-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KBoIcrqwUiSax9v6vqPAVOTEz8pYNpbzxSRq+Tks7vnNzqmrr8Al4PMrHvYlUaqn OWZwDysWuygAE/DBH2Vimg== 0001005477-99-005477.txt : 19991122 0001005477-99-005477.hdr.sgml : 19991122 ACCESSION NUMBER: 0001005477-99-005477 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GABELLI EQUITY TRUST INC CENTRAL INDEX KEY: 0000794685 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 222736509 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: SEC FILE NUMBER: 001-09234 FILM NUMBER: 99760881 BUSINESS ADDRESS: STREET 1: ONE CORP CENTER CITY: RYE STATE: NY ZIP: 10580 BUSINESS PHONE: 9149215070 N-30B-2 1 THIRD QUARTER REPORT [GRAPHIC OMITTED] [LOGO] THE GABELLI EQUITY TRUST INC. Third Quarter Report September 30,1999 [LOGO] THE GABELLI EQUITY TRUST INC. Our cover icon represents the underpinnings of Gabelli. The Teton mountains in Wyoming represent what we believe in in America -- that creativity, ingenuity, hard work and a global uniqueness provide enduring values. They also stand out in an increasingly complex, interconnected and interdependent economic world. [FLAGS OF THE UNITED STATES OMITTED] Alabama Alaska Arizona Arkansas California Colorado Hawaii Idaho Illinois Indiana Iowa Kansas Massachusetts Michigan Minnesota Mississippi Missouri Montana New Mexico New York N. Carolina N. Dakota Ohio Oklahoma S. Dakota Tennessee Texas Utah Vermont Virginia Connecticut Delaware Florida Georgia Kentucky Louisiana Maine Maryland Nebraska Nevada New Hampshire New Jersey Oregon Pennsylvania Rhode Isl. S. Carolina West Virginia Washington Wisconsin Wyoming Investment Objective: The Gabelli Equity Trust Inc. is a closed-end, non-diversified management investment company whose primary objective is long-term growth of capital, with income as a secondary objective. This report is printed on recycled paper. To Our Shareholders, Through most of the third quarter of 1999, stocks were slowly sinking under the weight of a declining bond market, a tumbling dollar, and the prospect of more aggressive Federal Reserve monetary policy tightening. Technology stocks--the last bastion of strength in an otherwise weak market--finally cracked in the last two weeks of the quarter, sending virtually all market indices sharply lower. [PHOTOGRAPH OMITTED] [LOGO] THE GABELLI EQUITY TRUST INC. Investment Performance For the third quarter ended September 30, 1999, The Gabelli Equity Trust Inc.'s ("Equity Trust") net asset value (NAV) per share decreased 4.33% to $11.11, after adjusting for the $0.27 per share distribution on September 28, 1999. The Standard & Poor's 500 Index (S&P 500), the Value Line Composite Index and the Russell 2000 Index decreased 6.24%, 8.18% and 6.32%, respectively, over the same period. Each is an unmanaged indicator of stock market performance. Year to date, the Equity Trust is up 9.70%, versus 5.37%, 3.64% and 2.37% for the S&P 500, the Value Line Composite and the Russell 2000, respectively. For the twelve months concluded September 30, 1999, the Equity Trust appreciated 26.10% after adjusting for the $1.185 per share in distributions and the spin-off of the Gabelli Utility Trust. The S&P 500, the Value Line Composite and the Russell 2000 rose 27.79%, 22.44% and 19.07%, respectively, over the same twelve-month period. For the five year period ended September 30, 1999, the Equity Trust's return averaged 14.97% annually, compared to average annual returns of 25.03%, 15.73% and 12.39% for the S&P 500, the Value Line Composite and the Russell 2000. Total return includes adjustments of $7.50 per share for the reinvestment of dividends and distributions, rights offerings and the spin-off of the Gabelli Utility Trust and the Gabelli Global Multimedia Trust. For the ten years ended September 30, 1999, the Equity Trust achieved a total return of 188.61%, including adjustments of $14.53 per share in distributions, which equates to an average annual return of 11.18%. This compares to 16.80%, 12.26% and 10.93% average annual returns over the same time period for the S&P 500, the Value Line Composite and the Russell 2000. Since its inception on August 21, 1986 through September 30, 1999, the Equity Trust has had a total return of 460.78%, including adjustments of $16.92 per share in distributions, which equates to an average annual return of 14.04%. Average Annual Returns - September 30, 1999 NAV Average Average Annual Annual Return Investment Return (a) ------------- --------------------- 1 Year ................................... 26.10% 26.77% 5 Year ................................... 14.97% 15.10% 10 Year.................................... 11.18% 11.61% Life of Fund (August 21, 1986)............. 14.04% 13.56% (a) Based on initial offering price of $10.00 The Equity Trust's common shares ended the quarter at $11.25 per share on the New York Stock Exchange, a decrease of 1.52% for the quarter. Year to date, the common shares are up 10.19%. For the twelve months ended September 30, 1999, the common shares are up 26.77%, after adjusting for all distributions. Our long-term performance goal is to grow our net asset value by a real rate of return of 10% per year. In addition, our goal is to have the publicly traded market price track the net asset value. Spin-off of The Gabelli Utility Trust At our Annual Meeting on May 17, 1999, the shareholders of The Gabelli Equity Trust overwhelmingly approved the spin-off of The Gabelli Utility Trust (the "Utility Trust"), a newly organized, non-diversified, closed-end management investment company which will seek long-term growth of capital and income by investing primarily in utility companies involved in the distribution of electricity, gas and water. We are pleased to announce that the spin-off was successfully completed on the distribution date of July 9, 1999. Each shareholder of the Equity Trust received one share of the Utility Trust for every ten Equity Trust common shares owned. The Utility Trust is listed on the New York Stock Exchange (NYSE) under the symbol "GUT" and began trading on a regular way basis on July 12, 1999. The initial net asset value of the Utility Trust was $7.50 per share. In addition to receiving a monthly dividend, we believe this transaction to be beneficial to you because it allows you to participate more directly in the on-going opportunities presented by deregulation and consolidation in the utility industry. [GRAPHIC OMITTED] What We Do The success of momentum investing in recent years and investors' desire for instant gratification have combined to make value investing appear dull. At the risk of being dull, we will once again describe the "boring" value approach that has seen us through both good and bad markets over the last 13 years at The Gabelli Equity Trust and for over 22 years at Gabelli Asset Management Company. In past reports, we have tried to articulate our investment philosophy and methodology. The following graphic further illustrates the interplay among the four components of our valuation approach. Our focus is on free cash flow: earnings before interest, taxes, depreciation and amortization (EBITDA) minus the capital expenditures necessary to grow the business. We believe free cash flow is the best barometer of a business' value. Rising free cash flow often foreshadows net earnings improvement. We also look at earnings per share trends. Unlike Wall Street's ubiquitous earnings momentum players, we do not try to forecast earnings with accounting precision and then trade stocks based on quarterly expectations and realities. We simply try to position ourselves in front of long-term earnings uptrends. In addition, we analyze on and off balance sheet assets and liabilities such as plant and equipment, inventories, receivables, and legal, environmental and health care issues. We want to know everything and anything that will add to or detract from our private market value (PMV) estimates. Finally, we look for a catalyst: something happening in the company's industry or indigenous to the company itself that will surface value. In the case of the independent telephone stocks, the catalyst is a regulatory change. In the agricultural equipment business, it is the increasing world-wide demand for American 2 food and feed crops. In other instances, it may be a change in management, sale or spin-off of a division or the development of a profitable new business. Once we identify stocks that qualify as fundamental and conceptual bargains, we then become patient investors. This has been a proven long-term method for preserving and enhancing wealth in the U.S. equities market. At the margin, our new investments are focused on businesses that are well-managed and will benefit from sustainable long-term economic dynamics. These include macro trends, such as the globalization of the market in filmed entertainment and telecommunications, and micro trends, such as an increased focus on productivity enhancing goods and services. COMMENTARY Too Much of a Good Thing? In the third quarter of 1999, the U.S. economy continued to barrel along at a pace that investors feared would lead to higher inflation. Paced by the long anticipated recovery in Japan, Asian economies are perking up. Coupled with prospects that European economies are gaining momentum, this has spawned concern that synchronized global growth would further increase inflationary pressure here at home. All of this positive global economic news was simply too much of a good thing for the U.S. bond market, which continued to slide. Long term, synchronized global growth is a blessing--we should all be thinking in terms of Gross World Product ("GWP") rather than Gross Domestic Product ("GDP"). However, in the short term it may put additional pressure on the Fed to press down on the monetary brakes. Investors should view this as a dose of cod liver oil--bitter medicine, but a tonic that will improve the long term health of the economy and the stock market. Unfortunately, "Mr. Market" often does not like to take his medicine and additional Fed interest rate hikes and higher bond yields are not likely to improve his mood. So, even though third quarter corporate earnings are likely to be quite strong, price/earnings ("P/E") multiples (a function of investor psychology and interest rates) may continue to contract, sending stocks even lower. The good news in this scenario would be the return of Ben Graham's "margin of safety" to the market. If the domestic economy begins to decelerate in the fourth quarter and the Fed declares a monetary cease-fire, "Mr. Market" may be in a better mood. Although P/E multiples are not likely to expand, they may stabilize, allowing earnings to rally stocks. However, with equity valuations still at relatively lofty levels, advances will engender additional speculative risks. The Dollar in Limbo--How Low Can It Go? As we write, the dollar has hit a four-year low against the yen. This is another good news/bad news situation. A cheaper dollar benefits U.S. exporters and ultimately would help reduce trade deficits, which have been running at extraordinarily high levels. It also bolsters dollar denominated earnings from the international operations of U.S. companies. However, over the short term, it actually increases dollar calculated trade deficits. Perhaps most importantly, a lower dollar is potentially inflationary, because the prices of imported products that U.S. consumers treasure will move higher. If the American consumer is willing to pay these higher prices for Toyota cars and trucks, Sony big screen televisions, and Sega video games, it will soon be reflected in the Consumer Price Index ("CPI"). This leads us to another important question... 