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THIRD QUARTER REPORT
THE GABELLI
EQUITY TRUST INC.
SEPTEMBER 30, 1995
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RIGHTS OFFERING
THE GABELLI EQUITY TRUST INC.
[GRAPHIC] [PICTURE]
THE GABELLI EQUITY TRUST is a closed-end, non-diversified
investment company which trades on the New York Stock
Exchange (Symbol: GAB).
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The rights offering expires at 5:00 pm (Eastern Time)
November 21, 1995
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Rights not exercised by the expiration date cannot be
exercised thereafter.
FOR COPIES OF A PROSPECTUS CALL
1-800-422-2274
(914) 921-5070 -- FAX:(914)921-5118
GABELLI EQUITY TRUST, INC. - ONE CORPORATE CENTER,
RYE, NY 10580-1435
VISIT GABELLI ON THE INTERNET AT http://www.gabelli.com
The Gabelli Equity Trust Inc. rights will trade on the
New York Stock through November 20, 1995
==============================================================
INVESTMENT OBJECTIVE:
The Gabelli Equity Trust Inc. is a
closed-end, non-diversified management
investment company whose primary objective
is long-term growth of capital, with
income as a secondary objective.
THIS REPORT IS PRINTED ON RECYCLED PAPER.
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[Picture]
The Gabelli Equity Trust
Logo
To our Shareholders,
During the three months ended September 30, 1995, increasing investor
confidence that the economy was landing with its nose up resulted in another
strong backdrop for U.S. stocks. Consumer non-durables replaced high
technology stocks as market leaders. Bank stocks performed well as the
visible Chase Manhattan/Chemical merger underscored accelerating consolidation
in that industry. The Disney/Capital Cities, Westinghouse/CBS, and Time
Warner/Turner Broadcasting deals focused Attention on underlying values in the
media marketplace.
In the third quarter of 1995, The Gabelli Equity Trust Inc.'s ("Equity
Trust") net asset value per share increased 7.4% to $10.65 on September 30,
1995. This compares to the 7.9% return in the unmanaged Standard & Poor's 500
Composite Stock Price Index ("S&P 500") for the quarter. Year to date, the net
asset value has increased 18.4% versus the S&P 500's 29.8% increase. For the
twelve months ended September 30, 1995, the Equity Trust's net asset value
increased 15.4%, after adjusting for all distributions and the spin-off of The
Gabelli Global Multimedia Trust Inc. ("Multimedia Trust"). The S&P 500 was up
29.8% for the same period.
Since inception on August 21, 1986, the Equity Trust's net asset value
has achieved a 222.2% total return, which equates to a 13.7% average annual
return. The three- and five-year average annual returns were 15.0% and 17.2%,
respectively.
The Equity Trust's common shares ended the third quarter at $9.875 per
share on the New York Stock Exchange, a decrease of 1.2% for the third quarter
and up 7.9% for the year. For the twelve months ending September 30, 1995, the
common shares had a return of 3.9%, after adjusting for all distributions and
the Multimedia Trust spin-off.
RIGHTS OFFERING 1995
Your Board of Directors has announced a transferable rights offering
for 1995. The offering is being made to shareholders of record on October 19,
1995, by means of a prospectus. The Equity Trust is offering shareholders one
transferable right for every full share held as of the record date. Six rights
will be required to purchase one additional share at the discounted price of
$8.00 and free of commission.
Shareholders who fully exercise their primary subscription rights may
oversubscribe for any additional amount of shares they wish. These
oversubscription shares will also be at the subscription price of $8.00 and
will be distributed based on a pro-rata allocation formula.
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[Graphic]
WHAT WE DO
We do what is described as bottom up research: we read annual reports;
we visit the competition; we talk to customers; we go belly to belly with
management. We structure our portfolio by picking stocks.
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 worldwide demand for
American food and feed crops. In other instances, it may be a change in
management, a sale or spin-off of a division, or the development of a
profitable new business.
Once we have identified 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.
BACK TO BASICS
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We are approaching our tenth anniversary. The Fund was
launched on August 21, 1986, when we received $411 million, with an NAV
of $9.34. Our investment objective was, and still is, to achieve
long-term growth of capital through investment in a portfolio of equity
securities, with income being a secondary objective. Our goal was to
provide a 10% real rate of return. We would now like to discuss some of
the basic issues of the Fund in a question and answer format.
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INVESTMENT STYLE
Q. WHAT WAS THE INVESTMENT APPROACH WHEN THE FUND BEGAN?
At the inception of our Fund, our investment decision-making process
stemmed from the premise that we could achieve superior rates of return over the
longer term for our shareholders by investing in the stocks of domestic, cash
generating, "franchise" companies selling at substantial discounts to their
Private Market Values. We looked for a catalyst that would help surface values
and narrow the spread between the public market price and our private market
appraisal. Also, to moderate downside risk, we focused on companies whose assets
were growing in value at least in step with the prevailing inflation rate. As a
final hurdle, we purchased only those stocks with the potential to appreciate
50% in two years, thereby producing a 10% annual after-inflation rate of return.
Q. WHAT IS THE INVESTMENT APPROACH NOW?
We maintain the same fundamental Graham/Dodd/Buffett/Gabelli investment
approach as when the Fund began, however, we have expanded our investment scope
to include non-U.S. investments up to 35% of the overall portfolio. At
September 30, 1995, non-U.S. stocks represented 7.5% of the portfolio.
NET ASSET VALUE
Q. WHAT IS THE NET ASSET VALUE AND HOW IS IT CALCULATED?
The net asset value (NAV) of a mutual fund is calculated by totaling all
assets including the market value of all securities owned, deducting the
liabilities and dividing the balance by the number of shares outstanding. The
resulting figure is the net asset value per share. At September 30, 1995, our
net assets were at $948 million and, with 88,988,289 shares outstanding, the net
asset value was $10.65 per share.
Q. WHAT IS THE GOAL FOR THE NET ASSET VALUE?
We manage the Fund with the goal of maximizing shareholder wealth by
using a value investing methodology. This is achieved by picking stocks that
will maximize the total market value of the portfolio. Even with the U.S.
markets at historic record levels, we continue to pursue our goal of increasing
the NAV by a real rate of return of 10% per year.
RETURNS
Q. HOW IS THE RETURN ON NET ASSET VALUE CALCULATED?
The Fund's return represents the percentage change in the net asset
value of the shares after adjusting for the reinvestment of all distributions
and participation in rights offerings.
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Q. HOW HAS THE FUND PERFORMED SINCE INCEPTION?
The Fund has achieved a cumulative return of 222.2% since inception on
August 21, 1986. This equates to an average annual return of 13.7%. An
investment of $10,000 on the date of inception, assuming the reinvestment of
all distributions, adjustments for rights, and the value of The Gabelli Global
Multimedia Trust spin-off, would have been worth $32,220 on September 30, 1995.
Q. HOW HAS THE FUND PERFORMED THIS YEAR?
The Fund has increased 18.4% through September 30, 1995, including the
reinvestment of dividends. This exceeds our goal of a 10% real rate of return
when measuring inflation at approximately 2.5%. For the quarter ended
September 30, 1995, the Fund achieved a return of 7.4%.
PUBLIC MARKET PRICE
Q. WHAT IS THE PUBLIC MARKET PRICE AS IT RELATES TO CLOSED-END FUNDS?
The public market price is the price of a share on the New York Stock
Exchange. The Gabelli Equity Trust is traded on the New York Stock Exchange
under the symbol GAB. The public market price represents the value of a share
as determined by the forces of supply and demand in the marketplace. The
public market price dictates the price at which investors may buy or sell
shares of the Fund.
Q. HOW DOES THE PUBLIC MARKET PRICE TRACK THE NAV?
The Fund's shares may, at times, sell at either a premium or discount
to the net asset value. Over the long-term, however, we believe that the
Equity Trust's market price will track the growth in the NAV.
Q. WHAT IS A PREMIUM? WHAT IS A DISCOUNT?
The Fund sells at a premium when the public market price is greater
than the net asset value per share. Conversely, the Fund sells at a discount
when the public market price is less than the underlying net asset value.
Q. WHAT IS THE HISTORY OF THE EQUITY TRUST AS IT RELATES TO THE
PREMIUM/DISCOUNT?
The Equity Trust traded at a discount early in its life, particularly
in 1987. In response, we initiated a stock repurchase plan which resulted in
the purchase of 800,000 shares in the open market from 1987 to 1988. When this
discount continued, we initiated a policy of paying out 10% of the NAV,
starting on August 1, 1988. Then, from 1988 to 1992, the Fund traded at or
near NAV. From 1992 through mid-1995 the Fund traded at a premium, reaching as
high as 12.3%. Currently, the Fund is trading at a slight discount.
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RIGHTS OFFERINGS
Q. WHAT ARE RIGHTS?
Rights are privileges granted to existing shareholders of a corporation
(in our case the Equity Trust) to subscribe to shares of a new issue of common
stock. These rights represent short-term options granted by the corporation
which the shareholder has the option of exercising.
