<PAGE>
ANNUAL REPORT
[THE GABELLI EQUITY TRUST INC. LOGO]
DECEMBER 31, 1995
<PAGE>
=====================================================================
THANK YOU!
RIGHTS OFFERING
OVER-SUBSCRIBED!
(In millions)
<TABLE>
The Gabelli Equity Trust Inc. Rights Offering Over-Subscribed
<CAPTION>
Proceeds Subscriptions
Sought Remitted
-------- -------------
<S> <C> <C>
1991 $ 63 $136
1992 $ 76 $160
1993 $ 93 $176
1995 $119 $200
</TABLE>
We extend our appreciation to all the full service brokers who
communicated the merits of these rights offerings to our shareholders
and their clients and to all the shareholders who participated.
THE GABELLI EQUITY TRUST INC.
One Corporate Center, Rye, New York 10580
Fax 914-921-5118 - http://www.gabelli.com
This announcement is not an offer to sell. The offerings referred to
have been completed.
=====================================================================
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.
<PAGE>
[PHOTO]
[THE GABELLI EQUITY TRUST INC. LOGO]
To our Shareholders,
The bull market stumbled at year-end 1995 as the Administration and
Congress fought over a balanced budget agreement. However, an early Christmas
gift from the Federal Reserve in the form of a 25 basis point drop in the
federal funds rate helped stocks regain some momentum to end the year at
near-record levels. Investors continued to migrate from technology stocks to
consumer non-durables, seeking safety in the form of more predictable earnings
in 1996. Cyclical stocks staged a comeback with the recognition that the economy
still had some "legs".
In the fourth quarter of 1995, The Gabelli Equity Trust Inc.'s ("Equity
Trust") net asset value per share increased 1.9% to $9.95 on December 31, 1995.
This compares to the 6.0% return in the unmanaged Standard & Poor's 500
Composite Stock Price Index ("S&P 500") for the quarter. For the twelve months
ended December 31, 1995, the Equity Trust's net asset value increased 20.6%,
after adjusting for all distributions. The S&P 500 was up 37.6% for the same
period.
Since inception on August 21, 1986, the Equity Trust's net asset value has
achieved a 228.2% total return, which equates to a 13.5% average annual return.
The three- and five-year average annual returns were 14.1% and 14.5%,
respectively.
The Equity Trust's common shares ended 1995 at $9.375 per share on the New
York Stock Exchange, an increase of 5.6% for the fourth quarter and up 11.7% for
the year, after adjusting for all distributions and the rights offering.
RIGHTS OFFERING 1995 - AN OUTSTANDING SUCCESS - THANK YOU
The Equity Trust Rights Offering proved to be an overwhelming success. To
raise additional capital, Rights Offerings have historically been a fair and
efficient method. This method is widely used in England. The traditional Rights
Offering allows an issuer's shareholders to participate directly in the growth
of that issuer by purchasing additional common shares at a set subscription
price. We appreciate the efforts of the brokerage community in explaining the
offering to their clients, resulting in a high level of participation.
Shareholders of record on October 19, 1995 were issued one Right for each
share of the Equity Trust. Every six Rights entitled that shareholder to
purchase one additional share of the Equity Trust at $8.00 per share without
incurring commission costs. Shareholders remitted nearly $200 million in
subscription requests, of which the Fund retained $119.5 million for the
14,931,430 shares offered.
Furthermore, since these Rights were transferable, any shareholder who did
not want to exercise, or did not have the funds available, could sell his/her
Rights. The market value of the Rights during the subscription period was such
that a seller would have regained most of the decrease in the value of his/her
holdings that resulted from the Offering. Our subscription agent, State Street
Bank and Trust Company, sold Rights in the open market through Gabelli &
Company, Inc. at a nominal commission cost until November 28, 1995.
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.
[PYRAMID SHAPED GRAPHIC]
<PAGE>
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.
COMMENTARY
THE GREAT BULL MARKET OF 1995 -- A HARD ACT TO FOLLOW
MODEST STRONG LOW DECLINING RISING
ECONOMIC GROWTH + CORPORATE PROFITS + INFLATION + INTEREST RATES = STOCK PRICES
This simple equation drove equity prices to record levels in 1995. Will
the same factors add up to another good year for stocks in 1996? Let's take a
fresh look at all the components of this winning formula.
We are estimating growth in Gross Domestic Product (GDP) of 2.5% to 3%
this year. With lower interest rates in Great Britain, Germany and France as a
stimulant, we see European economies growing at about 2%. As a free market
system continues to evolve in China and the expansion of the middle classes in
more developed Asian countries translates into economic activity, Pacific Rim
economies should regain momentum. In short, we anticipate reasonably good
worldwide economic growth in the year ahead.
On the inflation front, we see little pressure coming from wage increases.
In fact, we are encouraged by the strong stands governments here and abroad are
taking against inflationary wage demands. Even the French, who have
traditionally been at the mercy of public workers unions, are holding the line.
Rising food and fuel prices could, however, result in more inflation than most
investors expect. Lower grain production in the U.S. last year, strong demand
from the Chinese, and crop failures in the former Soviet Union will push food
prices higher. Regarding energy, we are producing less and consuming more. This
will ultimately lead to higher pricing. The potential of political unrest in
Saudi Arabia may be a short-term catalyst for higher fuel prices. We are
estimating that inflation could run as high as 3.5% in the second half of 1996.
If this inflation forecast proves accurate, long-term interest will not
stay at the current 6% level. Herein lies the primary threat to the stock
market. The consensus is that, with a soft economy, low inflation, lower
interest rates in Europe, a balanced budget agreement, and a Federal Reserve
Chairman who is up for reappointment in an election year, interest rates are
bound to come down. At current levels, stock and bond valuations reflect this
consensus. With a soft economy coupled with a flat yield curve, we could see
short-term rates come down without long-term rates following. Be reminded that
price/earnings multiples are a function of earnings growth and longer term
interest rates. If earnings growth slows as we anticipate and long rates remain
flat or possibly trend modestly higher, stock multiples are likely to contract.
Flow of funds into the U.S. stock market should continue to be favorable.
Equity mutual funds still enjoy strong cash inflows. If deal activity matches
that of 1995 ($458 billion in the U.S. and $866 billion worldwide), investors
will end up with a pile of cash. In addition, corporate stock buybacks and
rising dividends will buttress stock prices. Some of that
2
<PAGE>
money finds its way into initial public offerings. More will go into non-U.S.
investments, particularly markets which languished in 1995. But much more will
be recycled into a shrinking supply of stock.
Our conclusion from all this conjecture is a somewhat different formula
for the 1996 stock market:
<TABLE>
<S> <C> <C> <C> <C>
MODEST DECENT LOW SLIGHTLY HIGHER A DECENT, BUT MUCH LESS
ECONOMIC GROWTH + CORPORATE PROFITS + INFLATION + INTEREST RATES = INSPIRING STOCK MARKET
</TABLE>
THE NET
Speculative bubbles are part of the free market system. In the 1960s, it
was the "nifty fifty" growth stocks. In the 1970s, it was oil, gold, silver, and
the Hong Kong stock market. In the 1980s, it was semiconductors, biotechnology,
and Japanese real estate. Today, it is the Internet. These bubbles are always
very exciting and can be profitable for a time. Unfortunately, most people who
invest in these bubbles end up taking a bath. The Internet is showing signs of
becoming a "similar" speculative frenzy.
This is not to say that the Internet will not be a tremendous growth
business. But, how does the value oriented investor participate? One of the
tenets of value investing is to buy what is, as opposed to what will be. We
believe we have found a way, in the terminology of Graham & Dodd, to buy
"net/nets" on the Internet.
The cable television industry currently has more than 60 million
subscribers in the U.S. and is working feverishly to upgrade systems to offer
telephony services. It is estimated that 25 million of these subscribers also
have personal computers and that 10% of those 25 million people will be Internet
users.
How will they access the Internet? They can do it through telephone line
modems. Or, in the not-too-distant future, through cable modems that will be
more than 100 times faster, since existing cable lines going into the home will
be able to carry much more digital information than telephone lines. At a recent
investment conference, Comcast Corporation (CMCSA - $17.625 - NASDAQ) staged a
horse race between the most commonly used telephone modem and a cable modem
prototype. It was no contest. The list of telecommunications equipment
manufacturers developing cable modems represents a "Who's Who" of the industry,
including: Motorola, Inc. (MOT - $57.00 - NYSE), Hewlett-Packard Co. (HWP -
$83.75 - NYSE), Intel Corporation (INTC - $56.75 - NASDAQ), Zenith Electronics
Corp. (ZE - $6.875 - NYSE), General Instrument Corporation (GIC - $23.375 -
NYSE), and Scientific-Atlanta, Inc. (SFA - $15.00 - NYSE). Rollout of these new
modems is scheduled for mid-1996. We believe personal computer manufacturers
will respond by adapting their machines for cable modem use.
The bottom line is that those dull old cable television stocks are good
"back door" plays on the promising future of the Internet. You don't have to pay
nosebleed multiples to participate. Cable stocks are good values today based on
their existing business. If they can tack on incremental revenues of $25 per
month from those subscribers who want to "Surf the Net", they are an even
greater bargain.
LET'S MAKE A DEAL
We were among the first on Wall Street to proclaim the beginning of the
third great wave of takeovers since World War II. Record setting merger and
acquisition activity, highlighted by a big jump in hostile deals this year
further validated our thesis. In 1995, it was the three Bs -- banks,
broadcasters and brokers. In 1996, we believe deal activity will spread to bell
operating companies, telephone companies generally, cable television networks
and small and mid-sized industrial franchises. If we get a lower capital gains
rate, smaller companies in which management has significant ownership will have
more incentive to put out the "For Sale" sign. With our portfolio well stocked
with small to mid-sized companies trading at deep discounts to private market
value, we would expect to benefit.