3 Will Fatigue Hit the American Consumer? High employment and the "wealth effect" of a rising housing and stock market have buoyed consumer confidence. Discretionary income has risen as a result of depressed energy prices, low mortgage rates, and rising wages. If the domestic economy does slow down, consumers may become more concerned about job security. When investors receive third quarter statements from their brokers, money managers and mutual funds, they will realize that their net worth has been trimmed. Americans are paying more at the pump for gasoline and their home heating bills will be significantly higher this winter. Variable rate mortgage payments will increase and new fixed rate mortgages are higher. So, consumers will not be able to raise spending money by leveraging real estate assets--no more "take the home mortgage from $100,000 to $150,000 with the same monthly payments and pocket the difference". As aforementioned, the prices for imported goods are increasing. Will all this be enough to cause the American consumer to tighten the purse strings? Or, will a significant tax cut--the Republicans are running on the "3 Fs" (Faith, Finances, and Family)--embolden the American consumer and keep the economic wheels moving here and abroad? Deals, Deals, Deals--A Value Investors' Best Friend We have discussed some of the issues likely to impact the economy and the stock market over the short term. Being investors, not clairvoyants, we have not come to any rock solid conclusions. One thing we are much more certain about that is ongoing, and perhaps accelerating, is global consolidation. As economic borders continue to be eliminated and regulatory barriers fall, bigger is better. Companies that can extend their franchises and lower their costs will be the ultimate winners in the global economic village. Contrary to popular opinion, the future elimination of pooling of interest accounting in mergers is not going to slow what we have coined "The Third Great Wave of Takeovers". In fact, it will accelerate the process over the next year as deals get done ahead of the accounting rules changes. Beyond 2001, different accounting rules will be no match for the powerful economic forces that are driving global consolidation. Wall Street will learn to value companies based on free cash flow-earnings before interest, taxes, depreciation, and amortization (or EBITDA) minus capital expenditures. This method is already the valuation standard for several of the industries we have followed for years, including broadcasting and cable television. Free cash flow is what any savvy business buyer looks at when evaluating an acquisition in any industry. As more deals get done in a wider range of industries, corporate managements will wean Wall Street analysts and investors from net earnings oriented valuation (price/earnings ratios) and lead them to understand that free cash flow is the best barometer of the value of a business. This Quarter's Scorecard Wireless stocks performed well this quarter as several deals in the industry helped surface value. Omnipoint, Nextel, and Vodafone AirTouch made it to the first page of our performance list. The Federal Communications Commission's ("FCC") decision to allow broadcasters to own two television stations in the same market focused investor attention on small group broadcasters such as Chris-Craft Industries, which delivered attractive returns. Gold stocks such as Newmont Mining, and Placer Dome glittered this quarter as gold prices moved higher. Gaming industry holdings Park Place Entertainment and Aztar also came up winners. In general, cyclical companies struggled as investors feared that additional Fed tightening would take the starch out of the economy. Portfolio disappointments included auto parts manufacturers Modine, Federal-Mogul, 4 and Borg-Warner, and aerospace component companies Crane, Curtiss-Wright, Fairchild, GenCorp, and Precision Castparts. Based on valuations relative to earnings power through the economic cycle, we believe these cyclicals as well as other companies in the portfolio are outstanding values. Viacom and CBS--Dan Rather, Meet The Rugrats We are not likely to see cartoon characters on the CBS Evening News, but there is a great deal of synergy in the new Viacom/CBS. The combined company joins Time Warner, News Corp., and Disney in the pantheon of fully integrated media companies. They have content--Paramount Pictures, CBS' programming assets, and Simon & Schuster publishing--and distribution--the CBS Television Network, CBS Radio, Viacom's thriving cable networks (MTV, VH-1, and Nickelodeon), and CBS' huge outdoor advertising (billboard) business. Any advertiser looking to reach any demographic consumer segment will not have to go anywhere else. This "one stop shopping" feature for advertisers, the complete vertical integration of the company, and the ability to cross-market its own products should enhance revenues and drive down costs. In addition, CBS' Mel Karmazin is a worthy heir apparent to Viacom's energetic Chairman Sumner Redstone, thus diluting Wall Street's concern regarding the management succession question at Viacom. Both CBS' and Viacom's stock prices moved higher on the announcement of the merger, an indication that Wall Street understands that one plus one equals more than two in this combined company. Broadcast News The FCC's August 1999 decision to allow duopolies--ownership of two television stations in the same market--should accelerate consolidation in the broadcast industry. Any broadcaster with a station in the top fifty markets will likely be entertaining overtures from the likes of NBC (owned by General Electric), ABC (owned by Disney), the new CBS/Viacom, and larger independent broadcasters, such as Tribune. NBC has already purchased a 32% position in Paxson Communications. We expect to see portfolio holdings such as Young Broadcasting, United Television, Granite Broadcasting, and Chris-Craft Industries receive a lot of attention in the months ahead. Wireless Works About one year ago, AT&T began to set a new standard for the wireless communications industry. By piecing together a nearly seamless national network, eliminating roaming charges, and lowering prices to 20 cents per minute for calls to anywhere in the U.S., AT&T has forced other wireless providers to follow suit. The push is on for low cost national and even global wireless services. Prices throughout the industry are dropping and usage is increasing. New programs such as "calling party pays" and prepaid plans are also making wireless services more attractive. Finally, laptop computer sales continue to rise, and more data is moving over wireless systems. This further fuels demand for wireless spectrum and enhances the value of wireless assets. Toward the end of this quarter, we celebrated a blessed event. Telephone & Data Systems, one of our larger holdings, sold its personal communications services ("PCS") business Aerial Communications to VoiceStream Wireless. Although we like the investment prospects for PCS, TDS obtained a premium price for this business, and in the process of eliminating an asset that demanded considerable capital expenditures, improved its net earnings outlook. TDS stock made a move upward in the midst of the market declines during the last two weeks of September. In addition, this transaction should help to surface value in our other wireless communications holdings. 5 Gas, Electric and Water... Deregulation and impending competition in the electric and gas utilities industry has spawned a wave of consolidation. Cost cutting is a must and the single quickest way to cut costs is by merging with other utility companies, realizing economies of scale, saving money on plant and equipment, and eliminating duplicate corporate functions. Due to high costs and increasing concern over water quality, water companies have also become takeover targets. We have seen twenty-one transactions in the utilities industry from June 1 to September 30. This is not just a domestic phenomenon. Two large British utilities acquired American electric/gas utilities and the French, who brought us Perrier and Evian bottled water, are buying municipal water facilities in America. The "bigger is better" argument makes sense for utilities. Many electric utilities own, or are anxious to acquire, gas companies in order to be full service energy providers. Buying a gas company that overlaps the electric utility's service territory is particularly attractive to the electric companies because even more costs can be cut. Our conclusion is that the once dull utility stocks are becoming much more exciting. Our strategy is to own shares in fundamentally sound, reasonably valued mid-cap and small cap utilities and then wait for the buyers to come calling. Current utility holdings include Eastern Enterprises, Florida Progress, El Paso Electric, and St. Joseph Light & Power. We will most likely be adding more utility names to the portfolio in the quarters ahead. International Segment A portion of the Equity Trust's portfolio continues to be managed by Caesar Bryan. Caesar also manages the Gabelli International Growth Fund and is a co-manager of the recently launched Gabelli Global Opportunity Fund. Below are Caesar's thoughts on international markets and global economies: Perhaps the most important sign from the performance of international markets in the third quarter is that many had positive returns in the absence of U.S. market leadership. Apart from the Nasdaq Composite Index, other indices that measure the U.S. equity market's performance declined by about 6.5%. We believe that there are indications that overseas equity markets may begin to outperform the U.S. market after lagging for many years. This belief is based on our positive outlook for Europe and Japan and not due to a bearish view of the U.S. market. The baton of leadership in economic growth is probably in the process of being passed from the U.S. to Europe and Japan. After suffering from very sluggish economic growth, Japan and Europe appear to be making a comeback. Recent economic news from Germany (the largest economy in Europe) and Italy suggest that growth is accelerating. These two countries have been trailing the Euroland pack in terms of economic activity. In Japan, the government authorities remain determined to keep in place the conditions necessary for the slow recovery that Japan is experiencing. Stronger growth in Europe and Japan should lead to improved corporate earnings. We believe that monetary conditions also favor international markets. This belief is based upon the situations of the major economic blocks in relation to the economic cycle. The U.S. is experiencing higher interest rates as the Federal Reserve attempts to cool the economy. In Japan, by contrast, the Bank of Japan remains committed to a zero interest rate policy. In Euroland, short term interest rates are 2.5% but are likely to rise in the near future to a more normal level nearer to 3.5%. 