Q. WHAT IS A RIGHTS OFFERING AS IT RELATES TO CLOSED-END FUNDS?
A rights offering is an opportunity for shareholders to purchase
additional shares of a fund at a specified price -- the "subscription price". To
attract shareholder interest, the subscription price is typically set at a
discount to the current market price. Although shareholders are not required to
purchase additional shares, they are given the opportunity, or "right", to
purchase shares based on the number of underlying shares they own on the record
date. Rights may either be transferable or non-transferable and the offering
may or may not be underwritten with a commitment by the underwriter to buy what
is not subscribed for.
Q. WHAT ARE THE DETAILS OF THE CURRENT RIGHTS OFFERING?
The record date for our Gabelli Equity Trust rights offering is October
19, 1995 and the expiration date is November 21, 1995. The subscription period
covers the period from the record date to the expiration date. Shareholders may
only subscribe to additional shares during the subscription period. The
subscription ratio relates to the number of rights which are required to
purchase one additional share of the Fund. In our case it is a 6:1 ratio, which
permits shareholders to purchase one share for every six rights held. Stated
another way, a shareholder with 600 shares will receive 600 rights (one right
per share) and will be able to subscribe to an additional 100 shares(six
rights are required to purchase one share). The subscription price will be
$8.00, which is the price at which additional shares may be purchased.
The over-subscription privilege is available to shareholders who fully
subscribe to their primary shares and wish to purchase additional shares. If
all of the rights initially issued are not exercised, any shares for which
subscriptions have not been received will be offered to shareholders who have
exercised all of the rights initially issued to them and have over-subscribed
for more. If sufficient shares are not available to honor all
over-subscriptions, the available shares will be allocated among those who
over-subscribe based on the number of shares they originally owned on the
record date.
Q. HOW HAS THE FUND DONE IN ITS PREVIOUS RIGHTS OFFERING?
This is the fourth rights offering for the Fund. In each of the
previous three, primary share subscriptions have amounted to over 90% of the
total shares available, while the remaining shares were
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<TABLE>
heavily over-subscribed. The following details the share subscriptions
received versus the value of new shares issued for each of the previous
offerings:
<CAPTION>
AMOUNT SUBSCRIPTIONS
YEAR SOUGHT REMITTED
---- ------ --------
<S> <C> <C>
1991 $63.1 million $136.7 million
1992 $76.5 million $164.8 million
1993 $93.2 million $176.4 million
</TABLE>
Q. HOW ARE RIGHTS SOLD?
Registered shareholders of the Equity Trust may sell all or a portion of
their rights by designating this desire on the Subscription Certificate which
accompanies the Prospectus. Those shareholders who wish to subscribe to a
portion of their available primary shares and sell their remaining rights must
simply fill out sections A and E of the subscription certificate, while those
who wish to sell all of their rights must simply fill out section F of the
certificate. The certificate must be returned to State Street Bank and Trust
Company by the end of the offering period at the designated address.
Those who hold shares through a broker must make the broker aware of
their desire to sell their rights. The broker should fulfill the remainder of
the order.
Q. WHAT ARE THE TRANSACTION COSTS ON THE SALE OF THE GAB RIGHTS?
Equity Trust rights may be sold through State Street Bank and Trust
with no fees and only a nominal commission; however, certain brokerage firms
may charge a transaction fee to sell your rights.
A further discussion on rights offerings will appear in the Fund's
Annual Report. For additional information on the current rights offering or to
request a prospectus dated October 13, 1995, please call 1-800-422-2274.
DIVIDENDS
Q. WHY DOES THE FUND PAY DIVIDENDS?
A mutual fund pays dividends to satisfy one of the requirements to
qualify as a Regulated Investment Company to avoid paying income tax at the
corporate level. The Fund must distribute at least 90% of its ordinary income
and realized capital gains, but will generally distribute all of its taxable
income for the year to avoid all federal taxes. As a Regulated Investment
Company, the tax benefits of net long-term capital gains can be passed through
to shareholders.
Q. WHAT IS THE HISTORY OF THE EQUITY TRUST'S DIVIDENDS?
The Fund paid out only its income and realized capital gains through
1988. In August of 1988, we instituted our 10% Distribution Policy. Since
then, the Equity Trust has paid distributions equivalent to
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<TABLE>
10% of its average net assets every year. The following summarizes the total
per share distributions made or declared by the Equity Trust each year since
inception:
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994(a) 1995
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1.082 $0.55 $1.31 $1.18 $1.09 $1.06 $1.11 $1.89 $1.00
<FN>
(a) Includes the spin-off of The Gabelli Global Multimedia Trust equivalent to
$0.80625 per share.
</TABLE>
Q. DESCRIBE THE 10% PAYOUT POLICY.
The Equity Trust currently maintains a 10% Distribution Policy whereby
the Fund will pay out 10% of its average net asset value per share. The Fund's
normal policy is to make quarterly distributions of $0.25 per share at the end
of each of the first three calendar quarters of each year. The Fund's
distribution in December for each calendar year is an adjusting distribution
(equal to the sum of 2.5% of the net asset value per share of the Fund as of
the last day of the four preceding calendar quarters less the aggregate
distributions made for the most recent three calendar quarters) in order to
meet the Fund's 10% pay-out goal as well as the distribution requirements of
the Internal Revenue Code.
Q. WHY IS THE FUND PAYING A $0.50 PER SHARE DISTRIBUTION THIS YEAR IN
DECEMBER?
The reason that we combined the third and fourth quarter distributions
in 1995 has to do with the requirement by the Investment Company Act of 1940
that long-term capital gains can only be distributed once a year. Typically,
the Equity Trust has used the fourth quarter distribution to pay out its
realized capital gains. This year, however, the fourth quarter dividend amount
required to meet the 10% payout policy would not be sufficient to include all
of the Trust's realized capital gains. We have realized many gains this year
as a result of the many takeovers that took place in the market this year.
Since the Fund cannot allocate capital gains among its prior quarterly
distributions, to assure shareholders that they would receive the full tax
benefit of all the long-term capital gains, the Board of Directors voted to
combine the September and year-end distributions.
Q. HOW WILL THE PAYOUT BE DETERMINED AND DISTRIBUTED IN 1996?
The Directors have authorized the Fund to file an exemptive request
with the Securities and Exchange Commission to allow the Fund to distribute
long-term capital gains more frequently than once per year. If the exemption
is granted, the Directors expect to declare quarterly distributions in 1996 of
$0.25 per share in each of the first three quarters, with a year-end adjusting
distribution to meet the 10% payout policy.
Q. WHAT DID THE FUND DO WITH CAPITAL GAINS PRIOR TO 1990?
In 1988 and 1989, the Fund elected to retain net realized long-term
capital gains and pay the appropriate taxes thereon. However, we found the
bookkeeping under this procedure cumbersome.
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Q. CAN I REINVEST MY DIVIDENDS? IF SO, HOW?
All directly registered shareholders are eligible to participate in the
Fund's Automatic Dividend Reinvestment Plan which gives the shareholder the
option of having all distributions reinvested. Distributions will be reinvested
automatically unless the shareholder elects to receive cash. Distributions to
shareholders who hold their shares in "street name" with a broker are
reinvested by the broker in additional shares under the Plan, unless the
election is made to receive distributions in cash.
Q. WHAT ARE THE BENEFITS OF HOLDING SHARES DIRECTLY WITH THE FUND
AS OPPOSED TO HOLDING THEM IN "STREET NAME" WITH A BROKER?
The shareholder benefits from receiving all communications directly
from the Fund. Registered shareholders have the option to participate in the
Dividend Reinvestment Plan as well as the Voluntary Cash Purchase Plan. In
addition, not all brokers have the capability to allow their clients to
participate in the Dividend Reinvestment Plan. Registered shareholders may
also participate directly in rights offerings, paying little or no fees or
commissions.
Q. HOW DO I BECOME A REGISTERED SHAREHOLDER?
Shareholders who currently hold their shares through a broker and wish
to register directly with the Fund must simply direct their broker to do this.
The broker may charge a processing fee, but the shareholder will soon realize
the aforementioned benefits.
Q. MIGHT I INVEST DIRECTLY WITH THE FUND?
Registered shareholders who participate in the Dividend Reinvestment
Plan may also participate in the Voluntary Cash Purchase Plan. This plan gives
participants the option to make additional cash payments to State Street Bank
for investment in the Fund's shares in any amount from $250 to $3,000. State
Street Bank uses the accumulated funds to purchase shares in the open market,
thus spreading the transaction costs over a larger base of shareholders. Of
course, rights offerings allow you to acquire additional shares as well.
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FURTHER QUESTIONS
We hope this question and answer format has resolved many of the
questions you may have had. If you have any further questions or wish to
discuss any matters relating to The Gabelli Equity Trust, please contact either
Marc Diagonale at (914) 921-5070 or Douglas Neviera at (914) 921-5071 directly,
or toll free at 1-800-GABELLI (422-3554).
Sincerely,
/s/ MARC DIAGONALE /s/ DOUGLAS NEVIERA
Marc Diagonale Douglas Neviera
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COMMENTARY
THE MARKET
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As money managers entrusted with your hard earned financial assets, we
tend to spend less time pondering good news and more time worrying about what
could go wrong. This mindset no doubt colors our opinions on the economy and
market.