3
<PAGE>
THE WAITING GAME
As little as ten years ago, America had the best telecommunications system
in the world by far. Today, we are already behind Great Britain and France, and
in danger of losing ground to other industrialized countries. It is not as a
result of telecommunications technology, in which we remain a world leader.
Rather, it is our antiquated regulatory system which has restrained competition
and productivity in the industry.
As of this writing, the comprehensive telecommunications bill promised to
us by the Clinton Administration and Congress three years ago remains stalled in
committee. Most of the difficult issues seem to be resolved. Presently, the bill
is being held captive to political posturing over whether broadcasters should be
made to pay for high definition television spectrum or simply be given this
spectrum as the FCC had originally planned. Once this issue is resolved, one
fears another will emerge to further delay this essential legislation. The devil
may be in the details here, however, as Washington must eliminate the artificial
barriers preventing the public from getting what they want: better service and
lower prices -- and telecommunications companies from getting what they need: a
set of rules that will allow them to implement competitive strategies for the
upcoming free market free-for-all.
With this cloud of uncertainty still hanging over the telephone/cable
television/broadcast industries, investors are not fully valuing the bright
future of well managed, financially strong companies in all of these sectors.
BREAKING UP'S NOT HARD TO DO
In our last quarter's letter to you, we talked about "Humpty Dumpty"
stocks and the trend toward surfacing value through the sale and/or spin-off of
businesses. Two of the Fund's larger portfolio holdings, AT&T Corp. (T - $64.75
- - NYSE) and ITT Corporation (ITT - $53.00 - NYSE), have performed quite well
since announcing their divestiture plans. We are now getting some financial
details on the new business structures and have concluded, in both instances,
that the parts remain more valuable than the whole.
AT&T will be breaking up into three publicly traded global businesses:
Communication Services (long distance and wireless); Communications Systems
(telecommunications equipment), and Global Information Solutions (the old NCR).
AT&T Capital Corp. (TCC - $38.25 - NYSE), 86% owned by AT&T, will be sold. The
sum of our Private Market Value (PMV) estimates for the three component
companies is $94 per share today, growing to $165 in 5 years. Estimated trading
values per share (about 70% of PMV), are $64 per share today, growing to $115
within 5 years. The divestiture is expected to be completed in 1996.
ITT has already been broken into three separate publicly traded companies:
the "new" ITT holds the hotel and gaming operations: ITT Industries, Inc. (IIN -
$24.00 - NYSE) consists of the parent's auto parts, pump and valve, and defense
electronics business; and ITT Hartford Group Inc. (HIG - $48.375 - NYSE) holds
the insurance operations. We value the "new" ITT at $55 today, with that value
growing to the mid-$60s next year. We estimate 20% annual earnings growth over
the next 3 to 5 years. We believe IIN is an even better bargain with a PMV of
$40 per share today and a 13% to 15% growth rate going forward. HIG is a slower
growth, interest rate sensitive business. If we mark HIG to its current $48 per
share market value and add our $55 and $40 PMVs for ITT and IIN, respectively,
we see parts worth $143 per share, compared with the old ITT's $118 collective
trading price for the three components.
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Fund's
investments. 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 Company (AXP - $41.375 - 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 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. We believe the company has been
<PAGE>
repositioned to enjoy double digit earnings growth over the balance of the
decade generating outstanding capital returns for shareholders in the process.
Chris-Craft Industries, Inc. (CCN - $43.25 - NYSE), through its 72% ownership of
BHC Communications, Inc. is primarily a television broadcaster. 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 over $1.5 billion in cash and marketable securities, is strongly positioned
to expand its operations. CCN is the eighth-largest TV station group owner in
the U.S. and covers almost 20% of TV households.
------------------------
Chris-Craft Industries
------------------------
72%
------------------------
BHC Communications
------------------------
56%
------------------------
United Television
------------------------
General Motors Corporation (GM - $52.875 - NYSE), the world's largest auto
manufacturer, is materially undervalued. Its North American operations have been
profitable for two years. 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 and greatly reducing its costs. Peak
earnings power is likely to exceed $10 per share. A reorganization of Ford and
GM along the lines of ITT and AT&T becomes an intriguing possibility assuming
the shares continue to trade at current levels.
GTE Corporation (GTE - $44.00 - 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 covering more than 50 million
people. Roughly 25% of earnings are derived from non-regulated businesses
growing at more than 25% per year.
Magma Copper Company (MCU - $27.875 - NYSE) is one of the biggest primary copper
producers in the United States. Magma produces high-quality copper cathodes and
rods for sale to customers worldwide. Its smelting operations represent 25% of
the United States' smelting capacity. On December 1, Broken Hill Proprietary
Co., Australia's largest resources company, agreed to buy the shares of Magma at
$28 per share, almost 30% above its market price. MCU is a great example of our
value style investment philosophy. Over the last four years, Magma had increased
its cash from operations by 115% on average annual sales growth of approximately
8%. With news of the takeover, the convertible preferred debt leaped from $73.75
to over $100 dollars.
Pittway Corporation (PRY'A - $66.375 - ASE; PRY - $67.75 - 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. Its 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 - $39.875 - 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 Corporation and Cox
Communications, Inc. We consider FON an interesting value with the risks
associated with new entrants in the long distance business offset by the
cable/telephony venture.
5
<PAGE>
Time Warner Inc. (TWX - $37.875 - NYSE), in a bold and brilliant tactic, is
acquiring Turner Broadcasting System, Inc. for $7.5 billion. The acquisition
will make TWX the largest diversified media and publishing company in the world
and will add 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 - $90.25 - 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 for favorable regulatory changes in the industry
and corporate cost controls will magnify EBITDA growth going forward. Our 1996
PMV is estimated at $114 per share, $25 of which is cash. UTVI's PMV is expected
to approach $200 by the year 2000.
Viacom Inc. (VIA - $45.875 - ASE; VIA'B - $47.375 - 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 is 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.
10% DISTRIBUTION POLICY
The Equity Trust continues to maintain its 10% distribution policy whereby
the Fund pays out 10% of its average net assets each year. Pursuant to this
policy, the Fund distributed $0.50 per share on December 21, 1995. The next
distribution is scheduled for payment in March 1996.
SPECIAL NOTE
Mr. Paul Ades, one of The Gabelli Equity Trust's original directors, has
announced that he will resign from the Board of the Equity Trust and its
offspring The Gabelli Global Multimedia Trust, in May, in order to devote more
time to his legal practice. We want to commend Paul for his nearly ten years of
service to the Equity Trust and Multimedia Trust, both of which have benefited
from his insightful guidance. On behalf of the Trust's shareholders, we wish
Paul every success and thank him for his advice and wisdom.
IN CONCLUSION
1995 was a terrific year for most equity investors. As is usually the case
during big bull markets, growth stocks delivered better returns than those in
the value sector. Looking forward to a less inspiring market in 1996, we believe
value investors will have the opportunity to excel.
We believe the Fund's portfolio is a diversified collection of solid
businesses trading at material discounts to their "real world" economic values.
In an environment in which individual stock fundamentals are likely to be more
important than market momentum in earnings returns, we are confident the Fund
will reward its shareholders.
We thank you for your confidence in our investing abilities and wish you a
productive and financially rewarding 1996.
Sincerely,
/s/ Mario J. Gabelli
Mario J. Gabelli
President and Chief Investment Officer
January 31, 1996
NOTE: The views expressed in this report reflect those of the portfolio manager,
only through the end of the period of this report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
6
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THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
QUARTER ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
OWNERSHIP AT
DECEMBER 31,
SHARES 1995
---------- -------------
<S> <C> <C>
NET PURCHASES
COMMON STOCKS
American Brands, Inc........... 35,000 250,000
AMETEK, Inc.................... 1,500 182,500
Archer Daniels Midland
Co.(a)....................... 40,000 70,000
Ascent Entertainment Group
Inc.......................... 25,000 25,000
Atlantic Richfield Company..... 5,000 40,000
BBN Corporation................ 58,000 58,000
Boeing Co...................... 5,000 25,000
Brau und Brunnen............... 500 13,040
Cable & Wireless plc, Sponsored
ADR.......................... 10,000 60,000
Cablevision Systems
Corporation, Class A......... 72,900 92,900
Carter-Wallace, Inc. .......... 15,000 190,000
Castle & Cooke Inc.(b)......... 16,667 16,667
CBI Industries Inc. ........... 20,000 20,000
Cincinnati Bell Inc............ 5,000 40,000
Compania de Telecomunicaciones
de Chile SA, Sponsored ADR... 10,000 10,000
COMSAT Corporation............. 10,000 110,000
Culbro Corporation............. 500 23,500
Deere & Company(c)............. 248,000 372,000
Earl Scheib, Inc. ............. 5,000 65,000
Ferro Corporation.............. 10,000 70,000
Financial Security Assurance
Holdings Ltd.(d)............. 1,432 13,432
Fund American Enterprises
Holdings Inc................. 5,000 5,000
Gaylord Entertainment Company,
Class A...................... 84,575 120,000
GEICO Corporation.............. 88,900 201,100
Grupo Televisa S.A., GDR....... 170,000 250,000
Halliburton Company............ 15,000 25,000
Honeywell, Inc................. 20,000 20,000
International Family
Entertainment, Inc., Class
B............................ 100,000 203,036
ITT Corporation, New(e)........ 100,000 100,000
ITT Hartford Group Inc.(e)..... 96,000 96,000
ITT Industries Inc.(e)......... 122,500 122,500
Keystone International, Inc.... 8,000 35,000
Lamson & Sessions Co........... 25,000 400,000
Lawter International, Inc...... 40,000 60,000
Lehman Brothers Holdings
Inc.......................... 50,000 150,000
Lillian Vernon Corporation..... 5,000 35,000
Magma Copper Company........... 380,800 380,800
Media General, Inc., Class A... 5,000 475,000
Meredith Corporation........... 15,000 70,000
Modine Manufacturing Company... 8,000 320,000
National Presto Industries,
Inc.......................... 1,500 9,000
Navistar International
Corporation.................. 20,000 400,000
Neiman Marcus Group, Inc....... 1,000 415,000
<CAPTION>
SHARES/ OWNERSHIP AT
PRINCIPAL DECEMBER 31,
AMOUNT 1995
---------- -------------
<S> <C> <C>
NEXTEL Communications, Inc.,
Class A...................... 10,400 30,000
Outlet Communications, Inc.,
Class A...................... 1,800 161,800
Pegasus Gold Inc............... 10,000 70,000
Pep Boys -- Manny, Moe & Jack.. 1,000 26,000
Precision Castparts Corp....... 2,300 2,300
Quaker Oats Company............ 60,000 140,000
Revco D.S. Inc., New........... 100,000 100,000
Royce Value Trust,
Inc.(a)(f)................... 10,832 43,601
Scientific-Atlanta, Inc........ 8,000 10,000
Sequa Corporation, Class A..... 8,000 40,000
Sequa Corporation, Class B..... 6,000 48,000
South China Morning Post
Holdings ORD................. 100,000 200,000
Tele-Communications
International, Inc., Class
A............................ 5,000 5,000
Telefonos De Mexico SA,
Sponsored ADR................ 5,000 20,000
Time Warner Inc................ 15,000 285,000
Tootsie Roll Industries,
Inc. ........................ 100 20,100
TransPro Inc................... 111,250 111,250
US WEST Media Group............ 85,000 85,000
Viacom Inc., Class A........... 20,000 310,000
Westinghouse Electric Corp..... 50,100 50,100
Wrigley (Wm.) Jr. Company...... 15,000 95,000
PREFERRED STOCKS
Magma Copper Company, Series D,
5.625%, Conv. Pfd. .......... 30,000 30,000
Magma Copper Company, Series E,
6.000%, Conv. Pfd............ 97,500 97,500
CORPORATE BONDS
Thomas Nelson Inc., Conv. Sub.