6 We believe the investment case for Europe and Japan is primarily based upon what companies themselves are doing and is not dependent upon government action. In Europe, there are many examples of companies restructuring, cutting costs, focusing on core activities and attempting to create scale in their particular activity. Let's take a look at France. The French have decided to create "National Champions". BNP bought Paribas to extend its national reach in the banking industry. TotalFina has agreed to buy Elf Acquitaine to form the world's fourth largest oil company, and Sanofi has merged with Synthelabo resulting in a world class pharmaceutical company. Most recently, Carrefour and Promodes have agreed to merge to become the world's second largest retailer behind Wal-Mart. What's next? Renault is likely to get together with Peugeot. These French companies will next look for opportunities outside France in a bid to become European champions. TotalFina is already making eyes towards ENI, the Italian state-controlled energy concern, and Seita, the French tobacco firm, is set to merge with Tabacalera of Spain. We anticipate that merger and acquisition activity will remain at a high level in Europe, which will underpin markets. European companies now understand that national governments will not protect them from a hostile bid but a high share price will. In Japan, more sectors of the economy are restructuring. In the last quarter, the world's largest bank was created when Industrial Bank of Japan, DKB and Fuji Bank agreed to merge. We expect further restructuring to occur among institutions operating in Japan's financial industry. Most of the Fund's top performing international holdings during the past quarter were Japanese stocks. These included Obic, a software company specializing in small companies, Japan Telecom and Tokyo Broadcasting Systems. Among European holdings, the Fund's winners included Vodafone AirTouch, NRJ (the French radio station operator) and Swatch (the Swiss watch company). Let's Talk Stocks The following are stock specifics on selected holdings of the Equity Trust. Favorable EBITDA prospects do not necessarily translate into higher stock prices, but they do express a positive trend which we believe will develop over time. American Express Co. (AXP - $134.625 - NYSE) and its subsidiaries provide travel-related services, financial advisory services and international banking services worldwide. Founded in 1850, the company operates in 160 countries around the world. Best known for its "green" charge card and its travel-related services, including travelers checks, American Express also offers financial planning, brokerage services, mutual funds, insurance and other investment products. Harvey Golub, Chairman and CEO, has focused AXP on its core charge card and investment management businesses. The company is expanding the competitive reach of its credit card operations, which should benefit if the U.S. Department of Justice prevails in its antitrust suit against the Visa and MasterCard associations. BCE Inc. (BCE - $49.8125 - NYSE) is Canada's global communications company. BCE recently completed a major transaction with Ameritech (AIT - $67.1875 - NYSE). Under the agreement, BCE sold 20% of Bell Canada, its wholly-owned Canadian telecommunications subsidiary, to Ameritech. BCE also owns strategic stakes in Nortel Networks (NT - $51.00 - NYSE), Teleglobe (TGO - $15.44 - NYSE), BCE Emergis and CGI Group. One share of BCE provides ownership of 0.42 shares of Nortel Networks. The company's positions in satellites, network operations, information technology, media and e-commerce are expected to provide growth for the company. 7 Chris-Craft Industries Inc. (CCN - $56.125 - NYSE), through its 80% ownership of BHC Communications (BHC - $139.50 - AMEX), is primarily a television broadcaster. BHC owns and operates UPN affiliated stations in New York (WWOR), Los Angeles (KCOP) and Portland, Oregon (KPTV). BHC also owns 59% of United Television (UTVI - $112.75 - Nasdaq), which operates an NBC affiliate, an ABC affiliate and five UPN affiliates. United Television recently completed the purchase of WHSW in Baltimore for $80 million. The station's call letters were changed to WUTB and the station became a UPN affiliate. UTVI also acquired WRBW, a UPN affiliate in Orlando, for $60 million in July 1998. Chris-Craft's television stations constitute one of the nation's largest television station groups, reaching approximately 22% of U.S. households. Chris-Craft is a major beneficiary of the recent FCC ruling allowing television duopoly, or ownership of two stations in a market. The Chris-Craft complex is debt free and strongly positioned to expand its operations, with roughly $1.5 billion in cash and marketable securities. Ferro Corp. (FOE - $21.3125 - NYSE), based in Cleveland, is a global specialty chemical manufacturer. The company is a leading producer of frits, powder coatings, polymer additives and plastic compounds. New CEO Hector Ortino is positioning Ferro to be a premier specialty chemical provider by focusing on profitable growth and shareholder value. The company's new strategy of using mature, cash generating businesses in the portfolio to finance investments in "springboard" businesses should help to accelerate earnings per share growth. Greif Bros. Corp. (GBCOA - $28.25 - Nasdaq; GBCOB - $29.875 - Nasdaq), founded in 1877, is a proven leader in industrial packagings, manufacturing fiber, steel, plastic drums, IBC's, multiwall bags, corrugated boxes and specialty products. The company is fully integrated, from its 305,000 acres of timberlands to corrugated sheet and box operations, including both virgin and recycled paper mills. Management is striving to become a packaging solutions supplier for major companies. Earlier this year, Greif obtained a 49% interest in a French fiber drum business. Greif also expects to repurchase 400,000 shares of its stock during fiscal 1999. Media General Inc. (MEG'A - $51.25 - AMEX) is a Richmond, Virginia-based communications company, publishing newspapers throughout the Southeast with daily circulation of nearly 250,000. Media General also operates thirteen network television stations in Southeastern markets, including Tampa and Jacksonville, Florida. The relaxation of broadcast station ownership restrictions provided by the Telecommunications Reform Act of 1996 is driving industry consolidation and is increasing the franchise values of strong, well-positioned media properties such as those owned by Media General. The company produces newsprint from recycled newspapers at its Garden State Paper Co. In April, MEG'A announced the sale of its Virginia cable franchises to Cox Communications for $1.4 billion. In June, MEG'A sold its equity interest in the Denver Post to Media News Group and redeemed its preferred stock for a total of $92 million. Navistar International Corp. (NAV - $46.50 - NYSE), with world headquarters in Chicago, is a leading North American manufacturer and marketer of medium and heavy trucks and school buses, and a worldwide leader in the manufacture of mid-range diesel engines, produced in a range of 160 to 300 horsepower for the International(R) brand. The company is also a private label designer and manufacturer of diesel engines for the full-size pickup truck and van markets. The company's products, parts and services are sold through a network of 1,000 International(R) brand dealer outlets in the United States, Canada, Brazil and Mexico, and through more than 90 8 dealers in 75 countries. Navistar provides financing for its customers and distributors principally through its wholly-owned subsidiary, Navistar Financial Corp. Telephone & Data Systems Inc. (TDS - $88.8125 - AMEX) is a diversified telecommunications company with established cellular and local telephone operations and a developing personal communications services ("PCS") business. TDS provides high quality telecommunications services to three million customers in 35 states. TDS owns 81.1% of United States Cellular Corp. (USM - $68.00 - AMEX), the nation's seventh largest cellular telephone company. It also owns 82.4% of Aerial Communications Inc. (AERL - $27.125 - Nasdaq), TDS's PCS subsidiary which owns the licenses to provide PCS service in six major trading areas ("MTAs") encompassing approximately 27.6 million population equivalents. On September 20, 1999, VoiceStream Wireless (VSTR - $61.72 - Nasdaq) announced the acquisition of Aerial in a $3.3 billion transaction. Pro-forma for this acquisition, TDS will own over 36 million shares of VoiceStream. Viacom Inc. (VIA'A - $43.25 - AMEX; VIA'B - $42.25 - AMEX), long a major provider of entertainment "content", has evolved into one of the world's dominant media companies. The additions of Paramount Communications, Blockbuster Entertainment (acquired in 1994), and publisher Simon & Schuster make Viacom one of the largest entertainment and publishing companies. Non-core assets are being divested and debt has been reduced to approximately $8 billion. Viacom is focusing on global expansion of its media franchises. Viacom is particularly well-positioned in music (notably MTV) and cable networks (such as Nickelodeon). Watts Industries Inc. (WTS - $21.75 - NYSE), based in North Andover, Massachusetts, makes valves for the plumbing, heating and water quality, industrial, steam, oil and gas markets. In December 1998, the company announced plans to spin off its Circor International industrial oil and gas unit to shareholders. The spin-off was completed on October 6, 1999. Watts shareholders received one Circor share valued at $10.625 per share for every two Watts shares. Accordingly, the price of Watts was reduced by $5.3125 per share to reflect the spin-off. Watts will now focus on its existing plumbing and heating and water quality businesses. Daily NAVs Now Distributed by Nasdaq Since our inception, we have made the net asset value available on nightly recordings through 1-800-GABELLI. Now, Nasdaq is also disseminating the daily per share net asset values (NAVs) for the Equity Trust, which is traded on the New York Stock Exchange. The NAV ticker symbol via Nasdaq is "XGABX". The NAVs are available through any stock quote lookup service and on broker Nasdaq level one terminals. The dissemination of daily NAVs allows investors and brokers to better track the long-term performance of the Fund's underlying portfolios. We support Nasdaq's efforts in making closed-end funds' NAVs available on a daily basis. Common Stock 10% Distribution Policy The Equity Trust continues to maintain its 10% Distribution Policy whereby the Equity Trust pays out to common stock shareholders 10% of its average net assets each year. Pursuant to this policy, the Equity Trust distributed $0.27 per share on September 28, 1999. The next distribution is scheduled for December 1999. 