Blessed with 20/20 hindsight, 1995's strong stock market is easily
explained. Steady economic growth, better than expected corporate earnings and
declining interest rates, all under the backdrop of investor optimism that
Washington will finally put our government's fiscal house in order, provided a
nearly perfect formula for a big market rally. These fundamentals were fueled
by a favorable flow of funds to U.S. equities through mutual funds and a record
amount being reinvested from torrid merger and acquisition activity.
Looking forward, we ask whether all the components of this bull market
will remain intact. Will the economy accelerate, and thus rekindle
inflationary concerns? Will corporate earnings continue to be good, although
perhaps not as strong as rising consensus expectations? Are stocks running too
far ahead of economic reality on a valuation basis? Will Washington deliver on
its promise to feed the entrepreneur and starve the bureaucrat? We
continuously evaluate these questions.
Over the short term, we expect the domestic economy to continue
chugging along aided by the higher demand for American products and services
from the reviving economies of Europe and the Pacific Rim. On the inflation
front, the outlook for wage costs, a major component of inflation, remains
favorable. However, the supply/demand balance for selected industrial and
agricultural commodities points to somewhat higher prices. Oil prices may also
trend upward with worldwide energy consumption rising and production shifting
to the Middle East. Overall, while we currently see no yellow flags, we are
not among those investors betting that inflation is stone cold dead.
As for corporate profits, our concern is that after two years of
underestimating earnings, Wall Street may have gone too far in the other
direction. During the third quarter, we have seen a number of high profile
corporations trying to constrain analysts' overly optimistic expectations.
Companies releasing even modest earnings disappointments have been shelled in
the market. Fortunately, we expect continued productivity gains and an uptick
in broad economic activity will help fourth quarter earnings, and results
should exceed analysts' cooled off expectations.
On a price/earnings (P/E) basis, one could argue that the market is
less expensive today than it was at the beginning of 1994. But remember, P/E
ratios are a function of interest rates and investor expectations. If, as we
anticipate, rates are near an intermediate-term bottom and traders' rosy
earnings expectations are not met, the market could get cheaper despite
reasonably good economic and earnings news.
Washington is another wild card. Will the so-called "Republican
Revolution" result in legislation which promotes long-term fiscal discipline
and prudent economic growth policies? We will get a solid glimpse at this as
the debate over deficit reduction/tax reduction crests in November/December.
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Our conclusion from all this conjecture is a simple one: that market
risk has risen. If any of the aforementioned concerns prove to be worth
worrying about, the broad market could hit a rough patch of road. Our response
is consistent with our investment philosophy: to focus on stocks that are
materially underpriced relative to their real world economic value. The
direction of the market will have some short-term impact on stock prices, but
longer term, it will recognize value.
CORPORATE MERGERS AND RESTRUCTURING
Humpty--Dumpty
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In the familiar nursery rhyme, Humpty Dumpty's fall was a tragedy: "All
the king's horses and all the king's men couldn't put Humpty Dumpty back
together again." Stock market investors are taking a very different attitude
to the breaking of several large corporate eggs. Pending and completed sales
and spin-offs from such companies as American Express Company (AXP - $44.375 -
NYSE), ITT Corporation (ITT - $124.00 - NYSE), Sears, Roebuck and Co. (S -
$36.875 - NYSE), Tenneco Inc. (TEN - $46.25 - NYSE) and most recently, AT&T
Corp. (T - $65.75 - NYSE), have shown that the value of the shell, egg white
and yolk is often greater than that of the whole egg.
Corporate CEOs are under increasing pressure to narrow the spread
between the public price and intrinsic value. We believe this trend will
continue. In many instances, the advantages of dismantling large companies are
clear cut. Parent companies which are able to focus more directly on core
businesses can improve operating performance substantially -- American Express'
progress with its core credit card business is a terrific example of this.
Spin-off companies generally have more focused, incentivized management --
AirTouch Communications Inc. (ATI - $30.625 - NYSE), spun off by Pacific
Telesis Group Inc. (PAC - $30.75 - NYSE), Allstate Corp. (ALL - $35.375 - NYSE)
spun off by Sears; and Eastman Chemicals Co. (EMN - $64.00 - NYSE), spun off by
Eastman Kodak Company (EK - $59.25 - NYSE) are good examples. By selling
underperforming divisions, companies can raise capital to enhance the growth of
their more profitable existing operations -- see Tenneco as an illustration.
And, by shedding the ugly duckling in an otherwise attractive flock of
businesses, companies like American Brands, Inc. (AMB - $42.25 - NYSE), which
stripped its low multiple life insurance business, receive a better appraisal
from investors.
As we predicted at the outset of 1995, our portfolio has experienced
some of the benefits of egg breaking in portfolio holdings such as AirTouch,
Allen Group Inc. (ALN - $36.25 - NYSE), American Express, American Brands and
Tenneco. In addition, the portfolio has many other potential Humpty Dumptys.
Hilton Hotels Corporation (HLT - $63.875 - NYSE), whose announced separation of
its hotel and gambling businesses has been delayed, should be split in early
1996, possibly foreshadowing the sale of one or both of the businesses.
General Motors Corporation (GM - $46.875 - NYSE), whose parts we believe could
be worth as much as $100 per share on an independent basis, is a prime
restructuring candidate, as is Ford Motor Co. (F - $31.125 - NYSE). Johnson
Controls, Inc. (JCI - $63.25 - NYSE) has several parts which are more valuable
as stand alone operations. Time Warner Inc. (TWX - $39.75 - NYSE) has
expressed a desire to separate its cable television operations from its content
and creativity businesses. The proposed combination with Turner Broadcasting
System, Inc. (TBSA - $27.625 - ASE) will delay progress on this front, but we
believe it is a goal that will eventually be accomplished.
Our conclusion is that investors who focus on Humpty Dumptys won't get
egg on their faces.
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THE MEDIA MATING GAME
In 1993, we said that Viacom Inc.'s (VIA - $49.75 - ASE; VIA'B - $49.75
- - ASE) acquisition of Paramount was only the beginning of the media mating
game. With the Disney/Cap Cities, Westinghouse/CBS and Time Warner/Turner
Broadcasting matches, the activity has intensified. Creativity and content
companies need to ensure distribution of their products. Distribution
companies need to guarantee the supply of programming. Everyone is scrambling
for a suitable partner.
Who's attending the party? General Electric Company's (GE - $63.75 -
NYSE) NBC and Seagram Company Ltd.'s (VO - $35.875 - NYSE) MCA are standing
alone by the punch bowl. News Corporation Limited's (NWS - $22.00 - NYSE)
Rupert Murdoch is prowling around the dance floor looking for more partners.
Viacom's Sumner Redstone is resting after his torrid tango with Paramount, but
may have a few more dances in him. Tele-Communications, Inc./Liberty Media
Group's (LBTYA - $26.75 - NASDAQ) John Malone is chaperoning a group of
attractive little cable networks. He appears willing to let Time Warner dance
with his Turner stake. He may be looking for a replacement for his stable or
perhaps encouraging some of his other wallflowers to dance.
The party won't be over for a while and it's hard to predict who will
ultimately be going home together. However, it's fun to be there with
portfolio holdings like Viacom, Time Warner, Seagram, Liberty Media,
International Family Entertainment, Inc. (FAM - $19.00 - NYSE), Gaylord
Entertainment Company (GET - $27.125 - NYSE), Chris-Craft Industries, Inc. (CCN
- - $43.50 - NYSE) and CCN's kissing cousins BHC Communications, Inc. (BHC -
$90.75 - ASE) and United Television, Inc. (UTVI - $89.25 - NASDAQ).
TIME WARNER/TURNER BROADCASTING
At the time of this writing, the proposed merger between Time Warner
and Turner Broadcasting still faces many hurdles. Time Warner partner US WEST,
Inc. (USW - $47.125 - NYSE) is threatening legal action to block the merger.
The government is raising anti-trust issues. Liberty Media's John Malone still
has effective veto power over the deal. Assuming these obstacles can be
overcome, what would the combined companies offer investors? In our opinion --
a global media entity with outstanding long-term growth potential.
Investors' immediate reaction to the deal has been negative, with Time
Warner stock dropping nearly 10% following the bid for Turner. We know the
problems: perceived near-term dilution for Time Warner shareholders; the
potential for internal management strife; and quite possibly a long delay in
Time Warner's plan to separate its cable television and content businesses.
Now, let's look at the positives: an unrivaled film library to feed
into expanding distribution systems here and abroad; the marriage of the most
consistently profitable filmed entertainment producer and market share leader
in recorded music with the most creative cable network package in the world; a
combined company with sufficient financial muscle to take its products to the
far corners of the globe. Ask yourself, "What American products travel well?"
In addition to Coca-Cola and blue jeans, the answer is news, sports, movies,
and music. The combined Time Warner/Turner Broadcasting has it all.
12
<PAGE>
LET'S MAKE A DEAL
We have talked at length in our last several shareholder letters about
increasing merger and acquisition activity and its likely impact on our
portfolio. Indeed, we believe we were the first on Wall Street to proclaim the
beginning of the third wave of takeovers since World War II. We pointed this
out following GE's takeover attempt of Kemper in early 1994. At the beginning
of this year, we opined that investors in the three Bs -- banks, brokers, and
broadcasters -- would likely get hit with takeovers. We don't own bank stocks
for the simple reason that we don't feel we have a competitive research
advantage. We have been looking carefully at brokerage firms, some of which
may find their way into our portfolio in the quarters ahead.