Note, 5.750% due
11/30/1999................... $1,000,000 $ 1,000,000
Time Warner Inc., Conv. Sub.
Deb., 8.750% due
01/10/2015................... $5,000,000 $24,190,850
NET SALES
COMMON STOCKS
AptarGroup, Inc................ 284,000 50,000
AT&T Corp...................... 35,000 95,000
BHC Communications, Inc.,
Class A...................... 80,000 55,000
Brunswick Corporation.......... 10,000 40,000
Capital Guaranty
Corporation(d)............... 20,000 --
CBS Inc.(g).................... 4,500 --
Coca-Cola Enterprises Inc...... 92,000 65,000
CTS Corporation................ 50,000 75,000
Dole Food Company, Inc. ....... 20,000 50,000
Eastman Kodak Company.......... 5,000 30,000
Echlin Inc. ................... 22,500 50,000
Eskimo Pie Corporation......... 15,000 --
General Motors Corporation..... 10,000 290,000
Genuine Parts Company.......... 40,000 110,000
</TABLE>
7
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES (CONTINUED)
QUARTER ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
OWNERSHIP AT
DECEMBER 31,
SHARES 1995
---------- -------------
<S> <C> <C>
NET SALES (CONTINUED)
COMMON STOCKS (CONTINUED)
GTE Corporation................ 5,000 435,000
Havas, Sponsored ADR........... 7,000 125,000
IDEX Corporation............... 35,800 335,000
ITT Corporation(e)............. 100,000 --
Johnson & Johnson.............. 35,000 70,000
Kaneb Services, Inc............ 45,000 255,000
LIN Broadcasting Corporation... 125,000 --
Minnesota Mining and
Manufacturing Company........ 5,000 105,000
Multimedia, Inc., New(h)....... 200,000 --
National Service Industries,
Inc.......................... 10,000 105,000
New York Times Company,
Class A...................... 10,000 180,002
Outboard Marine Corp........... 15,000 --
PepsiCo, Inc................... 10,000 90,000
Philips Electronics N.V.,
New York..................... 4,000 95,000
Pittway Corporation, Class A... 5,000 315,000
<CAPTION>
OWNERSHIP AT
DECEMBER 31,
SHARES 1995
---------- -------------
<S> <C> <C>
Republic Automotive Parts,
Inc. ........................ 2,500 25,000
SBC Communications Inc. ....... 5,000 185,000
Sprint Corporation............. 145,000 495,000
St. Joe Paper Company.......... 5,000 95,000
Standard Motor Products,
Inc.......................... 8,000 120,000
Tambrands Inc.................. 5,000 50,000
Telecomunicacoes Brasileiras SA
(Telebras), Sponsored ADR.... 5,000 249,073
United Television, Inc......... 20,000 340,000
Varity Corporation, New........ 13,000 205,000
Viacom Inc., Class B........... 85,000 115,000
COMMON STOCK WARRANTS AND
RIGHTS
Royce Value Trust, Inc.,
Rights, expired
11/03/1995(f)................ 32,769 --
PREFERRED STOCK
Sprint Corporation, 8.250%,
Conv. Pfd. .................. 4,000 18,000
</TABLE>
- ---------------
(a) Stock dividend.
(b) Spinoff -- 0.333333 shares of Castle & Cooke Inc. for each share of Dole
Food Company, Inc.
(c) 3 for 1 stock split.
(d) Merger -- $5.06 for each share of Capital Guaranty Corporation.
0.6716 shares of Financial Security Assurance Holding Ltd. for
each share of Capital Guaranty Corporation.
(e) Plan of reorganization -- 1 share of ITT Corporation, New for each share of
ITT Corporation.
1 share of ITT Hartford Group Inc. for each share
of ITT Corporation.
1 share of ITT Industries Inc. for each share of
ITT Corporation.
(f) Rights exercised -- 1 share of Royce Value Trust, Inc. for every 20 shares
of Royce Value Trust, Inc., Rights, expired 11/03/1995.
(g) Cash Merger -- @ $82.065 per share.
(h) Cash Merger -- @ $45.25 per share.
TOP TEN HOLDINGS
DECEMBER 31, 1995
<TABLE>
<S> <C>
Time Warner Inc. American Express Company
Chris-Craft Industries, Inc. Viacom Inc.
United Television, Inc. General Motors Corporation
Pittway Corporation Sprint Corporation
Magma Copper Company GTE Corporation
</TABLE>
8
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------- ------------- ---------------
COMMON STOCKS -- 78.5%
<S> <C> <C> <C>
INDUSTRIAL EQUIPMENT AND SUPPLIES -- 11.1%
182,500 AMETEK, Inc....................................... $ 2,597,580 $ 3,421,875
180,000 Ampco-Pittsburgh Corporation...................... 2,386,035 1,935,000
50,000 AptarGroup, Inc. ................................. 728,117 1,868,750
7,000 Caterpillar Inc................................... 191,305 411,250
66,000 CLARCOR Inc....................................... 1,202,150 1,344,750
71,925 Crane Co. ........................................ 1,852,074 2,652,234
75,000 CTS Corporation................................... 1,905,571 2,831,250
372,000 Deere & Company................................... 3,591,078 13,113,000
230,000 Donaldson Company, Inc............................ 2,654,323 5,778,750
19,125 Duriron Company, Inc.............................. 109,331 447,047
60,000 Gerber Scientific, Inc. .......................... 460,407 975,000
240,000 Greif Bros. Corporation, Class A.................. 4,285,781 6,450,000
3,400 Greif Bros. Corporation, Class B+(a).............. 69,824 91,375
40,000 Guardsman Products, Inc. ......................... 450,400 535,000
335,000 IDEX Corporation.................................. 3,312,183 13,735,000
35,000 Keystone International, Inc....................... 717,913 700,000
50,000 Lufkin Industries, Inc............................ 908,349 1,131,250
40,000 Manitowoc Company, Inc............................ 870,450 1,225,000
170,000 Mark IV Industries, Inc........................... 1,944,406 3,357,500
10,000 Martin Marietta Materials, Inc.................... 216,563 206,250
400,000 Navistar International Corporation+............... 7,286,553 4,200,000
130,000 Nortek, Inc.+..................................... 808,129 1,527,500
5,000 Nortek, Inc., Special Common+(a).................. 72,155 58,750
10,000 PACCAR Inc........................................ 450,000 421,250
45,000 Pittway Corporation............................... 985,804 2,986,875
315,000 Pittway Corporation, Class A...................... 4,888,607 21,341,250
10,000 Scientific-Atlanta, Inc........................... 149,325 150,000
40,000 Sequa Corporation, Class A+....................... 1,521,465 1,220,000
48,000 Sequa Corporation, Class B+....................... 2,239,935 1,896,000
84,000 SPS Technologies, Inc.+........................... 2,830,863 4,483,500
95,000 St. Joe Paper Company............................. 3,163,016 5,225,000
111,250 TransPro Inc. .................................... 991,546 1,182,031
205,000 Varity Corporation, New+.......................... 3,996,631 7,610,625
20,000 Watts Industries, Inc., Class A................... 415,830 465,000
------------- ---------------
60,253,699 114,978,062
------------- ---------------
TELECOMMUNICATIONS -- 10.0%
95,000 AT&T Corp. ....................................... 3,840,156 6,151,250
100,000 BC TELECOM Inc.................................... 1,788,094 1,831,166
80,000 BCE Inc........................................... 2,681,717 2,760,000
11 BHI Corporation+.................................. 176 173
7,000 British Telecommunications plc, Sponsored ADR..... 450,422 395,500
60,000 Cable & Wireless plc, Sponsored ADR............... 1,246,423 1,267,500
40,000 Cincinnati Bell Inc. ............................. 798,063 1,390,000
10,000 Compania de Telecomunicaciones de Chile SA,
Sponsored ADR................................... 719,250 828,750
141,000 C-TEC Corporation+................................ 2,782,272 4,371,000
30,000 C-TEC Corporation, Class B+....................... 463,817 915,000
435,000 GTE Corporation................................... 8,750,659 19,140,000
20,000 Hong Kong Telecommunications Ltd., Sponsored ADR.. 316,300 355,000
1,000 Hungarian Telephone & Cable Corp.+................ 12,000 10,625
1,020,000 Jamaica Telephone Ltd. ORD+....................... 101,641 89,372
40,000 Lincoln Telecommunications Company................ 593,225 845,000
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------- ------------- ---------------
COMMON STOCKS (CONTINUED)
<S> <C> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
10,000 Maritime Telegraph and Telephone Company,
Limited......................................... $ 162,919 $ 145,578
12,000 Motorola, Inc..................................... 225,900 684,000
50,000 NYNEX Corporation................................. 2,038,358 2,700,000
50,000 Pacific Telesis Group Inc......................... 1,515,115 1,681,250
185,000 SBC Communications Inc............................ 3,305,766 10,637,500
10,000 Singapore Telecommunications Limited ORD.......... 23,114 22,199
495,000 Sprint Corporation................................ 6,871,878 19,738,125
296,100 STET-Societa Finanziaria Telefonica SpA, Sponsored
ADR............................................. 5,735,550 8,253,788
4,000 Telecom Argentina Stet-France Telecom S.A.,
Sponsored ADR................................... 189,158 190,000
2,500,000 Telecom Italia SpA, ORD........................... 2,893,657 3,893,442
249,073 Telecomunicacoes Brasileiras SA (Telebras),
Sponsored ADR................................... 4,432,159 11,799,833
5,927 Telecomunicacoes Brasileiras SA (Telebras),
Sponsored ADR, 144A(c)+......................... 333,613 280,792
