[DESCRIPTION] Semi-Annual report
Semi-Annual Report
[Logo]
The Gabelli
Equity Trust Inc.
June 30, 1996
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On Our
Tenth Anniversary
We've given a great deal
to our shareholders
[The following table was represented as a bar chart in the written material]
Total Assets at 8/21/86(a) (in millions) $ 374
Distributions to Shareholders(b)(c) (in millions) $ 795
Total Assets at 8/21/96(c)(d) (in millions) $1,018
The Gabelli Equity Trust Inc.
(GAB - NYSE)
One Corporate Center, Rye, New York 10580 o (914) 921-5070
Fax: (914) 921-518 o http://www.gabelli.com o [email protected]
(a) Date of commencement of operations. Assets do not include $37.4 million
received at a second closing on 1/19/86. (b) Cumulative distributions plus the
intrinsic value of rights distributed and the spin-off of the Gabelli Global
Multimedia Trust. (c) Includes reinvested distributions of $179.2 million. (d)
Includes proceeds from rights offerings of $349.5 million.
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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.
[Logo]
The Gabelli
Equity Trust Inc.
Our cover icon represents the underpinnings of Gabelli. The Teton mountains in
Wyoming represent what we believe in in America -- that creativity, ingenuity,
hard work and a global uniqueness provide enduring values. They also stand out
in an increasingly complex, interconnected and interdependent economic world.*
This report is printed on recycled paper.
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[Photo of Mario J. Gabelli]
[Logo]
The Gabelli
Equity Trust Inc.
To Our Shareholders,
Rebounding from the inventory contraction of the previous two quarters, the
malaise of a snowy winter and political stalemate in Washington, the economy
surged ahead. Domestic profits will likely benefit despite earnings from
continental European sources being hobbled by a weaker economic backdrop and a
stronger dollar. This stronger than expected economy re-awakened long dormant
inflationary fears and a slumping bond market sounded a cautionary note for
stocks. Still, buoyed by favorable flow of funds -- investment in equity mutual
funds remained near record levels -- the Dow Jones Industrial Average and
Standard & Poors' 500 forged ahead.
During the second quarter ended June 30, 1996, the Gabelli Equity Trust
Inc.'s ("Equity Trust") net asset value per share increased 2.2% to $10.10,
after adjusting for the $0.25 distribution on June 24, 1996. This compares to
the 4.5% return in the unmanaged Standard & Poor's 500 Composite Stock Price
Index ("S&P 500") for the quarter. Year-to-date, the net asset value has
increased 6.9% versus the S&P 500's 10.1% increase. For the twelve months ended
June 30, 1996, the Equity Trust's net asset value increased 16.9% after
adjusting for all distributions. The S&P 500 was up 26.0% for the same period.
Since inception on August 21, 1986 through June 30, 1996, the Equity
Trust's net asset value has achieved a 250.7% total return, which equates to a
13.6% average annual return. The three- and five-year average annual returns
were 12.3% and 14.1%, respectively.
The Equity Trust's common shares ended the quarter at $9.625 per share on
the New York Stock Exchange, up 1.3% for the quarter and up 8.1% for the six
months ended June 30, 1996, after adjusting for all distributions. For the
trailing twelve months, the common shares are up 10.5%, after adjusting for all
distributions and the rights offering.
[Graphic depicting investment strategy]
What We Do
We do what is described as bottom-up research: we read annual reports; we
visit the competition; we talk to customers; we go belly to belly with
management. We structure our portfolio by picking stocks.
In past reports, we have tried to articulate our investment philosophy and
methodology. The following graphic further illustrates the interplay among the
four components of our valuation approach.
Our focus is on free cash flow; earnings before interest, taxes,
depreciation and amortization (EBITDA) minus the capital expenditures necessary
to grow the business. We believe free cash flow is the best barometer of a
business' value. Rising free cash flow often foreshadows net earnings
improvement. We also look at earnings per share trends. Unlike Wall Street's
ubiquitous earnings momentum players, we do not try to forecast earnings with
accounting precision and then trade stocks based on quarterly expectations and
realities. We simply
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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, sale or spin-off of a division or
the development of a profitable new business.
Once we identify stocks that qualify as fundamental and conceptual
bargains, we then become patient investors. This has been a proven long-term
method for preserving and enhancing wealth in the U.S. equities market. At the
margin, our new investments are focused on businesses that are well managed and
will benefit from sustainable long-term economic dynamics. These include macro
trends, such as globalization of the market in filmed entertainment and
telecommunications, and micro trends, such as increased focus on productivity
enhancing goods and services.
COMMENTARY
The Economy and the Stock Market
There is an old saying that, "If you laid all the world's economists end to
end, they wouldn't reach a conclusion". To that, we would add ". . . and if they
did, it would most likely be the wrong one". To wit, let's take a short trip
down memory lane to the beginning of this year. Following a sluggish fourth
quarter of 1995 (0.5% GDP growth), the consensus expected only a modest pickup
in economic activity in the first half of 1996. Inflation was declared dead and
it would be just a matter of time before the Federal Reserve would jump-start
the economy by dropping short-term interest rates. Long rates would follow and
we would see a vibrant bond market that would help sustain the bull market in
stocks. Some well-known mutual fund managers, and one particularly visible, now
former, mutual fund manager, placed big bets on this economic scenario.