We have had major and positive direct hits in the broadcast group, with
Multimedia, Inc. (MMEDC - $43.50 - NASDAQ) and Outlet Communications being
taken over at heady premiums to our purchase prices. We have benefited even
more by the mortar fire around us. Media General, Inc. (MEG'A - $35.75 - ASE)
and the Chris-Craft/BHC/United Television troika have been terrific performers.
If the telecommunications bill currently in front of Congress is passed
relatively intact, broadcast companies will be able to expand their empires.
If deals continue to be done at the kind of multiples to cash flow we have
seen, public share prices in these companies will continue to grow.
LET'S TALK STOCKS
American Express Company (AXP - $44.375 - NYSE), founded in 1850, is a
diversified travel and financial services company operating in 160 countries
around the world. The company is best known for its American Express charge
card and travel-related services. Its other important operation is
Minneapolis-based American Express Financial Advisors, Inc. (formerly IDS
Financial Services) which sells financial products ranging from mutual funds to
annuities. Harvey Golub, Chairman and CEO, has refocused AXP on its core
charge card and investment management businesses. Shearson, Executive Life and
Bankers Life have been sold, while Lehman Brothers has been spun off.
Discussions regarding a possible sale of its international banking subsidiary,
American Express Bank, have been confirmed. We believe the company has been
repositioned to enjoy double digit earnings growth over the balance of this
decade.
Chris-Craft Industries, Inc. (CCN - $43.50 - NYSE) is primarily a television
broadcaster through its 73% ownership of BHC Communications. BHC owns and
operates independent TV stations in Los Angeles (KCOP) and Portland (KPTV).
BHC also controls over 50% of United Television, Inc., which operates an NBC
affiliate, an ABC affiliate and three independent stations. BHC has entered
into a partnership agreement with Paramount Communications, Inc. to launch a
new fifth television network called United Paramount Television Network (UPN).
CCN, with about $1.5 billion in marketable securities and cash, is strongly
positioned to expand its operations. CCNis the eighth-largest TVstation group
owner in the U.S. and covers almost 20% of TV households.
General Motors Corporation (GM - $46.875 - NYSE), the world's largest auto
manufacturer, is materially undervalued. Last year, its North American
operations were profitable for the first time in four years and international
profits continue to grow. With Jack Smith at the helm, GM is improving the
style and quality of its cars, rationalizing its production processes, reducing
capacity and greatly reducing its costs. GM was the only "Big Three" member
to report a gain in the second quarter. Peak earnings power exceeds $10 per
share. A reorganization of Ford and GM along the lines of ITT and AT&T becomes
an increasingly speculative possibility assuming the shares continue at current
levels.
13
<PAGE>
GTE Corporation (GTE - $39.25 - NYSE) owns the largest non-Bell
telecommunications system. GTE is the fourth-largest publicly-owned
telecommunications company in the world and is the largest domestic local
telephone company, serving 22 million access lines in 30 states. GTE is the
nation's second largest provider of cellular services, with a controlling
interest in metropolitan and rural service areas having over 50 million POPS.
Roughly 25% of earnings are derived from non-regulated businesses growing at
more than 25% per year.
Media General, Inc. (MEG'A - $35.75 - ASE) is a Richmond, VA-based company
publishing daily newspapers in Richmond, Tampa, and Winston-Salem. Media
General owns three network television stations in Tampa, Charleston, and
Jacksonville and a cable television franchise in Fairfax County, VA. With the
recovery in the operations and values of media properties, and a pickup in
transactions in the cable arena, this company is poised for a significant
rebound.
Pittway Corporation (PRY'A - $62.25 - ASE; PRY - $62.00 - ASE) has undergone
significant changes over the past few years, selling or spinning off businesses
representing half its sales volume and over 60% of its income. The company
has two remaining core businesses: manufacturing and distributing professional
burglar and fire alarm equipment and publishing trade magazines and
directories. The Ademco Security Group, approximately 75% of revenues, is
growing rapidly. Penton Publishing appears to be emerging from three years of
difficult operating conditions as operating margins are now showing
improvement. Pittway is also involved in real estate and other promising
ventures, including a 45% interest in a leading manufacturer of encryption
equipment and a 5% equity interest in Hubbard, a direct to the home (DTH)
satellite broadcast company.
Sprint Corporation (FON - $35.00 - NYSE) is the third largest long-distance
carrier and the second largest independent local telephone company in the U.S.
The company has announced a spin-off of its cellular unit, which should take
place in the first quarter of 1996. The estimated trading value of the
spin-off is $9 to $10 per FON share. After the spin-off, the remaining long
distance/local telco shares should trade close to FON's current market price,
indicating shareholders are getting the cellular spin-off for "free". Sprint
has positioned itself on a global basis through a joint venture with France
Telecom/Deutsche Telekom, which will purchase a 20% stake in Sprint (excluding
the cellular unit) for $3.5 billion. Our interest in Sprint stems from its
promising national cable/telephony and PCS/wireless joint venture with three
major cable operators: Tele-Communications, Inc., Comcast and Cox. We consider
FON an interesting value with the risks associated with new entrants in the
long distance business offset by the cable/telephony venture.
Time Warner Inc. (TWX - $39.75 - NYSE), in a bold and brilliant tactic,
acquired Turner Broadcasting Systems Inc. for $7.5 billion. The acquisition
makes TWX the largest diversified media and publishing company in the world and
adds a wealth of programming to a company already rich in entertainment
content. Time Warner is restructuring into two general areas: copyright and
creativity, which includes publishing, music and filmed entertainment, and
distribution, which is mostly cable. Under the aegis of Gerald M. Levin,
investors can expect significant returns over the rest of the decade.
United Television, Inc. (UTVI - $89.25 - NASDAQ) is a television broadcasting
company which owns and operates five television stations: one ABC, one NBC
and three UPN affiliates. Its stations cover approximately 6% of the U.S.
population. UTVI is a 56%-owned subsidiary of BHC Communications. Strong
advertising demand, prospects
14
<PAGE>
for favorable regulatory changes in the industry and corporate cost controls
present a promising outlook for the company. Our present PMV estimate is $96
per share, $24 of which is cash. UTVI's PMV is expected to approach $200
by the year 2000.
Viacom Inc. (VIA - $49.75 - ASE; VIA'B - $49.75 - ASE), long a major provider of
entertainment "content", has evolved into one of the world's dominant media
companies. Following its recent acquisitions of Paramount Communications
and Blockbuster Entertainment, the company is now selling non-core assets to
reduce debt and focusing on the global expansion of its media franchises.
Viacom is well-positioned in music (notably MTV) and cable networks such as
Nickelodeon, USA (50% interest ) and the Sci-Fi Channel.
IN CONCLUSION
The kind of broadly rising market we have experienced in the first three
quarters of 1995 has been a tide lifting almost all boats. As is evidenced by
the terrific returns delivered by index funds in every capitalization sector of
the market, one has not needed to be an astute stock picker to have made very
good money.
Going forward, we doubt the market will be as kind to indexers and other
non-selective investors. There are pockets of value which offer good investment
opportunity in a less robust market and places of refuge should the market tide
turn. We believe our focus on value will help us to move forward even in a less
generous, broad market environment.
Thank you for your appreciation of our efforts to preserve and enhance
the assets you have entrusted to us.
Sincerely,
MARIO J. GABELLI, CFA
President and Chief Investment Officer
October 16, 1995
__________________________________________________________________
TOP TEN HOLDINGS
SEPTEMBER 30, 1995
Time Warner Inc. Sprint Corporation
Chris-Craft Industries, Inc. Pittway Corporation
United Television, Inc. General Motors Corporation
Viacom Inc. GTE Corporation
American Express Company Media General, Inc.