10,000 Telefonica de Argentina S.A., ADR, Class B........ 274,045 272,500
55,000 Telefonica de Espana, Sponsored ADR............... 1,880,319 2,303,125
20,000 Telefonos De Mexico SA, Sponsored ADR............. 733,042 637,500
------------- ---------------
55,158,808 103,589,968
------------- ---------------
BROADCASTING -- 9.6%
55,000 BHC Communications, Inc., Class A................. 2,691,792 5,197,500
70,000 Capital Cities/ABC, Inc........................... 3,120,473 8,636,250
316,313 Chris-Craft Industries, Inc....................... 4,690,339 13,680,537
511,448 Chris-Craft Industries, Inc., Class B (a)+........ 8,836,324 22,120,126
250,000 Grupo Televisa S.A., GDR.......................... 5,152,596 5,625,000
125,000 Havas, Sponsored ADR.............................. 2,399,506 2,453,125
50,000 Liberty Corporation............................... 1,449,401 1,687,500
3,000 LIN Television Corporation+....................... 28,855 89,250
161,800 Outlet Communications, Inc., Class A+............. 1,817,787 7,645,050
100,000 Television Broadcasting Ltd. ORD.................. 396,239 356,288
340,000 United Television, Inc. .......................... 9,771,669 30,685,000
50,100 Westinghouse Electric Corp. ...................... 822,892 826,650
------------- ---------------
41,177,873 99,002,276
------------- ---------------
FINANCIAL SERVICES -- 7.6%
560,000 American Express Company.......................... 10,199,405 23,170,000
24,000 Banco Santander SA, ADR........................... 1,024,016 1,182,000
260 Berkshire Hathaway Inc.+.......................... 824,299 8,346,000
30,000 Berliner Bank Aktiengesellschaft.................. 6,004,015 7,646,444
18,000 Commerzbank AG, Sponsored ADR..................... 715,857 841,500
150,000 Deutsche Bank AG, Sponsored ADR+.................. 6,224,445 7,087,500
13,432 Financial Security Assurance Holdings Ltd......... 335,800 334,121
5,000 Fund American Enterprises Holdings Inc. .......... 348,250 372,500
201,100 GEICO Corporation................................. 13,858,893 14,051,863
25,000 Hibernia Corporation.............................. 198,750 268,750
25,000 H&R Block Inc..................................... 935,871 1,012,500
96,000 ITT Hartford Group Inc.+.......................... 2,549,663 4,644,000
150,000 Lehman Brothers Holdings Inc. .................... 3,412,259 3,187,500
34,000 Midland Company................................... 1,023,956 1,670,250
12,000 Morgan (J.P.) & Co. Incorporated.................. 752,350 963,000
60,000 Riggs National Corporation+....................... 552,538 780,000
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------- ------------- ---------------
COMMON STOCKS (CONTINUED)
<S> <C> <C> <C>
FINANCIAL SERVICES (CONTINUED)
10,000 SunTrust Banks, Inc............................... $ 419,333 $ 685,000
50,000 Unitrin, Inc...................................... 1,724,643 2,400,000
------------- ---------------
51,104,343 78,642,928
------------- ---------------
ENTERTAINMENT -- 3.9%
25,000 Ascent Entertainment Group Inc.+.................. 375,000 393,750
29,000 Bay Meadows Operating Company..................... 498,410 424,125
120,000 Gaylord Entertainment Company, Class A............ 3,029,166 3,330,000
50,000 GC Companies, Inc.+............................... 952,487 1,675,000
10,000 GTECH Holdings Corporation+....................... 170,269 260,000
12,000 PolyGram NV....................................... 315,663 630,000
120,000 THORN EMI plc, Sponsored ADR...................... 1,752,187 2,790,000
285,000 Time Warner Inc................................... 7,708,213 10,794,375
67,179 Todd-AO Corporation, Class A...................... 183,215 520,637
310,000 Viacom Inc., Class A+............................. 4,260,108 14,221,250
115,000 Viacom Inc., Class B+............................. 2,815,713 5,448,125
------------- ---------------
22,060,431 40,487,262
------------- ---------------
WIRELESS COMMUNICATIONS -- 3.9%
245,000 AirTouch Communications Inc.+..................... 5,604,056 6,921,250
105,000 Allen Group Inc. ................................. 1,191,791 2,349,375
67,500 Associated Group, Inc., Class A+.................. 354,616 1,274,063
67,500 Associated Group, Inc., Class B+.................. 354,616 1,282,500
15,000 BCE Mobile Communications Inc.+................... 435,205 506,775
175,000 Century Telephone Enterprises, Inc................ 947,557 5,556,250
110,000 COMSAT Corporation................................ 2,150,688 2,048,750
30,000 NEXTEL Communications, Inc., Class A+............. 388,497 442,500
41,000 Securicor Group plc ORD........................... 611,606 1,069,706
4,000 Securicor Group plc, Class A ORD.................. 45,881 54,976
3,500,000 Telecom Italia Mobile SpA+........................ 3,245,693 6,168,033
322,000 Telephone and Data Systems, Inc................... 3,135,658 12,719,000
------------- ---------------
18,465,864 40,393,178
------------- ---------------
CONSUMER PRODUCTS -- 3.5%
250,000 American Brands, Inc.............................. 9,665,519 11,156,250
40,000 Brunswick Corporation............................. 536,042 960,000
190,000 Carter-Wallace, Inc............................... 2,848,843 2,161,250
68,000 Church & Dwight Co., Inc.......................... 1,466,590 1,258,000
23,500 Culbro Corporation+............................... 599,975 1,154,438
10,000 Duracell International Inc........................ 271,927 517,500
30,000 Eastman Kodak Company............................. 1,775,864 2,010,000
30,000 First Brands Corporation.......................... 775,625 1,428,750
24,000 Gillette Company.................................. 691,975 1,251,000
9,000 National Presto Industries, Inc................... 327,028 357,750
26,715 Park-Ohio Industries, Inc.+....................... 310,560 430,779
130,000 Ralston Purina Group.............................. 4,104,254 8,108,750
50,000 Scotts Company, Class A+.......................... 833,295 968,750
50,000 Tambrands Inc. ................................... 2,020,265 2,387,500
100,000 Whitman Corporation............................... 1,082,376 2,325,000
------------- ---------------
27,310,138 36,475,717
------------- ---------------
FOOD AND BEVERAGE -- 3.3%
13,040 Brau und Brunnen.................................. 2,572,668 1,973,278
30,000 Campbell Soup Company............................. 870,925 1,800,000
65,000 Coca-Cola Enterprises Inc......................... 874,044 1,738,750
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------- ------------- ---------------
COMMON STOCKS (CONTINUED)
<S> <C> <C> <C>
FOOD AND BEVERAGE (CONTINUED)
50,000 Dole Food Company, Inc. .......................... $ 1,299,337 $ 1,750,000
200,000 Fomento Economico Mexicano SA, ADR................ 607,500 450,000
34,000 General Mills, Inc................................ 729,062 1,963,500
20,000 Guinness plc, Sponsored ADR....................... 729,363 730,000
45,000 Kellogg Company................................... 2,393,384 3,476,250
10,000 LVHM Moet Hennessy Louis Vuitton, Sponsored ADR... 371,125 418,750
90,000 PepsiCo, Inc...................................... 3,003,421 5,028,750
140,000 Quaker Oats Company............................... 4,316,866 4,830,000
40,000 Ralcorp Holdings, Inc.+........................... 1,737,776 970,000
100,000 Seagram Company Ltd............................... 2,713,688 3,462,500
20,100 Tootsie Roll Industries, Inc...................... 671,995 796,463
95,000 Wrigley (Wm.) Jr. Company......................... 4,138,239 4,987,500
------------- ---------------
27,029,393 34,375,741
------------- ---------------
DIVERSIFIED INDUSTRIAL -- 3.2%
40,000 GATX Corporation.................................. 673,434 1,945,000
100,000 ITT Corporation, New+............................. 2,776,410 5,300,000
122,500 ITT Industries Inc................................ 1,795,027 2,940,000
400,000 Lamson & Sessions Co.+............................ 2,511,294 3,100,000
60,000 Lawter International, Inc......................... 632,883 697,500
105,000 Minnesota Mining and Manufacturing Company........ 5,766,689 6,956,250
105,000 National Service Industries, Inc.................. 2,325,133 3,399,375
100,000 Tenneco Inc....................................... 4,600,898 4,962,500
43,000 Thomas Industries Inc............................. 617,782 1,010,500
90,000 Trinity Industries, Inc. ......................... 1,543,169 2,835,000
100,000 Tyler Corporation+................................ 354,618 275,000
------------- ---------------
23,597,337 33,421,125
------------- ---------------
CABLE -- 3.1%
92,900 Cablevision Systems Corporation, Class A+......... 5,312,996 5,039,825
35,000 CANAL+, Sponsored ADR............................. 1,153,125 1,303,750
65,000 Comcast Corporation, Class A...................... 1,009,207 1,145,625
68,125 Comcast Corporation, Class A Special.............. 655,333 1,239,023
203,036 International Family Entertainment, Inc., Class
B+.............................................. 3,359,503 3,324,715
10,000 Shaw Cable Systems, Ltd., Class B, Conv........... 61,583 63,175