9 7.25% Tax Advantaged Cumulative Preferred Stock - Dividends The Equity Trust's 7.25% Tax Advantaged Cumulative Preferred Stock paid a cash distribution on September 28, 1999 of $0.453125 per share. The next distribution is scheduled for December 1999. In Conclusion The short term outlook for the market is, as always, uncertain. Investor psychology seems to have reversed itself. Last year, investors shrugged off bad news--anemic earnings, international economic turmoil, and big losses from highly leveraged hedge funds. This year, good news--a strong U.S. economy, good earnings, and the prospect for synchronized global growth--has investors worried. Mr. Market will eventually sort all this out. In the interim, we will continue to focus on good companies trading at discounted prices. In his currently glum mood, Mr. Market may remain ambivalent to value. This will only increase the appetite of business buyers aggressively looking for bargains. Sincerely, /s/ Mario J. Gabelli Mario J. Gabelli President and Chief Investment Officer October 25, 1999 - -------------------------------------------------------------------------------- Top Ten Holdings September 30, 1999 ------------------ Chris-Craft Industries Inc. Telephone & Data Systems Inc. Cablevision Systems Corp. Viacom Inc. United Television Inc. Time Warner Inc. BCE Inc. American Express Co. Navistar International Corp. Media General Inc. - -------------------------------------------------------------------------------- NOTE: The views expressed in this report reflect those of the portfolio managers only through the end of the period stated in this report. The managers' views are subject to change at any time based on market and other conditions. 10 THE GABELLI EQUITY TRUST INC. PORTFOLIO CHANGES Quarter Ended September 30, 1999 (Unaudited) Ownership at September 30, Shares 1999 ------ ------------- NET PURCHASES Common Stocks AGL Resources Inc. ................... 30,000 70,000 Allstate Corp. ....................... 17,000 42,000 Alltel Corp. (a) ..................... 28,140 68,140 American General Corp. ............... 8,000 8,000 American Home Products Corp. ......... 47,000 47,000 Archer-Daniels-Midland Co. (b) ....... 40,000 725,000 Arvin Industries Inc. ................ 2,000 52,000 Asatsu-DK Inc. ....................... 5,000 25,000 AT&T Canada Inc. ..................... 2,000 2,000 Avex Inc. (c) ........................ 2,250 2,250 Bank of Ireland (d) .................. 42,000 84,000 Bank One Corp. ....................... 45,000 45,000 Bell Atlantic Corp. .................. 5,000 27,000 Bestfoods Inc. ....................... 2,000 32,000 BF Goodrich Co. (1) .................. 12,208 -- Burlington Resources Inc. ............ 15,000 110,000 Cable & Wireless plc, Sponsored ADR ................................ 5,500 85,000 CANAL +, Sponsored ADR (e) ........... 120,000 160,000 Centros Comerciales Continente SA .... 20,000 20,000 Church & Dwight Co. Inc. (d) ......... 3,000 58,000 Cilcorp Inc. ......................... 50,000 50,000 Compaq Computer Corp. ................ 55,000 55,000 Conoco Inc. Cl. A .................... 40,000 40,000 Corn Products International Inc. ..... 3,000 53,250 Corus Entertainment Inc. Cl. B (f) ... 16,666 16,666 Crane Co. ............................ 5,000 145,000 Cresco Ltd. .......................... 2,000 2,000 Delhaize America Inc. (g) ............ 50,000 50,000 Delphi Automotive Systems Corp. ...... 5,000 80,001 Devon Energy Corp. (h) ............... 85,000 85,000 Dexter Corp. ......................... 3,000 50,000 Eastman Kodak Co. .................... 9,000 9,000 EchoStar Communications Corp. Cl. A .............................. 14,000 14,000 ELF Aquitaine SA ..................... 2,000 2,000 Federal-Mogul Corp. .................. 3,000 3,000 First Union Corp. .................... 5,000 25,000 Florida Progress Corp. ............... 100,000 100,000 Ford Motor Co. ....................... 12,000 12,000 Fort James Corp. ..................... 25,000 25,000 Fox Entertainment Group Inc. ......... 5,000 25,000 Fujitsu Ltd. ......................... 30,000 30,000 General Motors Corp. ................. 7,000 195,000 General Motors Corp., Cl. h .......... 10,000 20,000 Granada Group plc (d) ................ 100,000 200,000 Hannaford Bros. Co. .................. 17,000 17,000 Harcourt General Inc. ................ 5,000 55,000 Imasco Ltd. .......................... 100,000 100,000 Jafco Co. Ltd. ....................... 5,000 12,000 Japan Lifeline Co. Ltd. .............. 10,000 10,000 K N Energy Inc. ...................... 40,000 40,000 Kellogg Co. .......................... 15,000 130,000 Kmart Corp. .......................... 50,000 50,000 Mark IV Industries Inc. .............. 10,000 200,000 McKesson HBOC Inc. ................... 15,000 15,000 Merrill Lynch & Co. .................. 7,000 57,000 Nalco Chemical Co. ................... 190,000 210,000 Nashua Corp. ......................... 58,500 58,500 Nielsen Media Research ............... 40,000 40,000 Nikko Securities Co. Ltd. ............ 47,000 47,000 Nissin Co. Ltd. ...................... 4,000 4,000 NTT Mobile Communication Network Inc. ....................... 25 25 Nucor Corp. .......................... 8,000 8,000 Obic Co. Ltd. (i) .................... 1,000 6,000 Park-Ohio Holding Corp. .............. 3,000 58,715 Pepsi Bottling Group Inc. ............ 43,000 50,000 PepsiCo Inc. ......................... 29,000 379,000 Pfizer Inc. (j) ...................... 30,000 45,000 Philip Morris Companies Inc. ......... 14,000 14,000 Providian Financial Corp. ............ 10,000 10,000 Pulitzer Inc. ........................ 5,000 25,000 Republic New York Corp. .............. 5,000 5,000 Reynolds Metals Co. .................. 10,000 10,000 Seagate Technology Inc. .............. 30,000 30,000 Secom Co. Ltd. (k) ................... 6,000 6,000 Secom Co. Ltd. New Shares (k) ........ 6,000 6,000 Shohkoh Fund & Co. Ltd. .............. 450 450 Sony Corp. ........................... 7,000 7,000 Square Co. Ltd. ...................... 8,000 8,000 SRL Inc. ............................. 20,000 20,000 Sumisho Computer Systems Corp. ....... 6,000 6,000 Telefonica SA (j) .................... 38,640 57,960 Telefonica SA, Sponsored ADR (j) ..... 95,880 143,820 THK Co., Ltd. ........................ 20,500 45,000 Travelers Property Casualty Corp., Cl. A .............................. 12,000 42,000 Tribune Co. (d) ...................... 17,000 34,000 Union Planters Corp. ................. 10,000 10,000 UnitedGlobalCom Inc. ................. 1,000 4,000 United Television Inc. ............... 2,700 250,309 UnumProvident Corp. .................. 15,000 15,000 US West Inc. ......................... 20,000 27,000 Vulcan Materials Co. ................. 17,000 17,000 Walt Disney Co. ...................... 35,000 125,000 Waste Management Inc. ................ 80,000 80,000 Corporate Bonds Standard Motor Products Inc., 6.75% due 07/15/09 ................. 1,250,000 1,250,000 11 THE GABELLI EQUITY TRUST INC. PORTFOLIO CHANGES -- (Continued) Quarter Ended September 30, 1999 (Unaudited) Ownership at September 30, Shares 1999 ------ ------------- NET SALES Common Stocks 3Com Corp. ........................... (4,000) 30,000 Aliant Inc. (a) ...................... (42,000) -- American Bankers Insurance Group Inc. ......................... (150,000) -- American Express Co. ................. (35,000) 163,000 AT&T Corp. ........................... (50,000) 210,000 AutoNation Inc. ...................... (10,000) 340,000 Avondale Industries Inc. ............. (8,000) -- Banca Commerciale Italiana ........... (73,000) -- Banco Santander Central Hispano SA, Sponsored ADR ...................... (80,000) 90,000 Barrick Gold Corp. ................... (13,500) -- BCE Inc. ............................. (5,000) 510,000 BF Goodrich Co. (1) .................. (12,208) -- Block (H&R) Inc. ..................... (2,000) 108,000 Cablevision Systems Corp., Cl. A ..... (3,000) 569,000 Cendant Corp. ........................ (52,016) 102,984 CenturyTel Inc. ...................... (202,600) 52,400 CGU plc .............................. (45,342) -- Checkfree Holdings Corp. ............ (3,000) 7,000 Coltec Industries Inc. (l) ........... (169,800) -- COMSAT Corp., Series 1................ (82,335) 67,665 Convergys Corp. ...................... (13,000) 5,000 Deere & Co. .......................... (20,000) 320,000 Ericsson (L.M.) Telephone Co. ........ (28,500) -- Fairchild Corp., Cl. A ............... (5,000) 125,000 Food Lion Inc., Cl. A (h) ............ (160,000) -- Fortune Brands Inc. .................. (20,000) 110,000 Gabelli Utility Trust ................ (10,000) -- Global Telesystems Group Inc. (d) .... (1,000) -- Grupo Televisa SA, GDR ............... (5,000) 220,000 Gucci Group NV ....................... (10,000) -- Harley Davidson Inc. ................. (2,000) 50,000 IDEX Corp. ........................... (40,500) 299,500 Kadokawa Shoten Publishing Co. Ltd. .. (4,800) -- Kanamoto Co. Ltd. .................... (49,000) -- Kyorin Pharmaceutical Co. Ltd. ....... (21,000) -- Liberty Media Group Cl. A ............ (5,000) 443,448 Lockheed Martin Corp. ................ (17,000) 10,000 Loewen Group Inc. .................... (160,000) 40,000 Lyondell Chemical Co. ................ (5,000) 50,000 Matsushita Electric Industrial Co. Ltd., ORD ......................... (58,000) -- Mattel Inc. .......................... (10,000) 40,000 MediaOne Group Inc. .................. (5,000) 240,000 Mizuno Corp. ......................... (87,000) -- New York Times Co., Cl. A ............ (5,000) 165,000 Northrop Grumman Corp. ............... (5,000) 60,000 Oerlikon-Buhrle Holding AG ........... (9,000) -- Orogen Minerals Ltd. ................. (525,000) -- Park Place Entertainment Corp. ....... (40,000) 460,000 PennzEnergy Co. (g) .................. (250,000) -- Pennzoil-Quaker State Inc. ........... (25,000) 100,000 Pittway Corp. ........................ (2,000) 408,000 Pittway Corp., Cl. A ................. (45,000) 70,000 Placer Dome Inc. ..................... (27,000) 20,000 Precision Castparts Corp. ............ (3,000) 20,000 RCN Corp. ............................ (3,000) 237,000 Rental Services Corp. ................ (136,300) -- Rohm and Haas Co. .................... (24,001) 40,000 SCOR SA .............................. (20,000) -- Seagram Co. Ltd. ..................... (5,000) 120,000 Sekisui House Ltd. ................... (72,500) -- Sequa Corp., Cl. A ................... (500) 84,500 Simsmetal Ltd. ....................... (146,770) -- Sprint Corp. ......................... (45,000) 355,000 St. Joe Co. .......................... (2,000) 253,000 Swisscom AG .......................... (1,800) -- Telecom Italia SpA ................... (150,000) 400,040 Telephone and Data Systems Inc. ...... (15,000) 500,000 Tenneco Inc. ......................... (10,000) 530,000 Time Warner Inc. ..................... (13,000) 455,000 Toyo Seikan Kaisha Ltd. .............. (40,000) -- Tyco International Ltd. .............. (105,000) 155,000 - ---------- (a) Merger - 0.67 shares of Alltel Corp. for every 1 share of Aliant Inc. (b) 5% stock dividend (c) 3 for 2 stock split (d) 2 for 1 stock split (e) 4 for 1 stock split (f) Spinoff - 1 share of Corus Entertainment Inc. Cl. B for every 3 shares of Shaw Communications Inc., Cl. B, Conv. (g) Merger - 0.33 shares of Delhaize America Inc. for every 1 share of Food Lion Inc., Cl. A (h) Merger - 0.4475 shares of Devon Energy Corp. for every 1 share of PennzEnergy Co. (i) 6 for 5 stock split (j) 3 for 1 stock split (k) Spinoff - 1 share of Secom Co. Ltd. New Shares Cl. B for every 1 share of Secom Co. Ltd. (l) Merger - 0.56 shares of BF Goodrich Co. for every 1 share of Coltec Industries Inc. 12 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS September 30, 1999 (Unaudited) Market Shares Value ------ ----- COMMON STOCKS -- 97.2% Telecommunications -- 11.7% 16,670 Aliant Inc.