___________________________________________________________________
15
<PAGE>
<TABLE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
QUARTER ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<CAPTION>
OWNERSHIP AT
SEPTEMBER 30,
SHARES 1995
----------- -------------
<S> <C> <C>
NET PURCHASES
COMMON STOCKS
AMETEK, Inc. .......... 11,000 181,000
Amgen Inc. (a)......... 10,000 20,000
AMP Inc. (b)........... 3,360 --
Archer Daniels Midland
Co. (c).............. 30,000 30,000
Atlantic Richfield
Company.............. 2,000 35,000
BC TELECOM Inc. ....... 10,000 100,000
BHI Corporation (d).... 11 11
Boeing Co. ............ 20,000 20,000
Cablevision Systems
Corporation,
Class A.............. 20,000 20,000
CANAL+, Sponsored
ADR.................. 13,000 35,000
Capital Guaranty
Corporation.......... 20,000 20,000
Carter-Wallace,
Inc. ................ 15,000 175,000
CBS Inc. .............. 4,500 4,500
Central European Equity
Fund Inc. (e)........ 59,000 59,000
Chevron Corporation.... 5,000 10,000
Eastman Kodak
Company.............. 35,000 35,000
Fomento Economico
Mexicano SA, ADR..... 50,000 200,000
Gaylord Entertainment
Company, Class A..... 6,000 35,425
GEICO Corporation...... 112,200 112,200
Grupo Televisa S.A.,
GDR.................. 30,000 80,000
Halliburton Company.... 10,000 10,000
Handy & Harman......... 104,500 225,000
Havas, Sponsored ADR... 4,000 132,000
Hilton Hotels
Corporation.......... 20,000 100,000
Hitachi, Ltd., ADR..... 1,000 2,000
Hong Kong
Telecommunications
Ltd., Sponsored
ADR.................. 5,000 20,000
H&R Block Inc. ........ 25,000 25,000
International Family
Entertainment, Inc.,
Class B.............. 22,000 103,036
Keystone International,
Inc. ................ 4,000 27,000
Liberty Corporation.... 10,000 50,000
LIN Broadcasting
Corporation.......... 25,000 125,000
LVHM Moet Hennessy
Louis Vuitton,
Sponsored ADR........ 7,000 10,000
Matsushita Electric
Industrial Co. Ltd.,
ADR.................. 500 1,500
Meredith Corporation... 29,000 55,000
Midland Company........ 1,000 34,000
Multimedia, Inc.,
New.................. 25,000 200,000
National Presto
Industries, Inc. .... 1,100 7,500
Oriental Press Group
ORD.................. 50,000 299,000
Pacific Telesis Group
Inc. ................ 20,000 50,000
Pegasus Gold Inc. ..... 5,000 60,000
Pfizer Inc. (a)........ 10,000 20,000
Quaker Oats Company.... 20,000 80,000
Quaker State
Corporation.......... 1,900 12,000
Shaw Cable Systems,
Ltd., Class B,
Conv. ............... 5,000 10,000
Sony Corporation....... 18,000 20,000
STET-Societa
Finanziaria
Telefonica SpA,
Sponsored ADR (f).... 296,100 296,100
Tele-Communications,
Inc./Liberty Media
Group, Class A (g)... 350,000 350,000
Telecom Italia Mobile
SpA (h).............. 3,500,000 3,500,000
Telefonica de Argentina
S.A., ADR, Class B... 2,500 10,000
Telefonos De Mexico SA,
Sponsored ADR........ 2,000 15,000
Time Warner Inc. ...... 10,000 270,000
Todd-AO Corporation,
Class A (i).......... 6,107 67,179
Tootsie Roll
Industries, Inc.
(a).................. 11,000 20,000
Wrigley (Wm.) Jr.
Company.............. 14,000 80,000
</TABLE>
16
<PAGE>
<TABLE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES (CONTINUED)
QUARTER ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<CAPTION>
SHARES/ OWNERSHIP AT
PRINCIPAL SEPTEMBER 30,
AMOUNT 1995
----------- -------------
<S> <C> <C>
NET PURCHASES (CONTINUED)
COMMON STOCK
WARRANTS AND RIGHTS
Royce Value Trust,
Inc., Rights, expires
11/03/1995 (j)......... 32,769 32,769
CORPORATE BONDS
Time Warner Inc.,
Deb., 8.110% due
08/15/2006 (k)......... $ 2,400,000 $ 2,400,000
Time Warner Inc.,
Deb., 8.180% due
08/15/2007 (k)......... $ 2,400,000 $ 2,400,000
Time Warner Inc.,
Floating Rate
Note, 6.835% due
08/15/2000 (k)......... $ 2,000,000 $ 2,000,000
Time Warner Inc.,
Note, 7.975% due
08/15/2004 (k)......... $ 1,200,000 $ 1,200,000
NET SALES
COMMON STOCKS
AirTouch Communications
Inc. .................. 5,000 245,000
Allen Group Inc. ........ 5,000 105,000
American Brands,
Inc. .................. 5,000 215,000
American Express
Company................ 10,000 560,000
AMP Inc. ................ 3,360 --
AptarGroup, Inc. ........ 15,000 334,000
AT&T Corp. .............. 38,000 130,000
Belize Holdings
Inc. (d)............... 11 --
Black & Decker
Corporation............ 20,000 --
Church & Dwight Co.,
Inc. .................. 2,000 68,000
Coca-Cola Enterprises
Inc. .................. 73,000 157,000
Compania Telefonos de
Chile SA, Sponsored
ADR.................... 1,600 --
Darden Restaurants
Inc. .................. 5,000 --
Deutsche Bank AG,
Sponsored ADR.......... 5,000 150,000
Eskimo Pie
Corporation............ 15,000 15,000
Financial Security
Assurance Holdings
Ltd. .................. 3,000 12,000
Frontier Corporation..... 5,000 --
Future Germany Fund
(e).................... 61,123 --
Homestake Mining
Company................ 13,500 --
IDEX Corporation......... 29,200 370,800
ITT Corporation.......... 5,000 100,000
Johnson & Johnson........ 62,000 105,000
Lafarge Corporation...... 35,000 --
Lawter International,
Inc. .................. 10,000 20,000
LIN Television
Corporation............ 12,000 3,000
Lotus Development
Corporation (l)........ 125,500 --
M/A-Com, Inc. (b)........ 12,000 --
Marion Merrell Dow Inc.
(m).................... 103,000 --
Mark IV Industries,
Inc. .................. 8,068 170,000
Martin Marietta
Materials, Inc. ....... 2,500 10,000
Media General, Inc.,
Class A................ 5,000 470,000
Modine Manufacturing
Company................ 3,000 312,000
Morgan Grenfell
SMALLCap Fund
Inc. .................. 7,000 --
Motorola, Inc. .......... 8,000 12,000
Navistar International
Corporation............ 20,000 380,000
Neiman Marcus Group,
Inc. .................. 19,000 414,000
New Germany Fund......... 1,326 70,000
Outboard Marine
Corp. ................. 15,000 15,000
Pep Boys - Manny, Moe &
Jack................... 5,000 25,000
PepsiCo, Inc. ........... 50,000 100,000
Philip Morris Companies
Inc. .................. 20,000 --
Philips Electronics
N.V., New York......... 21,000 99,000
</TABLE>
17
<PAGE>
<TABLE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES (CONTINUED)
QUARTER ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<CAPTION>
OWNERSHIP AT
SEPTEMBER 30,
SHARES 1995
----------- -------------
<S> <C> <C>
NET SALES (CONTINUED)
COMMON STOCKS (CONTINUED)
Pittway Corporation,
Class A................ 72,000 320,000
Procter & Gamble
Company................ 60,000 --
Ralston Purina Group..... 4,075 130,000
Royal PTT Nederland NV,
Sponsored ADR,
144A................... 25,000 --
Salomon Inc. ............ 20,000 --
Sandoz Ltd., Sponsored
ADR.................... 2,000 54,000
Sequa Corporation,
Class B................ 2,000 42,000
Sony Music
Entertainment ORD...... 13,650 --
Sotheby's Holdings,
Inc., Class A.......... 5,000 --
Sprint Corporation....... 25,500 640,000
STET-Societa
Finanziaria
Telefonica p.a. ORD
(f).................... 3,000,000 --
Strawbridge & Clothier,
Series A............... 22,000 --
Telecom Corporation of
New Zealand Limited,
Sponsored ADR.......... 1,000 --
Telecom Italia SpA,
ORD.................... 700,000 2,500,000
Telecomunicacoes
Brasileiras SA
(Telebras), Sponsored
ADR.................... 5,927 254,073
Teleglobe Inc. .......... 5,500 --
U.S. Trust Corporation
(n).................... 2,000 --
Varity Corporation,
New.................... 22,000 218,000
Viacom Inc., Class B..... 45,000 200,000
PREFERRED STOCK
Sprint Corporation,
8.250%, Conv.
Pfd. .................. 5,000 22,000
COMMON STOCK
WARRANTS AND RIGHTS
Viacom Inc., Contingent
Value Rights, expires
07/07/1995............. 45,000 --
CORPORATE BONDS
Time Warner Inc., Conv.
Sub. Deb. (o).......... $15,809,150 $19,190,850
Time Warner Inc., Reset
Note (k)............... $20,500,000 --
<FN>
- ---------------
(a) 2 for 1 stock split.
(b) Merger -- 0.28 shares of AMP Inc. for each share of M/A-Com, Inc.
(c) 500 shares received as a stock dividend.
(d) Name change from Belize Holdings Inc. to BHI Corporation.
(e) Name change from Future Germany Fund to Central European Equity Fund Inc.
(f) Conversion of shares -- 1 share of STET-Societa Finanziaria Telefonica SpA, Sponsored ADR for every 10
shares of STET-Societa Finanziaria Telefonica p.a. ORD.
(g) Spinoff -- 0.25 shares of Tele-Communications, Inc./Liberty Media Group, Class A for each share of
Tele-Communications, Inc., Class A.
(h) Spinoff -- 1 share of Telecom Italia Mobile SpA for each share of Telecom Italia SpA, ORD.
(i) Stock dividend.
(j) Rights distribution -- 1 Right for each share of Royce Value Trust, Inc.
(k) Mandatory exchange -- $250 principal amount of Time Warner Inc., Floating Rate Note, due 08/15/2000 for each 1,000
principal amount of Time Warner Inc., Reset Note.