40,000 Shaw Communications Inc., Class B, Conv........... 382,635 252,701
462,125 Tele-Communications, Inc., Class A+............... 6,987,472 9,184,734
350,000 Tele-Communications, Inc./Liberty Media Group,
Class A+........................................ 8,114,871 9,406,250
5,000 Tele-Communications International, Inc., Class
A+.............................................. 128,169 113,750
85,000 US WEST Media Group+.............................. 1,583,987 1,615,000
------------- ---------------
28,748,881 32,688,548
------------- ---------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.0%
34,000 APS Holding Corporation, Class A+................. 527,000 765,000
50,000 Echlin Inc........................................ 832,050 1,825,000
110,000 Genuine Parts Company............................. 4,078,485 4,510,000
225,000 Handy & Harman.................................... 3,219,241 3,712,500
110,000 Johnson Controls, Inc. ........................... 3,093,027 7,562,500
320,000 Modine Manufacturing Company...................... 3,471,765 7,680,000
26,000 Pep Boys - Manny, Moe & Jack...................... 490,300 666,250
12,000 Quaker State Corporation.......................... 170,738 151,500
25,000 Republic Automotive Parts, Inc.+.................. 185,983 321,875
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------- ------------- ---------------
COMMON STOCKS (CONTINUED)
<S> <C> <C> <C>
AUTOMOTIVE: PARTS AND ACCESSORIES (CONTINUED)
40,000 SPX Corporation................................... $ 866,938 $ 635,000
120,000 Standard Motor Products, Inc. .................... 818,500 1,800,000
30,000 Wynn's International, Inc......................... 420,462 888,750
------------- ---------------
18,174,489 30,518,375
------------- ---------------
PUBLISHING -- 2.7%
50,000 Independent Newspapers plc ORD.................... 243,202 309,047
12,000 McGraw-Hill Companies, Inc. ...................... 707,700 1,045,500
475,000 Media General, Inc., Class A...................... 9,192,664 14,428,125
70,000 Meredith Corporation.............................. 2,051,939 2,931,250
180,002 New York Times Company, Class A................... 2,473,406 5,332,559
5,000 News Corporation Limited, ADS..................... 54,120 106,875
299,000 Oriental Press Group ORD+......................... 161,077 90,870
2,024 Pearson plc ORD................................... 20,058 19,598
46,000 Reader's Digest Association, Inc., Class B........ 1,806,980 2,173,500
200,000 South China Morning Post Holdings ORD............. 117,763 122,212
230,000 Western Publishing Group, Inc.+................... 3,633,014 1,811,250
------------- ---------------
20,461,923 28,370,786
------------- ---------------
ENERGY -- 1.8%
34,000 Apache Corporation................................ 844,013 1,003,000
40,000 Atlantic Richfield Company........................ 4,327,841 4,430,000
52,500 British Petroleum Company plc, ADR................ 2,431,319 5,361,563
115,000 Burlington Resources Inc. ........................ 5,340,447 4,513,750
10,000 Chevron Corporation............................... 427,525 525,000
25,000 Halliburton Company............................... 1,115,229 1,265,625
255,000 Kaneb Services, Inc.+............................. 1,350,008 573,750
50,000 Santa Fe Energy Resources, Inc.+.................. 478,875 481,250
------------- ---------------
16,315,257 18,153,938
------------- ---------------
BUSINESS SERVICES -- 1.7%
58,000 BBN Corporation+.................................. 2,189,256 2,385,250
20,000 Honeywell, Inc. .................................. 926,000 972,500
125,000 International Business Machines Corporation....... 6,188,440 11,468,750
125,000 Landauer, Inc. ................................... 809,065 2,718,750
------------- ---------------
10,112,761 17,545,250
------------- ---------------
AUTOMOTIVE -- 1.6%
290,000 General Motors Corporation........................ 9,175,358 15,333,750
30,000 Harley Davidson, Inc.............................. 298,350 862,500
------------- ---------------
9,473,708 16,196,250
------------- ---------------
RETAIL -- 1.4%
25,000 Crown Books Corporation+.......................... 284,112 306,250
65,000 Earl Scheib, Inc.+................................ 630,956 503,750
70,000 General Host Corporation+......................... 477,775 280,000
35,000 Lillian Vernon Corporation........................ 438,849 468,125
415,000 Neiman Marcus Group, Inc.+........................ 5,923,770 9,752,500
100,000 Revco D.S. Inc., New+............................. 2,755,000 2,825,000
------------- ---------------
10,510,462 14,135,625
------------- ---------------
METALS AND MINING -- 1.3%
15,000 Barrick Gold Corporation.......................... 403,375 395,625
380,800 Magma Copper Company+............................. 10,588,541 10,614,800
20,000 Newmont Gold Company.............................. 800,047 875,000
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------- ------------- ---------------
COMMON STOCKS (CONTINUED)
<S> <C> <C> <C>
METALS AND MINING (CONTINUED)
70,000 Pegasus Gold Inc.+................................ $ 1,131,666 $ 971,250
10,000 Placer Dome Inc................................... 175,163 241,250
------------- ---------------
13,098,792 13,097,925
------------- ---------------
HEALTH CARE -- 1.2%
20,000 Amgen Inc.+....................................... 366,444 1,187,500
6,500 Biogen, Inc.+..................................... 181,025 399,750
70,000 Johnson & Johnson................................. 3,110,849 5,993,750
24,000 Mallinckrodt Group, Inc. ......................... 710,919 873,000
20,000 Pfizer Inc. ...................................... 639,063 1,260,000
54,000 Sandoz Ltd., Sponsored ADR........................ 973,438 2,463,750
------------- ---------------
5,981,738 12,177,750
------------- ---------------
CONSUMER SERVICES -- 1.0%
450,000 Rollins, Inc...................................... 4,479,713 9,956,250
20,000 Sierra On-Line, Inc.+............................. 158,303 575,000
------------- ---------------
4,638,016 10,531,250
------------- ---------------
HOTELS/CASINOS -- 0.8%
100,000 Hilton Hotels Corporation......................... 5,464,111 6,150,000
50,000 Mirage Resorts, Incorporated+..................... 532,231 1,725,000
------------- ---------------
5,996,342 7,875,000
------------- ---------------
SPECIALTY CHEMICAL -- 0.6%
20,000 CBI Industries Inc................................ 673,500 657,500
39,000 E.I. du Pont de Nemours and Company............... 2,554,500 2,725,125
70,000 Ferro Corporation................................. 1,190,187 1,627,500
36,000 Pratt & Lambert, Inc. ............................ 523,025 1,255,500
------------- ---------------
4,941,212 6,265,625
------------- ---------------
AIRLINES -- 0.6%
82,000 AMR Corporation+.................................. 5,409,579 6,088,500
------------- ---------------
AVIATION: PARTS AND SERVICES -- 0.6%
25,000 Boeing Co. ....................................... 1,646,303 1,959,375
50,000 Curtiss-Wright Corporation........................ 2,491,103 2,687,500
145,000 Hi-Shear Industries Inc.+......................... 2,317,757 1,051,250
2,300 Precision Castparts Corp. ........................ 85,215 91,425
------------- ---------------
6,540,378 5,789,550
------------- ---------------
ELECTRONICS -- 0.5%
2,000 Hitachi, Ltd., ADR................................ 171,183 201,000
1,500 Matsushita Electric Industrial Co. Ltd., ADR...... 178,325 246,750
1,500 NEC Corp., ADR.................................... 43,625 91,500
95,000 Philips Electronics N.V., New York................ 1,260,404 3,408,125
20,000 Sony Corporation.................................. 1,057,068 1,227,500
------------- ---------------
2,710,605 5,174,875
------------- ---------------
COUNTRY/CLOSED-END FUNDS -- 0.3%
59,000 Central European Equity Fund Inc.................. 734,956 966,125
70,000 Emerging Germany Fund Inc......................... 512,662 507,500
25,000 France Growth Fund, Inc. ......................... 246,844 246,875
34,250 Italy Fund, Inc................................... 300,170 261,156
70,000 New Germany Fund.................................. 767,349 813,750
43,601 Royce Value Trust, Inc. .......................... 482,372 523,208
------------- ---------------
3,044,353 3,318,614
------------- ---------------
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------- ------------- ---------------
COMMON STOCKS (CONTINUED)
<S> <C> <C>
AGRICULTURE -- 0.1%
70,000 Archer Daniels Midland Co......................... $ 1,181,663 $ 1,260,000
------------- ---------------
TRANSPORTATION -- 0.1%
11,000 Florida East Coast Industries, Inc. .............. 523,108 750,750
------------- ---------------
REAL ESTATE -- 0.0%
16,667 Castle & Cooke Inc.+.............................. 205,658 279,166
------------- ---------------
TOTAL COMMON STOCKS.............................................. 494,226,811 811,584,034
------------- ---------------
PREFERRED STOCKS -- 2.1%
METALS AND MINING -- 1.2%
30,000 Magma Copper Company, Series D, 5.625%, Conv.