+ .................................... $ 249,500 5,000 Allegiance Telecom Inc.+ ........................ 263,125 68,140 Alltel Corp. .................................... 4,795,352 210,000 AT&T Corp. ...................................... 9,135,000 2,000 AT&T Canada Inc.+ ............................... 125,625 510,000 BCE Inc. ........................................ 25,404,375 52,500 BCT.Telus Communications Inc. ................... 1,094,717 12,750 BCT.Telus Communications Inc., Sponsored ADR ................................. 265,860 4,250 BCT.Telus Communications Inc. Cl. A ............. 87,463 17,500 BCT.Telus Communications Inc. Cl. A, Sponsored ADR ................................. 360,144 95,000 Cable & Wireless plc ............................ 1,033,794 85,000 Cable & Wireless plc, Sponsored ADR ............. 2,815,625 55,000 Cable & Wireless HKT Ltd. ....................... 1,196,250 2,448,000 Cable & Wireless Jamaica Ltd. ................... 86,079 30,000 Cincinnati Bell Inc. ............................ 583,125 255,466 Commonwealth Telephone Enterprises, Inc.+ ......................................... 11,240,504 20,000 Commonwealth Telephone Enterprises, Inc. Cl. B+ ................................... 868,750 35,000 Compania de Telecomunicaciones de Chile SA, Sponsored ADR .................... 632,187 167,000 Embratel Participacoes SA+ ...................... 1,910,062 265,000 GTE Corp. ....................................... 20,371,875 38 Japan Telecom Co. Ltd. .......................... 889,388 10,000 Motorola Inc. ................................... 880,000 150 Nippon Telegraph and Telephone Corp. ............ 1,839,629 237,000 RCN Corporation ................................. 9,717,000 29,655 Rogers Communications Inc., Cl. B+ .............. 501,345 150,000 Rogers Communications Inc., Cl. B+, Sponsored ADR ................................. 2,521,875 5,000 SBC Communications Inc. ......................... 255,312 355,000 Sprint Corp. .................................... 19,258,750 33,400 Tele Centro Sul Participacoes SA+ ............... 1,853,700 167,000 Tele Norte Leste Participacoes SA+ .............. 2,588,500 8,000 Telecom Argentina - Stet France Telecom S.A., Sponsored ADR ................... 213,500 400,040 Telecom Italia SpA .............................. 3,474,059 151,500 Telecom Italia SpA, Sponsored ADR ............... 13,057,406 167,000 Telecomunicacoes Brasileiras SA (Telebras), Sponsored ADR ................................. 5,219 8,000 Telefonica de Argentina SA, ADR, Cl. B .......... 211,000 57,960 Telefonica SA ................................... 927,109 143,820 Telefonica SA, Sponsored ADR .................... 6,903,360 18,000 Telefonos De Mexico SA, Cl. L, ADR .............. 1,282,500 167,000 Telesp Participacoes SA ......................... 2,630,250 90,000 Telstra Corp. Ltd.+ ............................. 466,573 27,000 U.S. West Inc. ................................. 1,540,687 -------------- 153,536,574 -------------- Equipment and Supplies -- 8.4% 90,000 AMETEK Inc. ..................................... 1,783,125 195,000 Ampco-Pittsburgh Corp. .......................... 2,632,500 143,000 Amphenol Corp., Cl. A+ .......................... 7,087,437 3,000 Case Corp. ...................................... 149,437 10,000 Caterpillar Inc. ................................ 548,125 107,000 CLARCOR Inc. .................................... 1,798,937 320,000 Deere & Co. ..................................... 12,380,000 252,000 Donaldson Co. Inc. .............................. 5,843,250 100,000 Flowserve Corp. ................................. 1,662,500 6,500 Franklin Electric Co. ........................... 429,000 105,000 Gerber Scientific Inc. .......................... 2,349,375 250,000 Hussmann International, Inc. .................... 4,250,000 299,500 IDEX Corp. ...................................... 8,479,594 50,000 Lufkin Industries Inc. .......................... 762,500 1,000 Manitowoc Co. Inc. .............................. 34,125 200,000 Mark IV Industries Inc. ......................... 3,950,000 445,000 Navistar International Corp.+ ................... 20,692,500 20,000 PACCAR Inc. ..................................... 1,017,500 20,000 Parker-Hannifin Corp. ........................... 896,250 408,000 Pittway Corp. ................................... 11,526,000 70,000 Pittway Corp., Cl. A ............................ 2,205,000 84,500 Sequa Corp., Cl. A+ ............................. 5,323,500 75,000 Sequa Corp., Cl. B+ ............................. 4,950,000 168,000 SPS Technologies Inc.+ .......................... 6,373,500 45,000 THK Co., Ltd. ................................... 1,322,848 100,000 Watts Industries Inc., Cl. A .................... 2,175,000 -------------- 110,622,003 -------------- Entertainment -- 8.4% 105,768 Ascent Entertainment Group Inc. ................ 1,454,310 2,250 Avex Inc. ....................................... 417,076 160,000 CANAL +, Sponsored ADR .......................... 1,682,474 12,000 Daiichi Kosho Co. Ltd. .......................... 505,547 188,288 EMI Group plc ................................... 1,376,304 118,000 EMI Group plc, Sponsored ADR .................... 1,711,000 13 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS (Continued) September 30, 1999 (Unaudited) Market Shares Value ------ ----- COMMON STOCKS (Continued) Entertainment (Continued) 25,000 Fox Entertainment Group Inc. .................... $ 528,125 75,000 GC Companies Inc.+ .............................. 2,250,000 3,000 King World Productions Inc. ..................... 112,500 443,448 Liberty Media Group Cl. A+ ...................... 16,463,007 455,000 Time Warner Inc. ................................ 27,641,250 65,000 Todd-AO Corp., Cl. A ............................ 975,000 300,000 USA Networks, Inc.+ ............................. 11,625,000 950,000 Viacom Inc., Cl. A+ ............................. 41,087,500 125,000 Walt Disney Co. ................................. 3,234,375 -------------- 111,063,468 -------------- Broadcasting -- 8.1% 50,000 Ackerley Group Inc. ............................. 615,625 22,700 Audiofina ....................................... 1,147,527 357,073 Chris-Craft Industries Inc.+ .................... 20,040,722 575,629 Chris-Craft Industries Inc. Cl. B+ (a) .......... 32,307,178 16,666 Corus Entertainment Inc. Cl. B+ ................. 269,282 200,000 Granada Group plc+ .............................. 1,713,797 37,500 Gray Communications Systems Inc. ................ 646,875 220,000 Grupo Televisa SA, GDR+ ......................... 8,786,250 140,000 Liberty Corp. ................................... 6,492,500 3,750 NRJ SA .......................................... 1,017,689 10,500 Pathe SA ........................................ 1,085,056 120,000 Paxson Communications Corp. Cl. A ............... 1,470,000 125,000 Publishing & Broadcasting Ltd. .................. 746,583 100,000 Television Broadcasting Ltd. ORD ................ 427,400 70,000 Tokyo Broadcasting System Inc. .................. 1,405,701 250,309 United Television Inc. .......................... 28,222,340 -------------- 106,394,525 -------------- Wireless Communications -- 8.1% 21,000 Aerial Commications Inc.+ ....................... 569,625 133,000 Associated Group Inc., Cl. A+ ................... 8,046,500 133,000 Associated Group Inc., Cl. B+ ................... 8,054,812 27,000 Bell Atlantic Corp. ............................. 1,817,437 52,400 CenturyTel Inc. ................................. 2,128,750 67,665 COMSAT Corp., Series 1 ......................... 2,004,576 14,000 EchoStar Communications Corp. Cl. A+ ............ 1,271,375 100,000 Loral Space & Communications Ltd. ............... 1,718,750 10,000 NEXTEL Communications Inc., Cl. A+ .............. 678,125 25 NTT Mobile Communication Network Inc. ........... 491,504 10,000 Omnipoint Corp.+ ................................ 558,750 250,000 Securicor Group plc ORD ......................... 2,467,391 110,000 Sprint Corp. (PCS Group) ........................ 8,201,875 340,000 TCI Satellite Entertainment Inc., Cl. A+ ........ 1,360,000 16,700 Tele Celular Sul Participacoes SA ............... 316,256 55,666 Tele Centro Oeste Celular Participacoes SA+ ..... 184,394 3,340 Tele Leste Celular Participacoes SA ............. 105,627 8,350 Tele Nordeste Celular Participacoes SA .......... 189,962 3,340 Tele Norte Celular Participacoes SA+ ............ 95,190 33,400 Tele Sudeste Celular Participacoes SA+ .......... 718,100 1,360,000 Telecom Italia Mobile SPA ....................... 8,452,698 8,350 Telemig Celular Participacoes SA+ ............... 246,325 500,000 Telephone and Data Systems Inc. ................. 44,406,250 66,800 Telesp Celular Participacoes SA+ ................ 1,745,150 32,500 Vodafone Airtouch plc, Sponsored ADR ............ 7,726,875 115,813 Vodafone Group plc ORD .......................... 2,741,732 -------------- 106,298,029 -------------- Financial Services -- 7.2% 163,000 American Express Co. (d) ........................ 21,943,875 30,000 Argonaut Group, Inc. ............................ 753,750 90,000 Banco Santander Central Hispano SA, Sponsored ADR ................................. 928,125 300,000 Bankgesellschaft Berlin AG ...................... 5,315,928 84,000 Bank of Ireland ................................. 683,887 56,000 Bank of Scotland ................................ 667,937 45,000 Bank One Corp. .................................. 1,566,562 260 Berkshire Hathaway Inc., Cl. A+ ................. 14,300,000 10,000 Chase Manhattan Corp. ........................... 753,750 209,979 Colonial Limited Inc.+ .......................... 762,075 50,000 Commerzbank AG, Sponsored ADR ................... 1,962,500 150,000 Deutsche Bank AG, Sponsored ADR ................. 10,387,500 25,000 First Union Corp. ............................... 889,063 25,000 Hibernia Corp. .................................. 290,625 108,000 H&R Block Inc. .................................. 4,691,250 63,000 Lehman Brothers Holdings Inc. ................... 3,673,687 64,500 Leucadia National Corporation ................... 1,354,500 60,000 Mellon Bank Corporation ......................... 2,025,000 57,000 Merrill Lynch & Co. ............................. 3,829,687 110,000 Midland Co. ..................................... 