-- $300 principal amount of Time Warner Inc., Deb., 8.110% due 08/15/2006 for each 1,000
principal amount of Time Warner Inc., Reset Note.
-- $300 principal amount of Time Warner Inc., Deb., 8.180% due 08/15/2007 for each 1,000
principal amount of Time Warner Inc., Reset Note.
-- $150 principal amount of Time Warner Inc., Note, 7.975% due 08/15/2004 for each 1,000
principal amount of Time Warner Inc., Reset Note.
(l) Purchase offer @ $64.00 per share.
(m) Cash Merger @ $25.80 per share.
(n) Redemption @ $1.44375 per share.
(o) Redemption @ $104.375 per 1,000 principal amount.
</TABLE>
18
<PAGE>
<TABLE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995 (UNAUDITED)
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS -- 85.8%
INDUSTRIAL EQUIPMENT AND SUPPLIES -- 12.6%
181,000 AMETEK, Inc. .......................................................... $ 3,099,625
180,000 Ampco-Pittsburgh Corporation........................................... 1,867,500
334,000 AptarGroup, Inc. ...................................................... 11,063,750
7,000 Caterpillar Inc. ...................................................... 398,125
66,000 CLARCOR Inc. .......................................................... 1,551,000
71,925 Crane Co. ............................................................. 2,481,413
125,000 CTS Corporation........................................................ 3,875,000
124,000 Deere & Company........................................................ 10,090,500
230,000 Donaldson Company, Inc. ............................................... 5,663,750
19,125 Duriron Company, Inc. ................................................. 559,407
60,000 Gerber Scientific, Inc. ............................................... 1,072,500
240,000 Greif Bros. Corporation, Class A....................................... 5,970,000
3,400 Greif Bros. Corporation, Class B+ (a).................................. 84,575
40,000 Guardsman Products, Inc. .............................................. 530,000
370,800 IDEX Corporation....................................................... 13,256,100
27,000 Keystone International, Inc. .......................................... 580,500
50,000 Lufkin Industries, Inc. ............................................... 1,175,000
40,000 Manitowoc Company, Inc. ............................................... 1,185,000
170,000 Mark IV Industries, Inc. .............................................. 3,782,500
10,000 Martin Marietta Materials, Inc. ....................................... 196,250
380,000 Navistar International Corporation+.................................... 4,560,000
130,000 Nortek, Inc.+.......................................................... 1,137,500
5,000 Nortek, Inc., Special Common+ (a)...................................... 43,750
10,000 PACCAR Inc. ........................................................... 467,500
45,000 Pittway Corporation.................................................... 2,790,000
320,000 Pittway Corporation, Class A........................................... 19,920,000
2,000 Scientific-Atlanta, Inc. .............................................. 33,750
32,000 Sequa Corporation, Class A+............................................ 856,000
42,000 Sequa Corporation, Class B+............................................ 1,357,125
84,000 SPS Technologies, Inc.+................................................ 3,276,000
100,000 St. Joe Paper Company.................................................. 6,362,500
218,000 Varity Corporation, New+............................................... 9,701,000
20,000 Watts Industries, Inc., Class A........................................ 497,500
------------
119,485,120
------------
TELECOMMUNICATIONS -- 11.0%
130,000 AT&T Corp. ............................................................ 8,547,500
100,000 BC TELECOM Inc. ....................................................... 1,748,187
80,000 BCE Inc. .............................................................. 2,670,000
11 BHI Corporation........................................................ 174
7,000 British Telecommunications plc, Sponsored ADR.......................... 438,375
50,000 Cable & Wireless plc, Sponsored ADR.................................... 981,250
35,000 Cincinnati Bell Inc. .................................................. 945,000
141,000 C-TEC Corporation+..................................................... 3,278,250
30,000 C-TEC Corporation, Class B+............................................ 682,500
440,000 GTE Corporation........................................................ 17,270,000
20,000 Hong Kong Telecommunications Ltd., Sponsored ADR....................... 365,000
1,000 Hungarian Telephone & Cable Corp.+..................................... 16,750
1,020,000 Jamaica Telephone Ltd. ORD+............................................ 84,997
40,000 Lincoln Telecommunications Company..................................... 750,000
10,000 Maritime Telegraph and Telephone Company, Limited...................... 142,273
</TABLE>
19
<PAGE>
<TABLE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED)
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
12,000 Motorola, Inc. ........................................................ $ 916,500
50,000 NYNEX Corporation...................................................... 2,387,500
50,000 Pacific Telesis Group Inc. ............................................ 1,537,500
190,000 SBC Communications Inc. ............................................... 10,450,000
10,000 Singapore Telecommunications Limited ORD............................... 19,745
640,000 Sprint Corporation..................................................... 22,400,000
296,100 STET-Societa Finanziaria Telefonica SpA, Sponsored ADR................. 9,142,088
4,000 Telecom Argentina Stet-France Telecom S.A., Sponsored ADR.............. 167,000
2,500,000 Telecom Italia SpA, ORD................................................ 4,131,657
254,073 Telecomunicacoes Brasileiras SA (Telebras), Sponsored ADR.............. 11,941,431
5,927 Telecomunicacoes Brasileiras SA (Telebras), Sponsored ADR, 144A (c)+... 278,569
10,000 Telefonica de Argentina S.A., ADR, Class B............................. 238,750
55,000 Telefonica de Espana, Sponsored ADR.................................... 2,275,625
15,000 Telefonos De Mexico SA, Sponsored ADR.................................. 476,250
------------
104,282,871
------------
BROADCASTING -- 10.8%
135,000 BHC Communications, Inc., Class A...................................... 12,251,250
70,000 Capital Cities/ABC, Inc. .............................................. 8,233,750
4,500 CBS Inc. .............................................................. 359,438
316,313 Chris-Craft Industries, Inc. .......................................... 13,759,616
511,448 Chris-Craft Industries, Inc., Class B (a).............................. 22,247,988
80,000 Grupo Televisa S.A., GDR............................................... 1,600,000
132,000 Havas, Sponsored ADR................................................... 2,458,500
50,000 Liberty Corporation.................................................... 1,625,000
3,000 LIN Television Corporation+............................................ 93,000
160,000 Outlet Communications, Inc., Class A+.................................. 7,400,000
100,000 Television Broadcasting Ltd. ORD+...................................... 402,241
360,000 United Television, Inc. ............................................... 32,130,000
------------
102,560,783
------------
FINANCIAL SERVICES -- 7.2%
560,000 American Express Company............................................... 24,850,000
24,000 Banco Santander SA, ADR................................................ 999,000
260 Berkshire Hathaway Inc.+............................................... 7,644,000
30,000 Berliner Bank Aktiengesellschaft....................................... 8,282,885
20,000 Capital Guaranty Corporation........................................... 445,000
18,000 Commerzbank AG, Sponsored ADR.......................................... 819,000
150,000 Deutsche Bank AG, Sponsored ADR........................................ 7,162,500
12,000 Financial Security Assurance Holdings Ltd. ............................ 304,500
112,200 GEICO Corporation...................................................... 7,657,650
25,000 Hibernia Corporation................................................... 253,125
25,000 H&R Block Inc. ........................................................ 950,000
100,000 Lehman Brothers Holdings Inc. ......................................... 2,312,500
34,000 Midland Company........................................................ 1,581,000
12,000 Morgan (J.P.) & Co. Incorporated....................................... 928,500
60,000 Riggs National Corporation+............................................ 772,500
10,000 SunTrust Banks, Inc. .................................................. 661,250
50,000 Unitrin, Inc. ......................................................... 2,350,000
------------
67,973,410
------------
</TABLE>
20
<PAGE>
<TABLE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED)
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
WIRELESS COMMUNICATIONS -- 6.2%
245,000 AirTouch Communications Inc.+.......................................... $ 7,503,125
105,000 Allen Group Inc. ...................................................... 3,806,250
67,500 Associated Group, Inc., Class A+....................................... 1,400,625
67,500 Associated Group, Inc., Class B+....................................... 1,400,625
15,000 BCE Mobile Communications Inc.+........................................ 463,084
175,000 Century Telephone Enterprises, Inc. ................................... 5,315,625
100,000 COMSAT Corporation..................................................... 2,250,000
125,000 LIN Broadcasting Corporation........................................... 16,171,875
19,600 NEXTEL Communications, Inc., Class A+.................................. 330,750
41,000 Securicor Group plc ORD................................................ 1,117,102
4,000 Securicor Group plc, Class A ORD....................................... 68,867
3,500,000 Telecom Italia Mobile SpA.............................................. 5,838,581
322,000 Telephone and Data Systems, Inc. ...................................... 13,524,000
------------
59,190,509
------------
CABLE -- 5.3%
20,000 Cablevision Systems Corporation, Class A+.............................. 1,192,500
35,000 CANAL+, Sponsored ADR.................................................. 1,190,000