Pfd. ........................................... 2,871,657 2,883,750
97,500 Magma Copper Company, Series E, 6.000%, Conv.
Pfd............................................. 9,729,650 9,786,562
------------- ---------------
12,601,307 12,670,312
------------- ---------------
AUTOMOTIVE -- 0.5%
75,000 General Motors Corporation, Depositary Shares,
$3.25, Pfd...................................... 3,750,000 5,493,750
------------- ---------------
CONSUMER PRODUCTS -- 0.2%
34,000 Fieldcrest Cannon, Inc., Series A, 6.000%, Conv.
Pfd., 144A(c)................................... 1,877,500 1,513,000
------------- ---------------
TELECOMMUNICATIONS -- 0.1%
18,000 Sprint Corporation, 8.250%, Conv. Pfd. ........... 573,750 684,000
2,130,723 Telecomunicacoes de Sao Paulo SA (Telesp), Pfd.,
Registered...................................... 261,253 313,487
------------- ---------------
835,003 997,487
------------- ---------------
CABLE -- 0.1%
8,000 Tele-Communications, Inc., Class B, 6.000%, Ex.
Jr. Pfd. ....................................... 408,017 564,000
------------- ---------------
DIVERSIFIED INDUSTRIAL -- 0.0%
3,500 GATX Corporation, 3.875%, Conv. Pfd. ............. 185,600 201,250
------------- ---------------
TOTAL PREFERRED STOCKS........................................... 19,657,427 21,439,799
------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -------------
CORPORATE BONDS -- 3.8%
<S> <C> <C>
ENTERTAINMENT -- 3.4%
$ 24,190,850 Time Warner Inc., Conv. Sub. Deb., 8.750% due
01/10/2015...................................... 25,363,863 25,037,530
2,400,000 Time Warner Inc., Deb., 8.110% due 08/15/2006..... 2,407,265 2,583,000
2,400,000 Time Warner Inc., Deb., 8.180% due 08/15/2007..... 2,398,284 2,607,000
2,000,000 Time Warner Inc., Floating Rate Note, 6.838% due
08/15/2000...................................... 2,018,671 2,000,000
1,200,000 Time Warner Inc., Note, 7.975% due 08/15/2004..... 1,194,652 1,272,000
1,575,000 Viacom Inc., Ex. Sub. Deb., 8.000% due
07/07/2006...................................... 1,017,844 1,630,125
------------- ---------------
34,400,579 35,129,655
------------- ---------------
INDUSTRIAL EQUIPMENT AND SUPPLIES -- 0.3%
3,300,000 Nortek, Inc., Sr. Sub. Note, 9.875% due
03/01/2004...................................... 3,256,920 3,052,500
------------- ---------------
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -------------
CORPORATE BONDS (CONTINUED)
<S> <C> <C>
PUBLISHING -- 0.1%
$ 200,000 News American Holdings Incorporated, Gtd. Ex. Sub.
Note, Zero Coupon due 03/31/2002................ $ 124,637 $ 186,250
1,000,000 Thomas Nelson Inc., Conv. Sub. Note, 5.750% due
11/30/1999...................................... 990,000 926,250
------------- ---------------
1,114,637 1,112,500
------------- ---------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.0%
500,000 GenCorp Inc., Conv. Sub. Deb., 8.000% due
08/01/2002...................................... 490,000 502,500
------------- ---------------
BROADCASTING -- 0.0%
FRF 125,000 Havas, Conv. Bonds, Payment-in-kind, 3.000% due
12/31/1997...................................... 26,357 31,364
------------- ---------------
TOTAL CORPORATE BONDS............................................ 39,288,493 39,828,519
------------- ---------------
U.S. TREASURY BILLS -- 15.2%
$ 158,500,000 4.880% to 5.350%++
due 01/11/1996 -- 05/30/1996(d)................. 157,229,690 157,229,690
------------- ---------------
REPURCHASE AGREEMENT -- 0.8%
7,856,000 Agreement with Salomon Inc., 5.920% dated
12/29/1995, to be repurchased at $7,861,168 on
01/02/1996, collateralized by $7,382,000 U.S.
Treasury Bonds, 7.875% due 01/15/1998 (value
$8,127,684)..................................... 7,856,000 7,856,000
------------- --------------
TOTAL INVESTMENTS......................................... 100.4% $718,258,421(b) 1,037,938,042
=============
OTHER ASSETS AND LIABILITIES (NET)........................ (0.4) (3,847,334)
------- --------------
NET ASSETS................................................ 100.0% $1,034,090,708
======= ==============
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Security fair valued under procedures established by the Board of Directors.
(b) Aggregate cost for Federal tax purposes was $718,264,688. Net unrealized appreciation for Federal tax
purposes was $319,673,354 (gross unrealized appreciation was $334,596,589 and gross unrealized depreciation
was $14,923,235).
(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>
FUTURES CONTRACTS--SHORT POSITION
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS APPRECIATION
- ------------- ---------------
<S> <C> <C>
310 S&P 500 Index Futures, March 1996................................. $ 266,686
=============
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
THE GABELLI EQUITY TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $718,258,421)
See accompanying portfolio:
Investment securities........................................... $ 872,852,352
U.S. Government obligations..................................... 157,229,690
Repurchase agreement............................................ 7,856,000
--------------
1,037,938,042
Cash and foreign currency (Cost $697,098)....................... 689,418
Dividends receivable............................................ 1,205,898
Interest receivable............................................. 923,571
--------------
Total Assets............................................ 1,040,756,929
--------------
LIABILITIES:
Payable for investment securities purchased..................... $4,625,265
Payable for investment advisory fee............................. 896,538
Rights Offering expenses payable................................ 364,473
Variation Margin................................................ 108,500
Accrued Directors' fees......................................... 35,000
Accrued expenses and other payables............................. 636,445
----------
Total Liabilities....................................... 6,666,221
--------------
NET ASSETS for 103,919,670 shares outstanding..................... $1,034,090,708
=============
NET ASSETS CONSIST OF:
Common stock at par value....................................... $ 103,920
Additional paid-in capital...................................... 714,321,114
Distributions in excess of net realized gain on investments..... (272,953)
Net unrealized appreciation of investments...................... 319,938,627
--------------
Total Net Assets........................................ $1,034,090,708
=============
NET ASSET VALUE ($1,034,090,708 / 103,919,670 shares outstanding;
200,000,000 shares authorized of $0.001 par value).............. $9.95
=====
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
THE GABELLI EQUITY TRUST INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $375,961)....... $ 12,658,485
Interest....................................................... 9,705,952
------------
Total Investment Income................................ 22,364,437
------------
EXPENSES:
Investment advisory fee........................................ $9,060,694
Shareholder communications expense............................. 723,146
Transfer agent fees............................................ 428,273
Custodian fees................................................. 241,553
Directors' fees................................................ 123,598
Payroll........................................................ 93,410
Legal and audit fees........................................... 79,039
Other.......................................................... 202,803
----------
Total Expenses......................................... 10,952,516
------------
NET INVESTMENT INCOME............................................ 11,411,921
------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on:
Securities transactions..................................... 73,731,906
Futures transactions........................................ (24,751,245)
Foreign currency transactions............................... 8,516
------------
Net realized gain on investments during the year............... 48,989,177
------------
Net change in unrealized appreciation/depreciation of:
Securities.................................................. 106,527,253
Futures transactions........................................ 1,644,866
Foreign currency and other assets and liabilities........... (52,267)
------------
Net change in unrealized appreciation/depreciation of
investments during the year................................. 108,119,852
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS.................. 157,109,029
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $168,520,950
===========
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
THE GABELLI EQUITY TRUST INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
12/31/95 12/31/94
-------------- ------------
<S> <C> <C>
Net investment income........................................... $ 11,411,921 $ 11,585,624
Net realized gain on investments during the year................ 48,989,177 32,781,619
Net change in unrealized appreciation/depreciation of
investments during the year................................... 108,119,852 (39,475,647)
-------------- ------------
Net increase in net assets resulting from operations............ 168,520,950 4,891,596
Distributions to shareholders:(a)
Net investment income...................................... (11,329,129) (11,514,882)
Net realized gain on investments........................... (48,989,177) (31,614,199)
Distributions in excess of net realized gains.............. (2,258,315) --
Paid-in capital............................................ (33,224,640) (112,954,633)
Net increase in net assets from Equity Trust share
transactions.................................................. 136,178,420 38,611,705
-------------- ------------
Net increase/(decrease) in net assets........................... 208,898,109 (112,580,413)
NET ASSETS:
Beginning of year............................................... 825,192,599 937,773,012
-------------- ------------
End of year..................................................... $1,034,090,708 $825,192,599
============= ===========
</TABLE>
- ---------------
(a) Distributions relating to The Gabelli Global Multimedia Trust Inc. spin-off
for the year ended December 31, 1994 from net investment income, realized
short-term gains and paid-in capital were $5,507,685, $2,660,988 and
$56,314,066, respectively.
See Notes to Financial Statements.
19
<PAGE>
THE GABELLI EQUITY TRUST INC.