2,310,000 20,000 Morgan (J.P.) & Co. Inc. ........................ 2,285,000 10,000 Morgan Stanley Dean Witter & Co. ................ 891,875 47,000 Nikko Securities Co. Ltd. ....................... 396,012 4,000 Nissin Co. Ltd. ................................ 267,004 10,000 Providian Financial Corp. ....................... 791,875 14 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS (Continued) September 30, 1999 (Unaudited) Market Shares Value ------ ----- COMMON STOCKS (Continued) Financial Services (Continued) 5,000 Republic New York Corp. ......................... $ 307,187 60,000 Riggs National Corp. ............................ 1,012,500 14,000 Safra Republic Holdings SA ...................... 812,000 40,000 Schroders, plc .................................. 833,686 450 Shohkoh Fund & Co. Ltd. ......................... 334,925 40,000 State Street Corp. .............................. 2,585,000 20,000 SunTrust Banks Inc. ............................. 1,315,000 55,000 T. Rowe Price Associates Inc. ................... 1,509,062 10,000 Union Planters Corp. ............................ 407,500 50,000 Unitrin Inc. .................................... 1,737,500 29,900 Waddell & Reed Financial Inc., Cl. A ............ 663,406 -------------- 95,239,233 -------------- Cable -- 5.1% 569,000 Cablevision Systems Corp., Cl. A+ ............... 41,394,750 40,000 Comcast Corp., Cl. A ............................ 1,442,500 98,400 Comcast Corp., Cl. A Special .................... 3,923,700 240,000 MediaOne Group Inc.+ ............................ 16,395,000 10,000 NTL Inc.+ ....................................... 960,938 40,000 Shaw Communications Inc.+ ....................... 1,102,500 10,000 Shaw Communications Inc., Cl. B, Conv ........... 274,849 200,000 TeleWest Communications plc+ .................... 737,542 4,000 UnitedGlobalCom Inc.+ ........................... 286,500 -------------- 66,518,279 -------------- Publishing -- 4.8% 70,000 Arnoldo Mondadori Editore SpA+ .................. 1,221,759 3,000 Central Newspapers Inc., Cl. A .................. 133,499 38,000 Dow Jones & Co. Inc. ............................ 2,028,250 55,000 Harcourt General Inc. ........................... 2,289,375 323,000 Independent Newspapers Ltd., ORD ................ 1,701,576 98,000 McGraw-Hill Companies Inc. ...................... 4,740,750 400,000 Media General Inc., Cl. A ....................... 20,500,000 130,000 Meredith Corp. .................................. 4,720,625 165,000 New York Times Co., Cl. A ....................... 6,187,500 170,000 News Corp. Ltd. ................................. 1,193,123 5,000 News Corp. Ltd., ADR ............................ 142,187 70,000 Pearson plc ORD ................................. 1,501,589 400,000 Penton Media Inc. ............................... 6,500,000 25,000 Pulitzer Inc. ................................... 1,135,937 160,000 Reader's Digest Association Inc., Cl. B ......... 4,220,000 70,000 Schibsted A/A ................................... 691,369 1,500,000 Seat Pagine Gialle SpA+ ......................... 2,190,226 200,000 South China Morning Post Holdings ORD ........... 133,884 70,000 Thomas Nelson Inc. .............................. 682,500 34,000 Tribune Co. ..................................... 1,691,500 -------------- 63,605,649 -------------- Food and Beverage -- 4.6% 30,108 Advantica Restaurant Group, Inc.+ ............... 91,265 32,000 Bestfoods Inc. .................................. 1,552,000 18,000 Brau und Brunnen+ ............................... 1,187,703 58,500 Celestial Seasonings Inc.+ ...................... 1,126,125 53,250 Corn Products International, Inc.+ .............. 1,620,797 40,000 Diageo plc, Sponsored ADR ....................... 1,657,500 450,000 Foster's Brewing Group Ltd. ..................... 1,268,946 70,000 General Mills Inc. .............................. 5,678,750 2,500 Groupe Danone SA ................................ 607,953 4,000 Keebler Foods Co.+ .............................. 119,500 130,000 Kellogg Co. ..................................... 4,866,875 12,100 LVHM Moet Hennessy Louis Vuitton, Sponsored ADR ................................. 726,000 800 Nestle SA ....................................... 1,501,697 50,000 Pepsi Bottling Group Inc. ....................... 853,125 379,000 PepsiCo Inc. .................................... 11,464,750 110,000 Quaker Oats Co. ................................. 6,806,250 60,000 Ralcorp Holdings Inc.+ .......................... 1,061,250 120,000 Seagram Co. Ltd. ................................ 5,460,000 93,101 Tootsie Roll Industries Inc. .................... 3,060,695 356,000 Whitman Corp. ................................... 5,073,000 70,000 Wrigley (Wm.) Jr. Co. ........................... 4,816,875 -------------- 60,601,056 -------------- Consumer Products -- 4.3% 530,000 Carter-Wallace Inc. ............................. 9,473,750 10,750 Christian Dior SA ............................... 1,750,425 58,000 Church & Dwight Co. Inc. ........................ 1,450,000 1,400 Compagnie Financiere Richemont AG, Cl. A. ....... 2,831,126 10,000 Department 56 Inc.+ ............................. 239,375 9,000 Eastman Kodak Co. ............................... 678,938 110,000 Fortune Brands Inc. (e) ......................... 3,547,500 252,300 Gallaher Group plc .............................. 6,859,406 180,000 General Cigar Holdings Inc. ..................... 1,215,000 105,000 General Cigar Holdings Inc. Cl. B+ (a) .......... 708,750 50,000 Harley Davidson Inc. ............................ 2,503,125 100,000 Imasco Ltd. ..................................... 2,612,423 35,000 KAO Corp. ....................................... 986,285 15 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS (Continued) September 30, 1999 (Unaudited) Market Shares Value ------ ----- COMMON STOCKS (Continued) Consumer Products (Continued) 1,500 Matsushita Electric Industrial Co. Ltd., ADR .... $ 313,500 40,000 Mattel Inc. ..................................... 760,000 35,000 National Presto Industries Inc. ................. 1,351,875 10,500 Nintendo Co. Ltd. ............................... 1,669,148 14,000 Philip Morris Companies Inc. .................... 478,625 422,000 Ralston Purina Co. .............................. 11,736,875 20,000 Sony Corp., ADR ................................. 3,001,250 1,500 Swatch Group AG, Bearer ......................... 1,166,212 10,425 Syratech Corp.+ ................................. 114,675 70,714 Unilever plc .................................... 665,905 -------------- 56,114,168 -------------- Energy and Utilities -- 3.6% 70,000 AGL Resources Inc. .............................. 1,137,500 34,000 Apache Corp. .................................... 1,468,375 70,000 Atlantic Richfield Co. .......................... 6,203,750 60,000 BP Amoco plc, ORD ............................... 1,095,447 69,000 BP Amoco plc, Sponsored ADR ..................... 7,646,063 110,000 Burlington Resources Inc. ....................... 4,042,500 50,000 Cilcorp Inc. .................................... 3,240,625 40,000 Conoco Inc. Cl. A ............................... 1,110,000 85,000 Devon Energy Corp. .............................. 3,522,188 48,000 Eastern Enterprises.............................. 2,229,000 350,000 El Paso Electric Co.+ ........................... 3,150,000 2,000 ELF Aquitaine SA ................................ 349,074 20,000 Energy East Corporation ......................... 475,000 112,000 ENI SpA ......................................... 702,064 100,000 Florida Progress Corp. .......................... 4,625,000 55,000 Halliburton Co. ................................. 2,255,000 40,000 K N Energy Inc.+ ................................ 897,500 25,000 New England Electric System ..................... 1,296,875 100,000 Pennzoil-Quaker State Inc.+ ..................... 1,262,500 6,000 Public Service Co. of North Carolina Inc. ....... 186,000 15,000 St. Joseph Light & Power Co. .................... 309,375 3,000 TNP Enterprises Inc.+ ........................... 116,813 -------------- 47,320,649 -------------- Diversified Industrial -- 3.3% 10,000 Cooper Industries Inc. .......................... 467,500 145,000 Crane Co. ....................................... 3,253,438 102,000 GATX Corp. ...................................... 3,168,375 105,000 GenTek Inc.+ .................................... 1,194,375 10,000 ITT Industries Inc.+ ............................ 318,125 416,300 Lamson & Sessions Co.+ .......................... 2,159,556 105,000 National Service Industries Inc. ................ 3,307,500 58,715 Park-Ohio Holding Corp.+ ........................ 733,938 10,000 Reynolds Metals Co. ............................. 603,750 530,000 Tenneco Inc. .................................... 9,010,000 5,500 Thermo Power Corp.+ ............................. 64,969 75,000 Thomas Industries Inc. .......................... 1,401,563 27,000 TI Group plc .................................... 197,358 50,000 Trinity Industries Inc. ......................... 1,543,750 155,000 Tyco International Ltd. ......................... 16,003,750 100,000 Weir Group plc .................................. 460,141 -------------- 43,888,088 -------------- Automotive: Parts and Accessories -- 3.3% 52,000 Arvin Industries Inc. ........................... 1,608,750 16,302 Borg Warner Automotive Inc. ..................... 700,986 290,000 Dana Corp. ...................................... 10,766,250 80,001 Delphi Automotive Systems Corp.+ (d) ............ 1,285,013 3,000 Federal-Mogul Corp. ............................. 82,688 210,000 GenCorp Inc. .................................... 3,845,625 100,000 Genuine Parts Co. ............................... 2,656,250 118,000 Johnson Controls Inc. ........................... 7,824,875 330,000 Modine Manufacturing Co. ........................ 7,693,125 6,500 SPX Corp. ....................................... 589,875 163,000 Standard Motor Products Inc. .................... 3,168,313 70,000 Superior Industries International, Inc. ......... 1,960,000 110,000 TransPro Inc. ................................... 543,125 60,000 Wynn's International Inc. ....................... 956,250 -------------- 43,681,125 -------------- Hotels and Gaming -- 1.9% 110,000 Aztar Corp.+ .................................... 1,127,500 90,000 Boca Resorts Inc.+ .............................. 945,000 180,000 Gaylord Entertainment Co., Cl. A ................ 5,310,000 5,000 GTECH Holdings Corp.+ ........................... 107,188 650,000 Hilton Hotels Corp. ............................. 6,418,750 1,016,949 Ladbroke Group plc .............................. 3,545,123 100,000 Mirage Resorts Inc.+ ............................ 1,406,250 460,000 Park Place Entertainment Corp.+ ................. 5,750,000 -------------- 24,609,811 -------------- Specialty Chemical -- 1.8% 5,400 Ciba Specialty Chemicals, ADR 144A (c)+ ......... 205,200 50,000 Dexter Corp. .................................... 