65,000 Comcast Corporation, Class A........................................... 1,291,875
68,125 Comcast Corporation, Class A Special................................... 1,362,500
103,036 International Family Entertainment, Inc., Class B+..................... 1,957,684
470,000 Media General, Inc., Class A........................................... 16,802,500
200,000 Multimedia, Inc., New+................................................. 8,700,000
10,000 Shaw Cable Systems, Ltd., Class B, Conv. .............................. 53,934
40,000 Shaw Communications Inc., Class B, Conv. .............................. 215,782
462,125 Tele-Communications, Inc., Class A+.................................... 8,087,188
350,000 Tele-Communications, Inc./Liberty Media Group, Class A................. 9,362,500
------------
50,216,463
------------
ENTERTAINMENT -- 4.5%
29,000 Bay Meadows Operating Company.......................................... 467,625
35,425 Gaylord Entertainment Company, Class A................................. 960,904
50,000 GC Companies, Inc.+.................................................... 1,606,250
10,000 GTECH Holdings Corporation+............................................ 301,250
12,000 PolyGram NV............................................................ 783,000
120,000 THORN EMI plc, Sponsored ADR........................................... 2,805,000
270,000 Time Warner Inc. ...................................................... 10,732,500
67,179 Todd-AO Corporation, Class A........................................... 554,227
290,000 Viacom Inc., Class A+.................................................. 14,427,500
200,000 Viacom Inc., Class B+.................................................. 9,950,000
------------
42,588,256
------------
DIVERSIFIED INDUSTRIAL -- 3.7%
40,000 GATX Corporation....................................................... 2,070,000
100,000 ITT Corporation........................................................ 12,400,000
375,000 Lamson & Sessions Co.+................................................. 2,343,750
20,000 Lawter International, Inc. ............................................ 225,000
110,000 Minnesota Mining and Manufacturing Company............................. 6,215,000
115,000 National Service Industries, Inc. ..................................... 3,363,750
100,000 Tenneco Inc. .......................................................... 4,625,000
</TABLE>
21
<PAGE>
<TABLE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED)
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
DIVERSIFIED INDUSTRIAL (CONTINUED)
43,000 Thomas Industries Inc. ................................................ $ 865,375
90,000 Trinity Industries, Inc. .............................................. 2,790,000
100,000 Tyler Corporation+..................................................... 275,000
------------
35,172,875
------------
FOOD AND BEVERAGE -- 3.6%
12,540 Brau und Brunnen....................................................... 2,202,849
30,000 Campbell Soup Company.................................................. 1,507,500
157,000 Coca-Cola Enterprises Inc. ............................................ 3,866,125
70,000 Dole Food Company, Inc. ............................................... 2,423,750
15,000 Eskimo Pie Corporation................................................. 281,250
200,000 Fomento Economico Mexicano SA, ADR..................................... 500,000
34,000 General Mills, Inc. ................................................... 1,895,500
20,000 Guinness plc, Sponsored ADR............................................ 813,000
45,000 Kellogg Company........................................................ 3,256,875
10,000 LVHM Moet Hennessy Louis Vuitton, Sponsored ADR........................ 377,500
100,000 PepsiCo, Inc. ......................................................... 5,100,000
80,000 Quaker Oats Company.................................................... 2,650,000
40,000 Ralcorp Holdings, Inc.+................................................ 945,000
100,000 Seagram Company Ltd. .................................................. 3,587,500
20,000 Tootsie Roll Industries, Inc. ......................................... 792,500
80,000 Wrigley (Wm.) Jr. Company.............................................. 4,040,000
------------
34,239,349
------------
CONSUMER PRODUCTS -- 3.6%
215,000 American Brands, Inc. ................................................. 9,083,750
50,000 Brunswick Corporation.................................................. 1,012,500
175,000 Carter-Wallace, Inc. .................................................. 2,187,500
68,000 Church & Dwight Co., Inc. ............................................. 1,479,000
23,000 Culbro Corporation+.................................................... 925,750
10,000 Duracell International Inc. ........................................... 448,750
35,000 Eastman Kodak Company.................................................. 2,073,750
30,000 First Brands Corporation............................................... 1,350,000
24,000 Gillette Company....................................................... 1,143,000
7,500 National Presto Industries, Inc. ...................................... 336,563
15,000 Outboard Marine Corp. ................................................. 322,500
26,715 Park-Ohio Industries, Inc.+............................................ 387,368
130,000 Ralston Purina Group................................................... 7,523,750
50,000 Scotts Company, Class A+............................................... 1,106,250
55,000 Tambrands Inc. ........................................................ 2,413,125
100,000 Whitman Corporation.................................................... 2,062,500
------------
33,856,056
------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.6%
34,000 APS Holding Corporation, Class A+...................................... 824,500
72,500 Echlin Inc. ........................................................... 2,591,875
150,000 Genuine Parts Company.................................................. 6,018,750
225,000 Handy & Harman......................................................... 3,375,000
110,000 Johnson Controls, Inc. ................................................ 6,957,500
312,000 Modine Manufacturing Company........................................... 8,892,000
25,000 Pep Boys - Manny, Moe & Jack........................................... 678,125
</TABLE>
22
<PAGE>
<TABLE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED)
<CAPTION>
MARKET
SHARES VALUE
------- ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
AUTOMOTIVE: PARTS AND ACCESSORIES (CONTINUED)
12,000 Quaker State Corporation............................................... $ 175,500
27,500 Republic Automotive Parts, Inc.+....................................... 397,032
40,000 SPX Corporation........................................................ 595,000
128,000 Standard Motor Products, Inc. ......................................... 2,432,000
30,000 Wynn's International, Inc. ............................................ 817,500
------------
33,754,782
------------
ENERGY -- 1.7%
34,000 Apache Corporation..................................................... 892,500
35,000 Atlantic Richfield Company............................................. 3,758,125
52,500 British Petroleum Company plc, ADR..................................... 4,718,438
115,000 Burlington Resources Inc. ............................................. 4,456,250
10,000 Chevron Corporation.................................................... 486,250
10,000 Halliburton Company.................................................... 417,500
300,000 Kaneb Services, Inc.+.................................................. 750,000
50,000 Santa Fe Energy Resources, Inc.+....................................... 475,000
------------
15,954,063
------------
AUTOMOTIVE -- 1.6%
300,000 General Motors Corporation............................................. 14,062,500
30,000 Harley Davidson, Inc. ................................................. 731,250
------------
14,793,750
------------
BUSINESS SERVICES -- 1.5%
125,000 International Business Machines Corporation............................ 11,796,875
125,000 Landauer, Inc. ........................................................ 2,375,000
------------
14,171,875
------------
PUBLISHING -- 1.5%
50,000 Independent Newspapers plc ORD......................................... 302,475
12,000 McGraw-Hill Companies, Inc. ........................................... 981,000
55,000 Meredith Corporation................................................... 2,186,250
190,002 New York Times Company, Class A........................................ 5,201,305
5,000 News Corporation Limited, ADS.......................................... 110,000
299,000 Oriental Press Group ORD............................................... 129,551
2,024 Pearson plc ORD........................................................ 18,950
46,000 Reader's Digest Association, Inc., Class B............................. 1,989,500
100,000 South China Morning Post Holdings ORD.................................. 59,172
230,000 Western Publishing Group, Inc.+........................................ 2,932,500
------------
13,910,703
------------
HEALTH CARE -- 1.4%
20,000 Amgen Inc.+............................................................ 997,500
6,500 Biogen, Inc.+.......................................................... 390,000
105,000 Johnson & Johnson...................................................... 7,783,125
24,000 Mallinckrodt Group, Inc. .............................................. 951,000
20,000 Pfizer Inc. ........................................................... 1,067,500
54,000 Sandoz Ltd., Sponsored ADR............................................. 2,052,000
------------
13,241,125
------------
</TABLE>
23
<PAGE>
<TABLE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED)
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
CONSUMER SERVICES -- 1.3%
450,000 Rollins, Inc. ......................................................... $ 11,025,000
20,000 Sierra On-Line, Inc.+.................................................. 785,000
------------
11,810,000
------------
RETAIL -- 0.9%
25,000 Crown Books Corporation+............................................... 250,000
60,000 Earl Scheib, Inc.+..................................................... 375,000
70,000 General Host Corporation............................................... 411,250
30,000 Lillian Vernon Corporation............................................. 401,250