FINANCIAL HIGHLIGHTS
PER SHARE AMOUNTS FOR AN EQUITY TRUST SHARE OUTSTANDING THROUGHOUT EACH
PERIOD/YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1986* 1987 1988 1989 1990 1991 1992 1993(a) 1994(a) 1995(a)
-------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of year...... $ 9.35 $ 9.40 $ 9.82 $ 11.22 $ 13.34 $ 10.49 $ 10.61 $ 10.58 $ 11.23 $ 9.46
-------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
Net investment income.... 0.10 0.16 0.14 0.38 0.44 0.27 0.19 0.14 0.14 0.13
Net realized and
unrealized gain/(loss)
on investments......... (0.04) 0.89 2.32+ 3.26+ (2.11) 1.37 1.21 2.13 (0.08) 1.74
Provision for income
taxes.................. -- -- (0.09) (0.21) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
Total from investment
operations............. 0.06 1.05 2.37 3.43 (1.67) 1.64 1.40 2.27 0.06 1.87
Increase/(decrease) in
net asset value from
Equity Trust share
transactions........... -- 0.01 0.02 -- -- (0.42) (0.36) (0.50) -- (0.37)
Offering expenses charged
to capital surplus..... (0.01) -- -- -- -- (0.01) (0.01) (0.01) -- (0.01)
Distributions to
shareholders from:
Net investment
income............. -- (0.19) (0.21) (0.29) (0.53) (0.27) (0.19) (0.11) (0.14)(b) (0.13)
Distributions in
excess of net
investment
income............. -- -- -- -- -- -- -- -- -- --
Net realized gains... -- (0.45) (0.78) (1.02) (0.23) (0.14) (0.38) (0.77) (0.37) (0.47)
Distributions in
excess of net
realized gains..... -- -- -- -- -- -- -- (0.02) -- (0.02)
Paid-in capital...... -- -- -- -- (0.42) (0.68) (0.49) (0.21) (1.32)(b) (0.38)
-------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
Total distributions...... -- (0.64) (0.99) (1.31) (1.18) (1.09) (1.06) (1.11) (1.83) (1.00)
-------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
Net asset value, end of
year................... $ 9.40 $ 9.82 $ 11.22 $ 13.34 $ 10.49 $ 10.61 $ 10.58 $ 11.23 $ 9.46 $ 9.95
======== ======== ======== ======== ======== ======== ======== ======== ======== =========
Market value, end of
year................... $ 8.625 $ 7.625 $ 9.875 $ 14.000 $ 10.500 $ 10.125 $ 10.250 $ 12.125 $ 9.625 $ 9.375
======== ======== ======== ======== ======== ======== ======== ======== ======== =========
Total Investment
Return**............... (13.8)% (0.9)% 37.8% 59.0% (16.7)% 10.9% 15.9% 36.5% (5.1)% 11.7%
======== ======== ======== ======== ======== ======== ======== ======== ======== =========
Net Asset Value Total
Return***.............. 0.5% 17.1% 21.5% 33.2% (12.7)% 16.2% 14.2% 22.4% 0.5% 20.6%
======== ======== ======== ======== ======== ======== ======== ======== ======== =========
Ratios to average net
assets/supplemental
data:
Net assets, end of year
(in 000's)............. $413,760 $429,490 $484,792 $589,990 $479,863 $595,151 $725,263 $937,773 $825,193 $1,034,091
Net investment
income............. 2.89%++ 1.50% 1.36% 2.82% 3.84% 2.34% 1.88% 1.25% 1.29% 1.26%
Operating expenses... 1.24%++ 1.24% 1.25% 1.18% 1.18% 1.24% 1.22% 1.20% 1.19% 1.21%
Portfolio turnover
rate................... 58.8% 96.5% 51.5% 28.1% 15.5% 11.2% 12.5% 24.4% 22.2% 25.1%
</TABLE>
- ---------------
* The Equity Trust commenced operations on August 21, 1986.
** Based on market value per share, adjusted for reinvestment of
distributions and taxes, including the effect of shares issued pursuant
to rights offering, assuming full subscription by shareholder.
*** Based on net asset value per share, adjusted for reinvestment of
distributions and taxes, including the effect of shares issued pursuant
to rights offering, assuming full subscription by shareholder.
+ Before provision for income taxes.
++ Annualized.
(a) Per share amounts have been calculated using the monthly average shares
outstanding method.
(b) A distribution equivalent to $0.75 per share for The Gabelli Global
Multimedia Trust Inc. spin-off from net investment income, realized
short-term gains, and paid-in capital were $0.064, $0.031 and $0.655,
respectively.
See Notes to Financial Statements.
20
<PAGE>
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Gabelli Equity Trust Inc. ("Equity Trust") is a closed-end,
non-diversified management investment company organized as a Maryland
corporation and registered under the Investment Company Act of 1940, as amended
(the "1940 Act") whose primary objective is long-term growth of capital. The
Equity Trust had no operations until August 11, 1986, when it sold 10,696 shares
of common stock to Gabelli Funds, Inc. (the "Adviser") for $100,008. Investment
operations commenced on August 21, 1986. The preparation of financial statements
in accordance with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ from those
estimates.
The following is a summary of significant accounting policies followed by
the Equity Trust in the preparation of its financial statements.
Security Valuation. Portfolio securities which are traded on a stock
exchange or NASDAQ National Market System are valued at the last sale price as
of the close of business on the day the securities are being valued, or lacking
any sales, at the mean between closing bid and asked prices. Other
over-the-counter securities are valued at the most recent bid prices as obtained
from one or more dealers that make markets in the securities. Portfolio
securities which are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market, as
determined by the Adviser. Securities traded primarily on foreign exchanges are
valued at the closing price immediately prior to the close of the New York Stock
Exchange of such securities on their respective exchanges or markets. Securities
and assets for which market quotations are not readily available are valued at
fair market value as determined in good faith by or under the direction of the
Board of Directors of the Equity Trust. Short-term investments that mature in
more than 60 days are valued at the highest bid price obtained from a dealer
maintaining an active market on that security. Short-term investments that
mature in 60 days or fewer are valued at amortized cost, unless the Board of
Directors determines that such valuation does not constitute fair value. Debt
instruments having a greater maturity are valued at the highest bid price
obtained from a dealer maintaining an active market in those securities or on
the basis of prices obtained from a pricing service approved as reliable by the
Board of Directors.
Repurchase Agreements. The Equity Trust may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Equity
Trust takes possession of an underlying debt obligation for a relatively short
period (usually not more than one week) subject to an obligation of the seller
to repurchase, and the Equity Trust to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Equity Trust's holding
period. This arrangement results in a fixed rate of return that is not subject
to market fluctuations during the Equity Trust's holding period. The value of
the collateral is at least equal at all times to the total amount of the
repurchase obligation, including interest. The Equity Trust bears a risk of loss
in the event that the other party to a repurchase agreement defaults on its
obligations and the Equity Trust is delayed or prevented from exercising its
rights to dispose of the collateral securities, including the risk of a possible
decline in the value of the underlying securities during the period while the
Equity Trust seeks to assert its rights. The Adviser, acting under the
supervision of the Board of Directors, reviews the value of the collateral and
the creditworthiness of those banks and dealers with which the Equity Trust
enters into repurchase agreements to evaluate potential risks.
Futures Contracts. The Equity Trust may engage in futures contracts for
the purpose of hedging against changes in the value of its portfolio securities
and in the value of securities it intends to purchase. Such investments will
only be made if they are economically appropriate to the reduction of risks
involved in the management of the Equity Trust's investments. Upon entering into
a futures contract, the Equity Trust is required to deposit with the broker an
amount of cash or cash equivalents
21
<PAGE>
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
equal to a certain percentage of the contract amount. This is known as the
"initial margin." Subsequent payments ("variation margin") are made or received
by the Equity Trust each day, depending on the daily fluctuation of the value of
the contract. The daily changes in the contract are recorded as unrealized gains
or losses. The Equity Trust recognizes a realized gain or loss when the contract
is closed. The net unrealized appreciation/depreciation is shown in the
financial statements.
There are several risks in connection with the use of futures contracts as
a hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk the
Equity Trust may not be able to enter into a closing transaction because of an
illiquid secondary market.
Foreign Currency. The books and records of the Equity Trust are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated on the respective dates of such
transactions. Unrealized gains and losses, not relating to securities, which
result from changes in foreign currency exchange rates have been included in
unrealized appreciation/depreciation of foreign currency and other assets and
liabilities. Unrealized gains and losses of securities, which result from
changes in foreign exchange rates as well as changes in market prices of
securities, have been included in unrealized appreciation/depreciation of
investment securities. Net realized foreign currency gains and losses resulting
from changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions and the difference between the amounts of interest and
dividends recorded on the books of the Equity Trust and the amounts actually
received. The portion of foreign currency gains and losses related to
fluctuation in exchange rates between the initial trade date and subsequent sale
trade date is included in realized gain/(loss) from investment securities sold.
Securities Transactions and Investment Income. Securities transactions are
accounted for as of the trade date with realized gain or loss on investments
determined using specific identification as the cost method. Interest income
(including amortization of premium and accretion of discount) is recorded as
earned.
Dividends and Distributions to Shareholders. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by the Equity Trust,
temporary differences and differing characterization of distributions made by
the Equity Trust.
Permanent differences incurred during the year ended December 31, 1995
resulting from different book and tax accounting policies for currency gains and
losses and capital gain distributions, are reclassified between net investment
income and net realized gains at year end. The reclassifications for the year
ended December 31, 1995 were a decrease in undistributed net investment income
of $82,792 and a decrease in distributions in excess of net realized gain on
investments of $82,792. Paid-in capital was reduced by $33,224,640 due to a tax
basis return of capital.
Provision for Income Taxes. The Equity Trust has qualified and intends to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended. As a result, a Federal income tax
provision is not required.
22
<PAGE>
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
The Equity Trust has entered into an investment advisory agreement (the
"Advisory Agreement") with the Adviser which provides that the Equity Trust will
pay the Adviser a fee, computed weekly and paid monthly, equal on an annual
basis, to 1.00 percent of the value of the Equity Trust's average weekly net
assets. In accordance with the Advisory Agreement, the Adviser manages the
Equity Trust's portfolio, makes investment decisions for the Equity Trust,
places orders to purchase and sell securities of the Equity Trust and oversees
the administration of all aspects of the Equity Trust's business and affairs.
During the year ended December 31, 1995, Gabelli & Company, Inc. ("Gabelli
& Company") and its affiliates received $90,468 in brokerage commissions as a
result of executing agency transactions in portfolio securities on behalf of the
Equity Trust.