1,865,625 16 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS (Continued) September 30, 1999 (Unaudited) Market Shares Value ------ ----- COMMON STOCKS (Continued) Specialty Chemical (Continued) 15,000 duPont de Nemours (E.I.) & Co. .................. $ 913,125 300,000 Ferro Corp. ..................................... 6,393,750 105,000 General Chemical Group Inc. ..................... 360,938 50,000 Lyondell Chemical Co. ........................... 668,750 210,000 Nalco Chemical Co. .............................. 10,605,000 40,000 Rohm and Haas Co. ............................... 1,445,000 105,000 Sybron Chemicals Inc. ........................... 1,601,250 -------------- 24,058,638 -------------- Health Care -- 1.7% 47,000 American Home Products Corp. .................... 1,950,500 30,000 Amgen Inc.+ ..................................... 2,445,000 35,146 Astra Zeneca plc ................................ 1,464,953 26,000 Biogen Inc.+ .................................... 2,049,125 4,000 Glaxo Wellcome plc ADR .......................... 208,000 50,000 Glaxo Wellcome plc ORD .......................... 1,303,869 10,000 Japan Lifeline Co. Ltd. ......................... 224,688 33,661 Life Technologies, Inc. ......................... 1,380,101 15,000 McKesson HBOC Inc. .............................. 435,000 1,150 Novartis AG, ADR+ ............................... 1,703,987 54,000 Novartis AG, Registered.......................... 4,050,000 45,000 Pfizer Inc. ..................................... 1,617,188 140 Roche Holding AG ................................ 1,618,252 20,000 Sanofi-Synthelabo SA ............................ 851,400 55,000 SmithKline Beecham plc .......................... 632,467 20,000 SRL Inc. ........................................ 355,755 10,000 Zeneca Group plc+ ............................... 419,333 -------------- 22,709,618 -------------- Retail -- 1.5% 340,000 AutoNation Inc.+ ................................ 4,271,250 20,000 Centros Comerciales Continente SA ............... 485,511 20,500 Coldwater Creek Inc.+ ........................... 410,000 50,000 Delhaize America Inc. ........................... 1,059,375 80,000 Earl Scheib Inc.+ ............................... 220,000 35,000 Gerald Stevens Inc.+ ............................ 490,000 17,000 Hannaford Bros. Co. ............................. 1,197,438 12,000 Ito Yokado Co. Ltd. ............................. 988,625 50,000 Kmart Corp.+ .................................... 584,375 100,000 Lillian Vernon Corp. ............................ 1,250,000 350,000 Neiman Marcus Group Inc.+ ....................... 8,181,250 -------------- 19,137,824 -------------- Automotive -- 1.0% 12,000 Ford Motor Co. .................................. 602,250 195,000 General Motors Corp. (d) ........................ 12,272,812 -------------- 12,875,062 -------------- Paper and Forest Products -- 1.0% 25,000 Fort James Corp. ................................ 667,188 252,000 Greif Bros. Corp., Cl. A ........................ 7,119,000 3,400 Greif Bros. Corp., Cl. B ........................ 101,575 253,000 St. Joe Co. ..................................... 5,455,312 -------------- 13,343,075 -------------- Business Services -- 0.9% 25,000 Asatsu-DK Inc. .................................. 814,492 102,984 Cendant Corp. ................................... 1,827,966 7,000 CheckFree Holdings Corp.+ ....................... 287,875 5,000 Convergys Corp.+ ................................ 99,062 12,000 Jafco Co. Ltd. .................................. 1,005,477 100,000 Landauer Inc. ................................... 2,512,500 58,500 Nashua Corp.+ ................................... 519,187 40,000 Nielsen Media Research Inc. ..................... 1,487,500 10,833 Reuters Holdings plc, Cl. B, Sponsored ADR ...... 746,123 30,000 Seagate Technology Inc.+ ........................ 924,375 6,000 Secom Co. Ltd. .................................. 533,633 6,000 Secom Co. Ltd., New Shares+ ..................... 544,867 15,150 Vivendi ......................................... 1,063,337 -------------- 12,366,394 -------------- Communications Equipment -- 0.8% 30,000 3Com Corp.+ ..................................... 862,500 300,000 Allen Telecom Inc.+ ............................. 2,925,000 60,000 Dynatech Corporation+ ........................... 300,000 65,000 Lucent Technologies Inc. ........................ 4,216,875 5,000 Mannesmann AG ................................... 801,806 22,000 Scientific-Atlanta Inc. ......................... 1,090,375 -------------- 10,196,556 -------------- Agriculture -- 0.7% 725,000 Archer-Daniels-Midland Co. ...................... 8,835,937 -------------- Consumer Services -- 0.6% 40,000 Loewen Group Inc. ............................... 22,500 30,000 Midas, Inc. ..................................... 618,757 17 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS (Continued) September 30, 1999 (Unaudited) Market Shares Value ------ ----- COMMON STOCKS (Continued) Consumer Services (Continued) 510,000 Rollins Inc. .................................... $ 7,873,125 -------------- 8,514,382 -------------- Real Estate -- 0.5% 430,000 Catellus Development Corp.+ ..................... 5,052,500 44,000 Florida East Coast Industries Inc. .............. 1,377,750 55,000 Griffin Land & Nurseries Inc.+ .................. 594,687 -------------- 7,024,937 -------------- Electronics -- 0.5% 30,000 Fujitsu Ltd. .................................... 932,453 20,000 General Motors Corp., Cl. h ..................... 1,145,000 3,000 Hitachi Ltd., ADR ............................... 327,375 11,040 Koninklijke Philips Electronics N.V. ............ 1,115,040 1,500 NEC Corp., ADR .................................. 150,750 7,000 Sony Corp. ...................................... 1,042,644 100,000 Ucar International Inc.+ ........................ 2,281,250 -------------- 6,994,512 -------------- Transportation -- 0.5% 79,000 AMR Corp.+ ...................................... 4,305,500 15,000 Kansas City Southern Industries, Inc. ........... 696,562 31,273 MIF Ltd.+ ....................................... 605,636 50,000 Ryder System Inc. ............................... 1,018,750 -------------- 6,626,448 -------------- Aviation: Parts and Services -- 0.4% 100,000 Curtiss-Wright Corp. ............................ 3,225,000 125,000 Fairchild Corp., Cl. A .......................... 1,281,250 145,000 Hi-Shear Industries Inc.+ ....................... 373,828 20,000 Precision Castparts Corp. ....................... 610,000 -------------- 5,490,078 -------------- Financial Services: Insurance -- 0.4% 42,000 Allstate Corp. .................................. 1,047,375 8,000 American General Corp. .......................... 505,500 50,000 Prudential Corp. plc ............................ 767,999 84,000 Skandia Forsakrings AB .......................... 1,753,204 42,000 Travelers Property Casualty Corp., Cl. A ........ 1,239,000 15,000 UnumProvident Corp. ............................. 441,563 -------------- 5,754,641 -------------- Housing Related -- 0.4% 150,000 Nortek Inc.+ .................................... 5,118,750 5,000 Nortek Inc., Special Common+ (a) ................ 170,625 -------------- 5,289,375 -------------- Aerospace / Defense -- 0.3% 10,000 Lockheed Martin Corp. ........................... 326,875 60,000 Northrop Grumman Corp. .......................... 3,813,750 -------------- 4,140,625 -------------- Closed-End Funds -- 0.3% 59,000 Central European Equity Fund Inc. ............... 726,438 70,000 Dresdner RCM Europe Fund ........................ 867,300 25,000 France Growth Fund Inc. ......................... 353,125 40,250 Italy Fund Inc. ................................. 586,141 68,000 New Germany Fund ................................ 803,250 45,942 Royce Value Trust Inc. .......................... 568,532 -------------- 3,904,786 -------------- Metals and Mining -- 0.3% 3,500 Anglogold Ltd. .................................. 220,408 10,000 Anglogold Ltd., Sponsored ADR ................... 314,375 110,909 Antofagasta Holdings plc ........................ 723,054 72,500 Harmony Gold Mining Co. Ltd. .................... 436,631 12,500 Harmony Gold Mining Co. Ltd., ADR ............... 75,000 38,000 Newmont Mining Corp. ............................ 983,250 8,000 Nucor Corp. ..................................... 381,000 20,000 Placer Dome Inc. ................................ 297,500 -------------- 3,431,218 -------------- Computer Software and Services -- 0.3% 5,000 CDNow Inc.+ ..................................... 62,188 2,000 Cresco Ltd. ..................................... 151,664 6,000 Obic Co. Ltd. ................................... 2,794,551 8,000 Square Co. Ltd. ................................. 587,183 6,000 Sumisho Computer Systems Corp. .................. 342,649 95,000 Tyler Technologies Inc. ......................... 421,563 -------------- 4,359,798 -------------- Building and Construction -- 0.2% 105,000 CRH plc ORD ..................................... 2,009,197 15,000 Martin Marietta Materials Inc. .................. 599,063 17,000 Vulcan Materials Co. ............................ 622,625 -------------- 3,230,885 -------------- Environmental Services -- 0.1% 80,000 Waste Management Inc. ........................... 1,540,000 -------------- Technology -- 0.1% 55,000 Compaq Computer Corp. ........................... 1,261,563 -------------- Conglomerates -- 0.1% 19,307 Invik & Co. AB, Cl. B ........................... 1,237,175 -------------- TOTAL COMMON STOCKS.......................................... 1,281,816,184 -------------- 18 THE GABELLI EQUITY TRUST INC. PORTFOLIO OF INVESTMENTS (Continued) September 30, 1999 (Unaudited) Market Shares Value ------ ----- PREFERRED STOCKS -- 0.5% Telecommunications -- 0.3% 10,000 Citizens Utilities Co., 5.000% Conv. Pfd. (EPPICS) ........................... $ 497,500 40,000 Sprint Corp., 8.250%, Conv. Pfd. ................ 3,135,000 2,223,575 Telecomunicacoes de Sao Paulo (Telesp), Pfd., Registered .............................. 197,053 -------------- 3,829,553 -------------- Publishing -- 0.1% 43,500 News Corp. Ltd., Sponsored ADR, Pfd ............. 1,160,906 -------------- Cable -- 0.1% 8,000 Tele-Communications Inc., Cl. B, 6.000%, Ex. Jr. Pfd ................................... 800,000 -------------- Wireless Communications -- 0.0% 2,223,575 Telecomunicacoes de Sao Paulo Celular, Pfd., B ....................................... 115,811 -------------- TOTAL PREFERRED STOCKS ...................................... 5,906,270 -------------- COMMON STOCK WARRANTS AND RIGHTS -- 0.0% Food and Beverage -- 0.0% 62,463 Advantica Restaurant Group, Inc., Warrants, expires 01/07/05+ ................... 19,520 -------------- TOTAL WARRANTS AND RIGHTS ................................... 19,520 -------------- CORPORATE BONDS -- 0.1% Principal Amount ------ Automotive: Parts and Accessories -- 0.1% $1,250,000 Standard Motor Products Inc., 6.75% due 07/15/09 ............................ 1,100,781 -------------- Publishing -- 0.0% 200,000 News American Holdings Inc., Gtd. Ex. Sub. Note, Zero Coupon due 03/31/02 .................................. 251,000 -------------- TOTAL CORPORATE BONDS ....................................... 