Note 2 to Financial Statements (Swap Agreements).
(h) Annualized.
* Based on current earnings and subject to change and recharacterization at
fiscal year end.
See accompanying notes to financial statements.
21
THE GABELLI EQUITY TRUST INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 ----------------------------------------
(UNAUDITED) 2003(a) 2002(a) 2001(a)
---------------- ---------- ---------- ----------
RATIOS AND SUPPLEMENTAL DATA:
Net assets including liquidation value of preferred
shares, end of period (in 000's) ........................ $1,536,169 $1,514,525 $1,271,600 $1,465,369
Net assets attributable to common shares,
end of period (in 000's) ................................ $1,117,273 $1,094,525 $ 842,403 $1,166,171
Ratio of net investment income to average net assets
attributable to common shares ........................... 1.16%(h) 0.67% 0.99% 0.81%
Ratio of operating expenses to average net assets
attributable to common shares (e)(g) .................... 1.21%(h) 1.62% 1.19% 1.12%
Ratio of operating expenses to average total net assets
including liquidation value of preferred shares (e)(g) .. 0.88%(h) 1.14% 0.87% 0.95%
Portfolio turnover rate ................................... 4% 19.2% 27.1% 23.9%
PREFERRED STOCK:
7.25% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............... -- -- $ 134,198 $ 134,198
Total shares outstanding (in 000's) ....................... -- -- 5,368 5,368
Liquidation preference per share .......................... -- -- $ 25.00 $ 25.00
Average market value (d) .................................. -- -- $ 25.75 $ 25.39
Asset coverage per share .................................. -- -- $ 74.07 $ 122.44
7.20% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............... $ 165,000 $ 165,000 $ 165,000 $ 165,000
Total shares outstanding (in 000's) ....................... 6,600 6,600 6,600 6,600
Liquidation preference per share .......................... $ 25.00 $ 25.00 $ 25.00 $ 25.00
Average market value (d) .................................. $ 26.64 $ 27.06 $ 26.40 $ 25.60
Asset coverage per share .................................. $ 91.70 $ 90.15 $ 74.07 $ 122.44
AUCTION RATE SERIES C CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............... $ 130,000 $ 130,000 $ 130,000 --
Total shares outstanding (in 000's) ....................... 5 5 5 --
Liquidation preference per share .......................... $ 25,000 $ 25,000 $ 25,000 --
Average market value (d) .................................. $ 25,000 $ 25,000 $ 25,000 --
Asset coverage per share .................................. $ 91,704 $ 90,150 $ 74,068 --
5.875% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............... $ 75,000 $ 75,000 -- --
Total shares outstanding (in 000's) ....................... 3,000 3,000 -- --
Liquidation preference per share .......................... $ 25.00 $ 25.00 -- --
Average market value (d) .................................. $ 24.88 $ 25.10 -- --
Asset coverage per share .................................. $ 91.70 $ 90.15 -- --
AUCTION RATE SERIES E CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............... $ 50,000 $ 50,000 -- --
Total shares outstanding (in 000's) ....................... 2 2 -- --
Liquidation preference per share .......................... $ 25,000 $ 25,000 -- --
Average market value (d) .................................. $ 25,000 $ 25,000 -- --
Asset coverage per share .................................. $ 91,704 $ 90,150 -- --
ASSET COVERAGE (f) ........................................ 367% 361% 296% 490%
YEAR ENDED DECEMBER 31,
-------------------------
2000(a) 1999(a)
---------- ----------
RATIOS AND SUPPLEMENTAL DATA:
Net assets including liquidation value of preferred
shares, end of period (in 000's) ........................ $1,318,263 $1,503,641
Net assets attributable to common shares,
end of period (in 000's) ................................ $1,184,041 $1,368,981
Ratio of net investment income to average net assets
attributable to common shares ........................... 0.42% 0.34%
Ratio of operating expenses to average net assets
attributable to common shares (e)(g) .................... 1.14% 1.27%
Ratio of operating expenses to average total net assets
including liquidation value of preferred shares (e)(g) .. 1.03% 1.15%
Portfolio turnover rate ................................... 32.1% 38.0%
PREFERRED STOCK:
7.25% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............... $ 134,223 $ 134,660
Total shares outstanding (in 000's) ....................... 5,369 5,386
Liquidation preference per share .......................... $ 25.00 $ 25.00
Average market value (d) .................................. $ 22.62 $ 24.43
Asset coverage per share .................................. $ 245.54 $ 279.16
7.20% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............... -- --
Total shares outstanding (in 000's) ....................... -- --
Liquidation preference per share .......................... -- --
Average market value (d) .................................. -- --
Asset coverage per share .................................. -- --
AUCTION RATE SERIES C CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............... -- --
Total shares outstanding (in 000's) ....................... -- --
Liquidation preference per share .......................... -- --
Average market value (d) .................................. -- --
Asset coverage per share .................................. -- --
5.875% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............... -- --
Total shares outstanding (in 000's) ....................... -- --
Liquidation preference per share .......................... -- --
Average market value (d) .................................. -- --
Asset coverage per share .................................. -- --
AUCTION RATE SERIES E CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............... -- --
Total shares outstanding (in 000's) ....................... -- --
Liquidation preference per share .......................... -- --
Average market value (d) .................................. -- --
Asset coverage per share .................................. -- --
ASSET COVERAGE (f) ........................................ 982% 1,117%
+ Based on net asset value per share, adjusted for reinvestment of
distributions, including the effect of shares issued pursuant to rights
offering, assuming full subscription by shareholder. Total return for the
period of less than one year is not annualized.
++ Based on market value per share, adjusted for reinvestment of
distributions, including the effect of shares issued pursuant to rights
offering, assuming full subscription by shareholder. Total return for the
period of less than one year is not annualized.
(a) Per share amounts have been calculated using the monthly average shares
outstanding method.
(b) A distribution equivalent to $0.75 per share for The Gabelli Utility Trust
spin-off from net investment income, realized short-term gains, realized
long-term gains, and paid-in-capital were $0.01029, $0.07453, $0.34218 and
$0.32300, respectively.
(c) Amount represents less than $0.005 per share.
(d) Based on weekly prices.
(e) The ratios do not include a reduction of expenses for custodian fee
credits on cash balances maintained with the custodian. Including such
custodian fee credits for the years ended December 31, 2002, 2001 and
2000, the ratios of operating expenses to average net assets attributable
to common stock would be 1.19%, 1.11%, and 1.14%, respectively, and the
ratios of operating expenses to average total net assets including
liquidation value of preferred shares would be 0.88%, 1.00%, 0.94% and
1.03%, respectively.
(f) Asset coverage is calculated by combining all series of preferred stock.
(g) See Note 2 to Financial Statements (Swap Agreements).
(h) Annualized.
* Based on current earnings and subject to change and recharacterization at
fiscal year end.
See accompanying notes to financial statements.
22
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 AND TREASURER
Carter W. Austin
VICE PRESIDENT
Matthew A. Hultquist
VICE PRESIDENT
Dawn M. Donato
ASSISTANT VICE PRESIDENT
James E. McKee
SECRETARY
INVESTMENT ADVISER
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
CUSTODIAN
Mellon Trust of New England, N.A.
COUNSEL
Willkie Farr & Gallagher LLP
TRANSFER AGENT AND REGISTRAR
EquiServe Trust Company
STOCK EXCHANGE LISTING
7.20% 5.875%
Common Preferred Preferred
----------- --------- ---------
NYSE-Symbol: GAB GAB PrB GAB PrD
Shares Outstanding: 138,506,691 6,600,000 2,949,700
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.
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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.