In connection with the 1995 Rights Offering, holders of unexercised rights
to purchase shares of the Equity Trust's common stock ("Rights") were permitted
to instruct the Subscription Agent to sell such Rights on their behalf. The
Subscription Agent was permitted to effect such sales through Gabelli & Company,
unless the Subscription Agent was able to negotiate a lower commission rate with
an independent broker. Total commissions from sales of Rights effected by the
Subscription Agent through Gabelli & Company amounted to $122,614.
3. PORTFOLIO SECURITIES
Cost of purchases and proceeds from sales of securities, other than
short-term securities, aggregated $205,184,405 and $274,920,190, respectively,
for the year ended December 31, 1995.
4. CAPITAL
Common stock transactions were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
12/31/95 12/31/94**
-------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Shares issued via rights offering*........ 14,931,430 $118,877,097 -- --
Shares issued due to reinvestment of
dividends and distributions............. 1,764,509 17,301,323 3,750,021 $38,611,705
---------- ------------ --------- -----------
Net increase.............................. 16,695,939 $136,178,420 3,750,021 $38,611,705
========= =========== ======== ==========
</TABLE>
- ---------------
* On October 19, 1995 the Equity Trust distributed one transferable Right for
each of the 89,588,286 shares outstanding to shareholders of record on that
date entitling each shareholder to acquire with six Rights one newly issued
share of Common Stock at the issue price of $8.00 per share. Stock issuance
costs, which totalled approximately $639,288, were charged directly against
the proceeds of the offering.
** Estimated stock issuance costs relating to the July 14, 1993 Rights Offering,
which totaled approximately $650,511, were charged directly against the
proceeds of the offering on July 14, 1993. During the year ended December 31,
1994, the estimated stock issuance costs exceeded the actual stock issuance
costs by $109,131. Therefore, additional paid-in capital has been increased
by this amount in 1994.
23
<PAGE>
THE GABELLI EQUITY TRUST INC.
QUARTERLY RESULTS OF INVESTMENT OPERATIONS (UNAUDITED)
Shown in thousands of dollars and per common share:
<TABLE>
<CAPTION>
NET REALIZED
AND UNREALIZED NET
TOTAL NET GAIN/(LOSS) ON INCREASE/(DECREASE)
INVESTMENT INVESTMENT INVESTMENTS AND IN NET ASSETS
INCOME INCOME NET OTHER ASSETS FROM OPERATIONS
--------------- --------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995--QUARTER ENDED
12/31/95............ $5,640 $0.06 $2,860 $0.03 $ 16,301 $ 0.15 $ 19,161 $ 0.18
09/30/95............ 5,236 0.06 2,371 0.03 62,752 0.70 65,123 0.73
06/30/95............ 6,110 0.07 3,448 0.04 37,620 0.43 41,068 0.47
03/31/95............ 5,378 0.06 2,733 0.03 40,436 0.46 43,169 0.49
1994--QUARTER ENDED
12/31/94............ 5,395 0.06 2,801 0.03 (25,113) (0.29) (22,312) (0.26)
09/30/94............ 5,936 0.07 3,190 0.04 50,303 0.59 53,493 0.63
06/30/94............ 5,895 0.07 3,306 0.04 (2,277) (0.03) 1,029 0.01
03/31/94............ 5,032 0.06 2,289 0.03 (29,607) (0.35) (27,318) (0.32)
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of The Gabelli Equity Trust Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Gabelli Equity Trust Inc. (the
"Equity Trust") at December 31, 1995, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the nine years in the
period then ended and for the period August 21, 1986 (commencement of
operations) through December 31, 1986, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Equity Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 13, 1996
24
<PAGE>
THE GABELLI EQUITY TRUST INC.
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
CALENDAR YEAR 1995
CASH DIVIDENDS AND DISTRIBUTIONS
<TABLE>
<CAPTION>
TOTAL AMOUNT ORDINARY RETURN LONG-TERM DIVIDEND
PAYABLE RECORD PAID INVESTMENT OF CAPITAL REINVESTMENT
DATE DATE PER SHARE INCOME CAPITAL GAINS PRICE
- -------- -------- ------------- ---------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
03/28/95 03/14/95 $0.25 $ 0.0636 $0.1864 -- $ 9.7000
06/27/95 06/13/95 0.25 0.0636 0.1864 -- 9.9204
12/21/95 12/15/95 0.50 0.0017 0.0052 $0.4931 9.5732
------ ---------- -------- -----------
$1.00 $ 0.1289 $0.3780 $0.4931
</TABLE>
A Form 1099-DIV has been mailed to all shareholders of record for the
distributions mentioned above, setting forth specific amounts to be included in
the 1995 tax returns. Ordinary income distributions include net investment
income and realized net short-term capital gains.
RETURN OF CAPITAL
The amount received as a non-taxable (return of capital) distribution
should be applied to reduce the tax cost of shares. This amount will be
reflected on Form 1099-DIV. If the amount of the non-taxable portion exceeds
your tax basis, the excess will be taxable as a capital gain.
CORPORATE DIVIDENDS RECEIVED DEDUCTION AND U.S. TREASURY SECURITIES INCOME
The Equity Trust paid to shareholders ordinary income dividends of $0.0636
per share on March 28, 1995, $0.0636 per share on June 27, 1995 and $0.0017 per
share on December 21, 1995. The percentage of such dividends that qualifies for
the dividends received deduction available to corporations is 47.66% for all
such dividends paid in 1995. The percentage of the ordinary income dividends
paid by the Equity Trust during 1995 derived from U.S. Treasury Securities was
21.13%.
DISTRIBUTION OF RIGHTS
Neither the receipt nor the exercise of Rights distributed to shareholders
results in taxable income and no loss will be realized if the Rights expired
without being exercised. Rights sold will result in a capital gain or loss to
shareholders based on the difference between their adjusted basis and the sale
price. The holding period for the Rights includes the holding period of the
Common Stock in respect of which the Rights were distributed.
Shareholders may opt to make an election on their Form 1040, Schedule D, to
assign cost basis to the Rights received from their existing Equity Trust
shares. The allocation percentage for the 1995 Rights is:
<TABLE>
<S> <C>
Common Stock.............................. 98.07846%
Rights.................................... 1.92154%
</TABLE>
Multiply the existing basis of common stock by the above percentages to
determine the new basis on both the stock and the Rights. If no election is
made, the adjusted basis of the Rights is $0.00 and the basis of the common
stock remains unchanged. Consult your personal tax adviser to determine which
approach is most advantageous to you.
25
<PAGE>
THE GABELLI EQUITY TRUST INC.
HISTORICAL DISTRIBUTION SUMMARY
<TABLE>
<CAPTION>
TAXES PAID
SHORT- LONG- UNDISTRIBUTED ON
TERM TERM LONG-TERM UNDISTRIBUTED ADJUSTMENT
ANNUAL INVESTMENT CAPITAL CAPITAL RETURN OF CAPITAL CAPITAL TOTAL TO
SUMMARY INCOME GAINS GAINS CAPITAL(a) GAINS GAINS(b) DISTRIBUTIONS COST BASIS
- ------------------ ---------- -------- -------- ---------- ------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 (c).......... $0.12890 -- $0.49310 $0.37800 -- -- $ 1.00000 $0.37800-
1994 (d).......... 0.13536 $0.06527 0.30300 1.38262 -- -- $ 1.88625 1.38262-
1993 (e).......... 0.13050 0.02030 0.72930 0.22990 -- -- $ 1.11000 0.22990-
1992 (f).......... 0.20530 0.04050 0.29660 0.51760 -- -- $ 1.06000 0.51760-
1991 (g).......... 0.22590 0.03990 0.14420 0.68000 -- -- $ 1.09000 0.68000-
1990.............. 0.50470 -- 0.22950 0.44580 -- -- $ 1.18000 0.44580-
1989.............. 0.29100 0.35650 0.66250 -- $0.6288 $0.2138 $ 1.31000 0.41500+
1988.............. 0.14500 0.20900 0.19600 -- 0.2513 0.0854 $ 0.55000 0.16590+
1987.............. 0.25600 0.49100 0.33500 -- -- -- $ 1.08200 --
</TABLE>
- ---------------
(a) Non-taxable.
(b) Net Asset Value is reduced by this amount on the last business day of the
year.
(c) On October 19, 1995, the Company distributed Rights equivalent to $0.37 per
share based upon full subscription of all issued shares.
(d) On November 15, 1994, the Company distributed shares of the Gabelli Global
Multimedia Trust Inc. valued at $8.0625 per share.
(e) On July 14, 1993, the Company distributed Rights equivalent to $0.50 per
share based upon full subscription of all issued shares.
(f) On September 28, 1992, the Company distributed Rights equivalent to $0.36
per share based upon full subscription of all issued shares.
(g) On October 21, 1991, the Company distributed Rights equivalent to $0.42 per
share based upon full subscription of all issued shares.
- - Decrease in cost basis.
+ Increase in cost basis.
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 ("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
27
<PAGE>
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 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 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 15th of each month beginning in April 1996. 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 15th of the month. Funds
not received at least five days before the investment date shall be held for
investment in the following month. A payment may be withdrawn without charge if
notice is received by 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.
------------------------------------------------------------------
The Annual Meeting of the Equity Trust's Stockholders will be held
at 9:30 A.M. on Monday, May 13, 1996, at the Cole Auditorium,
Greenwich Public Library in Greenwich, Connecticut.
------------------------------------------------------------------
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
Douglas Neviera
Assistant Vice President
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 103,919,670
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 in
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 Gabelli Funds' Internet
homepage at: HTTP://WWW.GABELLI.COM, or
e-mail us at: [email protected]
------------------------------------------------
- --------------------------------------------------------------------------------
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>
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER, RYE, NY 10580-1434
PHONE: 1-800-GABELLI (1-800-422-3554)
FAX: 1-914-921-5118 INTERNET: HTTP://WWW.GABELLI.COM
E-MAIL: [email protected]