414,000 Neiman Marcus Group, Inc. ............................................. 7,452,000
------------
8,889,500
------------
HOTELS/CASINOS -- 0.9%
100,000 Hilton Hotels Corporation.............................................. 6,387,500
50,000 Mirage Resorts, Incorporated+.......................................... 1,643,750
------------
8,031,250
------------
ELECTRONICS -- 0.7%
2,000 Hitachi, Ltd., ADR..................................................... 220,250
1,500 Matsushita Electric Industrial Co. Ltd., ADR........................... 228,000
1,500 NEC Corp., ADR......................................................... 104,813
99,000 Philips Electronics N.V., New York..................................... 4,826,250
20,000 Sony Corporation....................................................... 1,060,000
------------
6,439,313
------------
AIRLINES -- 0.6%
82,000 AMR Corporation+....................................................... 5,914,250
------------
SPECIALTY CHEMICAL -- 0.5%
39,000 E.I. du Pont de Nemours and Company.................................... 2,681,250
60,000 Ferro Corporation...................................................... 1,492,500
36,000 Pratt & Lambert, Inc................................................... 841,500
------------
5,015,250
------------
AVIATION: PARTS AND SERVICES -- 0.5%
20,000 Boeing Co.............................................................. 1,365,000
50,000 Curtiss-Wright Corporation............................................. 2,212,500
145,000 Hi-Shear Industries Inc.+.............................................. 1,051,250
------------
4,628,750
------------
COUNTRY/CLOSED-END FUNDS -- 0.3%
59,000 Central European Equity Fund Inc. ..................................... 944,000
70,000 Emerging Germany Fund Inc. ............................................ 507,500
25,000 France Growth Fund, Inc. .............................................. 243,750
34,250 Italy Fund, Inc. ...................................................... 265,438
70,000 New Germany Fund....................................................... 875,000
32,769 Royce Value Trust, Inc. ............................................... 442,382
------------
3,278,070
------------
</TABLE>
24
<PAGE>
<TABLE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED)
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
METALS AND MINING -- 0.2%
15,000 Barrick Gold Corporation............................................... $ 388,125
20,000 Newmont Gold Company................................................... 810,000
60,000 Pegasus Gold Inc.+..................................................... 817,500
10,000 Placer Dome Inc. ...................................................... 262,500
------------
2,278,125
------------
TRANSPORTATION -- 0.1%
11,000 Florida East Coast Industries, Inc. ................................... 789,250
------------
AGRICULTURE -- 0.0%
30,000 Archer Daniels Midland Co.............................................. 461,250
------------
TOTAL COMMON STOCKS..................................................................... 812,926,998
------------
PREFERRED STOCKS -- 0.9%
AUTOMOTIVE -- 0.5%
75,000 General Motors Corporation, Depositary Shares, Pfd., $3.25............. 4,865,625
------------
CONSUMER PRODUCTS -- 0.2%
34,000 Fieldcrest Cannon, Inc., 6.000%, Series A, Conv. Pfd., 144A (c)........ 1,666,000
------------
TELECOMMUNICATIONS -- 0.1%
22,000 Sprint Corporation, 8.250%, Conv. Pfd. ................................ 783,750
2,130,723 Telecomunicacoes de Sao Paulo SA (Telesp), Pfd., Registered............ 348,768
------------
1,132,518
------------
CABLE -- 0.1%
8,000 Tele-Communications, Inc., Jr. Pfd., Class B, Ex., 6.000%.............. 528,000
------------
DIVERSIFIED INDUSTRIAL -- 0.0%
3,500 GATX Corporation, 3.875%, Conv. Pfd. .................................. 211,750
------------
TOTAL PREFERRED STOCKS.................................................................. 8,403,893
------------
COMMON STOCK WARRANTS AND RIGHTS -- 0.0%
COUNTY/CLOSED END-FUNDS -- 0.0%
32,769 Royce Value Trust, Inc., Rights, expires 11/03/1995+................... 0
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- ---------------
<C> <S> <C>
CORPORATE BONDS -- 3.5%
ENTERTAINMENT -- 3.1%
$19,190,850 Time Warner Inc., Conv. Sub. Deb., 8.750% due 01/10/2015............... 20,054,439
2,400,000 Time Warner Inc., Deb., 8.110% due 08/15/2006.......................... 2,469,000
2,400,000 Time Warner Inc., Deb., 8.180% due 08/15/2007.......................... 2,487,000
2,000,000 Time Warner Inc., Floating Rate Note, 6.835% due 08/15/2000............ 2,012,500
1,200,000 Time Warner Inc., Note, 7.975% due 08/15/2004.......................... 1,227,000
1,575,000 Viacom Inc., Ex. Sub. Deb., 8.000% due 07/07/2006...................... 1,554,329
------------
29,804,268
------------
INDUSTRIAL EQUIPMENT AND SUPPLIES -- 0.3%
3,300,000 Nortek, Inc., Sr. Sub. Note, 9.875% due 03/01/2004..................... 2,970,000
------------
</TABLE>
25
<PAGE>
<TABLE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995 (UNAUDITED)
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
<C> <S> <C>
CORPORATE BONDS (CONTINUED)
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1%
$500,000 GenCorp Inc., Conv. Sub. Deb., 8.000% due 08/01/2002................... $ 493,750
------------
PUBLISHING -- 0.0%
200,000 News American Holdings Incorporated, Gtd. Ex. Sub. Note,
Zero Coupon due 03/31/2002........................................... 195,250
------------
BROADCASTING -- 0.0%
FRF 125,000 Havas, Conv. Bonds, Payment-in-kind, 3.000% due 12/31/1997............. 30,246
------------
TOTAL CORPORATE BONDS................................................................... 33,493,514
------------
U.S. TREASURY BILLS -- 8.6%
$82,000,000 5.220% to 6.800%++ due 11/02/1995 -- 02/08/1996 (d).................... 81,117,340
------------
REPURCHASE AGREEMENT -- 0.7%
6,860,000 Agreement with Salomon Inc., 6.400% dated 09/29/1995, to be repurchased
at $6,863,659 on 10/02/1995, collateralized by $6,400,000 U.S.
Treasury Bonds, 7.875% due 08/15/2001 (value $7,000,320)............. 6,860,000
------------
TOTAL INVESTMENTS (COST $609,767,014)(B)........................................ 99.5% 942,801,745
OTHER ASSETS AND LIABILITIES (NET).............................................. 0.5 5,208,358
----- ------------
NET ASSETS...................................................................... 100.0% $948,010,103
===== ============
NET ASSET VALUE ($948,010,103/88,988,289 SHARES OUTSTANDING)........................... $10.65
======
<FN>
- ---------------
(a) Security fair valued under procedures established by the Board of Directors.
(b) Aggregate cost for Federal tax purposes was $609,279,606. Net unrealized
appreciation for Federal tax purposes was $333,522,139 (gross unrealized
appreciation was $345,583,998 and gross unrealized depreciation was
$12,061,859).
(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.
(d) Securities pledged as collateral for futures contracts.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR -- American Depositary Receipt, ADS -- American Depositary Share, FRF -- French Franc,
GDR -- Global Depositary Receipt, ORD -- Ordinary Share
</TABLE>
<TABLE>
FUTURES CONTRACTS--SHORT POSITION
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS DEPRECIATION
- --------- ------------
<C> <S> <C>
290 S&P 500 Index Futures, December 1995........................................ $ 3,171,649
============
</TABLE>
26
<PAGE>
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 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 Bank and Trust
Company at 1 (800) 336-6983.
Shareholders wishing to liquidate reinvested shares held at State Street
Bank and Trust Company 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 such institution 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
27
<PAGE>
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 and participate in the Dividend Reinvestment
Plan.
Participants in the Voluntary Cash Purchase Plan have the option of making
additional cash payments to State Street Bank and Trust Company for investments
in the Equity Trust's shares at the then current market price. Shareholders may
send an amount from $250 to $3,000. State Street Bank and Trust Company will use
these funds to purchase shares in the open market on or about February 15 and
August 15 of each year. State Street Bank and Trust Company 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 February 15 or August 15. A payment may be
withdrawn without charge if notice is received by State Street Bank and Trust
Company at least 48 hours before such payment is to be invested.
For more information regarding the Dividend Reinvestment Plan and Voluntary
Cash Purchase Plan, brochures are available by calling (914) 921-5070 or by
writing directly to the Equity Trust.
28
<PAGE>
DIRECTORS AND OFFICERS
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER, RYE, NY 10580-1434
Directors
Mario J. Gabelli, CFA
Chairman
Paul R. Ades
Attorney-at-Law
Partner, Murov & Ades
Dr. Thomas E. Bratter
President, John Dewey Academy
Bill Callaghan
President, Bill Callaghan Associates
Felix J. Christiana
Former Senior Vice President,
Dollar Dry Dock Savings Bank
James P. Conn
Managing Director/Chief Investment Officer,
Financial Security Assurance Holdings Ltd.
Karl Otto Pohl
Former President, Deutsche Bundesbank
Anthony R. Pustorino
Certified Public Accountant
Professor, Pace University
Salvatore J. Zizza
Chairman & Chief Executive Officer,
The Lehigh Group, Inc.
Officers
Mario J. Gabelli, CFA
President &
Chief Investment Officer
Bruce N. Alpert
Vice President & Treasurer
Marc S. Diagonale
Vice President
James E. McKee
Secretary
Brigid O. Bieber
Assistant Secretary
Richard W. Ingram
Assistant Treasurer
Investment Advisor
Gabelli Funds, Inc.
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
NYSE-Symbol: GAB
Shares Outstanding: 88,988,289
The Net Asset Value appears in the Publicly Traded Funds column, under the
heading "General Equity Funds," in Saturday's The New York Times and 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 or, visit our Internet
homepage at:
http://www.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 capital 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.
- -------------------------------------------------------------------------------
<PAGE>
____________________
FIRST CLASS MAIL
THE GABELLI EQUITY TRUST INC. U.S. POSTAGE
ONE CORPORATE CENTER PAID
RYE, NY 10580-1434 RYE, NY
(914) 921-5070 PERMIT No. 109
___________________
THIRD QUARTER REPORT
SEPTEMBER 30, 1995
09/95