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ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
REGISTRANT PURCHASES OF EQUITY SECURITIES
=============================================================================================================================
(D) MAXIMUM NUMBER (0R
(C) TOTAL NUMBER OF SHARES APPROXIMATE DOLLAR VALUE) OF SHARES
(A) TOTAL NUMBER (B) AVERAGE (OR UNITS) PURCHASED AS PART (0R UNITS) THAT MAY YET BE
OF SHARES (OR PRICE PAID PER OF PUBLICLY ANNOUNCED PLANS PURCHASED UNDER THE PLANS OR
PERIOD UNITS) PURCHASED SHARE (OR UNIT) OR PROGRAMS PROGRAMS
=============================================================================================================================
Month #1 Common - N/A Common - N/A Common - N/A Common - 137,189,884
01/01/04
through 01/31/04 Preferred Series B - Preferred Series B Preferred Series B - Preferred Series B - 6,600,000
N/A - N/A N/A
Preferred Series D - Preferred Series D - 3,000,000
Preferred Series D - Preferred Series D N/A
N/A - N/A
=============================================================================================================================
Month #2 Common - N/A Common - N/A Common - N/A Common - 137,189,884
02/01/04
through 02/29/04 Preferred Series B - Preferred Series B Preferred Series B - N/A Preferred Series B - 6,600,000
N/A - N/A
Preferred Series D - N/A Preferred Series D - 3,000,000
Preferred Series D - Preferred Series D
N/A - N/A
=============================================================================================================================
Month #3 Common - N/A Common - N/A Common - N/A Common - 137,189,884
03/01/04
through 03/31/04 Preferred Series B - Preferred Series B Preferred Series B - N/A Preferred Series B - 6,600,000
N/A - N/A
Preferred Series D - N/A Preferred Series D - 3,000,000
Preferred Series D - Preferred Series D
N/A - N/A
=============================================================================================================================
Month #4 Common - N/A Common - N/A Common - N/A Common - 137,855,637
04/01/04
through 04/30/04 Preferred Series B - Preferred Series B Preferred Series B - N/A Preferred Series B - 6,600,000
N/A - N/A
Preferred Series D - Preferred Series D - 3,000,000 -
Preferred Series D - Preferred Series D 11,900 11,900 = 2,988,100
11,900 - $24.2986
=============================================================================================================================
Month #5 Common - N/A Common - N/A Common - N/A Common - 137,855,637
05/01/04
through 05/31/04 Preferred Series B - Preferred Series B Preferred Series B - N/A Preferred Series B - 6,600,000
N/A - N/A
Preferred Series D - Preferred Series D - 2,988,100 -
Preferred Series D - Preferred Series D 28,600 28,600 = 2,959,500
28,600 - $23.1641
=============================================================================================================================
Month #6 Common - N/A Common - N/A Common - N/A Common - 137,855,637
06/01/04
through 06/30/04 Preferred Series B - Preferred Series B Preferred Series B - N/A Preferred Series B - 6,600,000
N/A - N/A
Preferred Series D - Preferred Series D - 2,959,500 - 9,800
Preferred Series D - Preferred Series D 9,800 = 2,949,700
9,800 - $23.8314
=============================================================================================================================
Total Common - N/A Common - N/A Common - N/A N/A
Preferred Series B - Preferred Series B Preferred Series B -
N/A - N/A N/A
Preferred Series D -
Preferred Series D - Preferred Series D 50,300
50,300 - $23.5625
=============================================================================================================================
a. The date each plan or program was announced - The notice of the potential
repurchase of common and preferred shares occurs quarterly in the Fund's
quarterly report in accordance with Section 23 (c) of the Investment Company Act
of 1940, as amended.
b. The dollar amount (or share or unit amount) approved - Any or all common
shares outstanding may be repurchased when the Fund's common shares are trading
at a discount of 10% or more from the net asset value of the shares.
Any or all preferred shares outstanding may be repurchased when the Fund's
preferred shares are trading at a discount to the liquidation value of $25.00.
c. The expiration date (if any) of each plan or program - The Fund's repurchase
plans are ongoing.
d. Each plan or program that has expired during the period covered by the table
- The Fund's repurchase plans are ongoing.
e. Each plan or program the registrant has determined to terminate prior to
expiration, or under which the registrant does not intend to make further
purchases. - The Fund's repurchase plans are ongoing.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's Board of Directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) The Gabelli Equity Trust Inc.
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By (Signature and Title)* /s/ BRUCE N. ALPERT
-----------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date September 7, 2004
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ BRUCE N. ALPERT
-----------------------------------------------------
Bruce N. Alpert, Principal Executive Officer and
Principal Financial Officer
Date September 7, 2004
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* Print the name and title of each signing officer under his or her signature.