1,351,781 -------------- U.S. TREASURY BILLS -- 2.6% 33,827,000 U.S. Treasury Bills 4.42% to 4.50%++ due 11/4/1999 to 11/8/1999 (d) ................ 33,644,077 -------------- TOTAL INVESTMENTS (b) -- 100.4% ............................. 1,322,737,832 ============== OTHER ASSETS, LIABILITIES AND LIQUIDATION VALUE OF CUMULATIVE PREFERRED STOCK -- (10.4%) ................................ (132,123,351) -------------- Market Shares Value ------ ------ NET ASSETS - COMMON STOCK (107,096,103 common shares outstanding) -- 89.8% ..................................... $1,190,614,481 ============== NET ASSETS - PREFERRED STOCK (5,394,000 preferred shares outstanding)-- 10.2% .......... 134,850,000 -------------- TOTAL NET ASSETS -- 100.0% .................................. $1,325,464,481 ============== NET ASSET VALUE PER COMMON SHARE ($1,190,078,809 / 107,096,103 shares outstanding) $11.11 ============== FUTURES CONTRACTS -- SHORT POSITION Number of Unrealized Contracts Appreciation --------- ------------ (380) S&P 500 Index Futures, December 1999 ........................... $ 3,307,300 ============== SCHEDULE OF FORWARD FOREIGN EXCHANGE CONTRACTS Settlement Unrealized Date Depreciation ---- ------------ Forward Foreign Exchange Contracts to Deliver 14,657,129(f) Hong Kong Dollars in exchange for USD1,860,749 ............... 08/24/00 $ (9,898) ============== - ---------- (a) Security fair valued under procedures established by the Board of Directors. (b) For Federal tax purposes: Aggregate cost $ 789,682,898 ============== Gross unrealized appreciation $ 576,107,583 Gross unrealized depreciation (43,052,649) -------------- Net unrealized appreciation $ 533,054,934 ============== (c) Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. The market value of these securities at September 30, 1999 was $205,200 representing 0.01% of total net assets. (d) Security was pledged as collateral for futures contracts. (e) At September 30, 1999, 100,000 shares were pledged as collateral for futures contracts. (f) Principal amount denoted in Hong Kong Dollars. + Non-income producing security. ++ Represents annualized yield at date of purchase. ADR -- American Depositary Receipt USD -- United States Dollar ORD -- Ordinary Share GDR -- Global Depositary Receipt 19 AUTOMATIC DIVIDEND REINVESTMENT AND VOLUNTARY CASH PURCHASE PLAN Enrollment in the Plan It is the policy of The Gabelli Equity Trust Inc. ("Equity Trust") to automatically reinvest dividends. As a "registered" shareholder you automatically become a participant in the Equity Trust's Automatic Dividend Reinvestment Plan (the "Plan"). The Plan authorizes the Equity Trust to issue shares to participants upon an income dividend or a capital gains distribution regardless of whether the shares are trading at a discount or a premium to net asset value. All distributions to shareholders whose shares are registered in their own names will be automatically reinvested pursuant to the Plan in additional shares of the Equity Trust. Plan participants may send their stock certificates to State Street Bank and Trust Company ("State Street") to be held in their dividend reinvestment account. Registered shareholders wishing to receive their distribution in cash must submit this request in writing to: The Gabelli Equity Trust Inc. c/o State Street Bank and Trust Company P.O. Box 8200 Boston, MA 02266-8200 Shareholders requesting this cash election must include the shareholder's name and address as they appear on the share certificate. Shareholders with additional questions regarding the Plan may contact State Street at 1 (800) 336-6983. Shareholders wishing to liquidate reinvested shares held at State Street Bank must do so in writing or by telephone. Please submit your request to the above mentioned address or telephone number. Include in your request your name, address and account number. The cost to liquidate shares is $2.50 per transaction as well as the brokerage commission incurred. Brokerage charges are expected to be less than the usual brokerage charge for such transactions. If your shares are held in the name of a broker, bank or nominee, you should contact such institution. If such institution is not participating in the Plan, your account will be credited with a cash dividend. In order to participate in the Plan through such institution, it may be necessary for you to have your shares taken out of "street name" and re-registered in your own name. Once registered in your own name your dividends will be automatically reinvested. Certain brokers participate in the Plan. Shareholders holding shares in "street name" at participating institutions will have dividends automatically reinvested. Shareholders wishing a cash dividend at such institution must contact their broker to make this change. The number of shares of Common Stock distributed to participants in the Plan in lieu of cash dividends is determined in the following manner. Under the Plan, whenever the market price of the Equity Trust's Common Stock is equal to or exceeds net asset value at the time shares are valued for purposes of determining the number of shares equivalent to the cash dividends or capital gains distribution, participants are issued shares of Common Stock valued at the greater of (i) the net asset value as most recently determined or (ii) 95% of the then current market price of the Equity Trust's Common Stock. The valuation date is the dividend or distribution payment date or, if that date is not a New York Stock Exchange trading day, the next trading day. If the net asset value of the Common Stock at the time of valuation exceeds the market price of the Common Stock, participants will receive shares from the Equity Trust valued at market price. If the Equity Trust should declare a dividend or capital gains distribution payable only in cash, State Street will buy Common Stock in the open market, or on the New York Stock Exchange or elsewhere, for the participants' accounts, except that State Street will endeavor to terminate purchases in the open market and cause the Equity Trust to issue shares at net asset value if, following the commencement of such purchases, the market value of the Common Stock exceeds the then current net asset value. The automatic reinvestment of dividends and capital gains distributions will not relieve participants of any income tax which may be payable on such distributions. A participant in the Plan will be treated for Federal income tax purposes as having received, on a dividend payment date, a dividend or distribution in an amount equal to the cash the participant could have received instead of shares. The Equity Trust reserves the right to amend or terminate the Plan as applied to any voluntary cash payments made and any dividend or distribution paid subsequent to written notice of the change sent to the members of the Plan at least 90 days before the record date for such dividend or distribution. The Plan also may be amended or terminated by State Street on at least 90 days' written notice to participants in the Plan. Voluntary Cash Purchase Plan The Voluntary Cash Purchase Plan is yet another vehicle for our shareholders to increase their investment in the Equity Trust. In order to participate in the Voluntary Cash Purchase Plan, shareholders must have their shares registered in their own name. Participants in the Voluntary Cash Purchase Plan have the option of making additional cash payments to State Street for investments in the Equity Trust's shares at the then current market price. Shareholders may send an amount from $250 to $10,000. State Street will use these funds to purchase shares in the open market on or about the 1st and 15th of each month. State Street will charge each shareholder who participates $0.75, plus a pro rata share of the brokerage commissions. Brokerage charges for such purchases are expected to be less than the usual brokerage charge for such transactions. It is suggested that any voluntary cash payments be sent to State Street Bank and Trust Company, P.O. Box 8200, Boston, MA 02266-8200 such that State Street receives such payments approximately 10 days before the 1st or 15th of the month. Funds not received at least five days before the investment date shall be held for investment on the following investment date. A payment may be withdrawn without charge if notice is received by State Street at least 48 hours before such payment is to be invested. For more information regarding the Dividend Reinvestment Plan and Voluntary Cash Purchase Plan, brochures are available by calling (914) 921-5070 or by writing directly to the Equity Trust. 20 DIRECTORS AND OFFICERS THE GABELLI EQUITY TRUST INC. One Corporate Center, Rye, NY 10580-1434 Directors Mario J. Gabelli, CFA Chairman & Chief Investment Officer, Gabelli Funds, Inc. Dr. Thomas E. Bratter President, John Dewey Academy Felix J. Christiana Former Senior Vice President, Dollar Dry Dock Savings Bank James P. Conn Former Managing Director and Chief Investment Officer, Financial Security Assurance Holdings Ltd. Frank J. Fahrenkopf, Jr. President and Chief Executive Officer, American Gaming Association Karl Otto Pohl Former President, Deutsche Bundesbank Anthony R. Pustorino Certified Public Accountant Professor, Pace University Salvatore J. Zizza Chairman, The Bethlehem Corp. Officers Mario J. Gabelli, CFA President & Chief Investment Officer Bruce N. Alpert Vice President & Treasurer Marc S. Diagonale Vice President James E. McKee Secretary Investment Advisor Gabelli Funds, LLC One Corporate Center Rye, New York 10580-1434 Custodian Boston Safe Deposit and Trust Company Counsel Willkie Farr & Gallagher Transfer Agent and Registrar State Street Bank and Trust Company Stock Exchange Listing Common 7.25% Preferred ------ --------------- NYSE-Symbol: GAB GAB Pr Shares Outstanding: 107,096,103 5,400,000 The Net Asset Value appears in the Publicly Traded Funds column, under the heading "General Equity Funds," in Sunday's The New York Times and in Monday's The Wall Street Journal. It is also listed in Barron's Mutual Funds/Closed End Funds section under the heading "General Equity Funds". The Net Asset Value may be obtained each day by calling (914) 921-5071. - -------------------------------------------------------------------------------- For general information about the Gabelli Funds, call 1-800-GABELLI (1-800-422-3554), fax us at 914-921-5118, visit Gabelli Funds' Internet homepage at: http://www.gabelli.com or e-mail us at: closedend@gabelli.com - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the Equity Trust may, from time to time, purchase shares of its common stock in the open market when the Equity Trust shares are trading at a discount of 10% or more from the net asset value of the shares. The Equity Trust also may, from time to time, purchase shares of its Cumulative Preferred Stock in the open market when the shares are trading at a discount to the Liquidation Value of $25.00. - -------------------------------------------------------------------------------- THE GABELLI EQUITY TRUST INC. One Corporate Center Rye, NY 10580-1434 (914) 921-5070 http://www.gabelli.com Third-Quarter Report September 30, 1999 GBFCM 09/99 -----END PRIVACY-ENHANCED MESSAGE-----