What actually happened? The economy started the year strong with 2.3% GDP
growth in the first quarter and gained momentum -- the second quarter is
projected to come in at a 3.5 to 4.0% growth rate. Employment surged with a
series of not so good Fridays for the stock market (employment statistics are
released on the first Friday of every month). Grain prices soared with "beans in
the teens" as the rallying cry in the commodities pits. Higher oil and gasoline
prices made headlines before backing off in early summer. Lo and behold,
inflation was not dead! Bonds dropped and the Fed started hinting that their
next move was more likely up than down. Buoyed by strong cash inflow into equity
mutual funds, the stock market posted good gains. However, an increasingly
choppy market indicated that investors were finally looking down as well as up.
What have we learned from this? Despite being more right than wrong in our
own economic/market projections (we did forecast inflationary pressure and
higher long-term interest rates, but we also expressed limited expectations for
what has proved to be a fairly vibrant stock market), we were once again
reminded that our long held and articulated belief that focusing on the
fundamental value of individual stocks is, over the long term, a safer and
vastly more reliable way to generate consistent returns.
This is not to say that we don't have opinions on the economy and financial
markets. We do and will continue to share them with you. For example, we have
long opined that President Clinton was not likely to make
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the same mistake in an election year that the then incumbent President Bush made
in 1992. He'll want a strong economy through the election. While domestic GDP
growth is likely to ebb in the second half from the unsustainable pace of the
second quarter as higher interest rates begin impacting economic activity and
the somewhat overextended American consumer tightens the purse strings, economic
growth should be good through the rest of the year. Corporate earnings will be
decent -- up around 10% for the year. It is inflation, interest rates and the
flow of funds that will call the tune for the stock and bond markets over the
next several quarters.
On the inflation front, we echo our comments from our year-end 1995 letter
to you. Inflation is peeking out of the coffin to which it was consigned by the
majority of Wall Street economists. What are the inflationary gremlins? Oil is a
wild card. The bombing of an American military base in Saudi Arabia may
represent an escalation of terrorism in the Mid-East. Political instability in
the region, along with increasing worldwide demand for oil, could translate into
higher prices. Wholesale food inflation is another wild card. With corn at $5.50
per bushel, soybeans at around $8.50, and wheat above $5.00, it is just a matter
of time before we see higher prices at the supermarket. Retail food inflation
has been moderated in the first half as declining meat prices have partially
compensated for higher grain prices -- cattle and hog farmers slaughter herds
rather than continue to fatten them up with more expensive grain. We will see
higher beef and pork prices next year. Finally and most importantly, we may see
upward pressure on wages as outsourcing, downsizing, globalization of labor and
technology inputs run their course. Strong employment and a potential showdown
between General Motors and the United Auto Workers may prove disquieting. The
recent confirmation of Federal Reserve Chairman Greenspan to another term should
pave the way for an early Fed response to these stirrings of inflation, even if
the action is prior to the election. Long rates are up more than 100 basis
points this year. Long bonds are already down 3% on a total return basis and
nearly double that in price alone. In addition, we expect both candidates to
talk about tax cuts - which could spark more jitters for the long bond. If, as
we anticipate, inflation does hit the 3.5% level in the second half, equity
investors may have cause to pause. In other words, if bonds keep sneezing,
sooner or later stocks will catch a cold.
Market observers may respond to this note of caution by saying investors no
longer care about the economy, inflation, interest rates or valuations. Flow of
funds is the only thing that matters. The stock market will move relentlessly
higher until all the baby boomers who are pouring money into equity funds reach
retirement age. Other observers point out that the aging of populations around
the world and the explosive growth in private pension plans in industrial
countries such as Japan, Germany, France, Italy and England point to strong
demand for global equities and, ultimately, for U.S. equities. We do not
discount the favorable influence these demographics have on the flow of funds
and on the equities market. We do think valuations matter and competition to
stocks in the form of higher bond yields could easily disrupt this comfortable
scenario.
In previous letters, we shared with you our observations that deals
(takeovers) will dominate the investment landscape. In this report, we want to
highlight other themes.
The Consolidators - The 1990s Game
The 1960s was the decade of the conglomerates. Individuals like Harold
Geneen at ITT, Charlie Bluhdorn at Gulf & Western, and Royal Little at Textron
championed corporate growth and stability by bundling non-related businesses.
Wall Street was in love with the conglomerates. And why not? They were using
their shares trading at 12 times earnings to buy smaller less visible companies
at 8 times earnings. Earnings marched steadily upward as did conglomerate stock
prices.
Times change. Wall Street now shuns conglomerates. They are difficult for
analysts to understand and many are saddled with mature low-growth companies
that restrain, rather than contribute to, earnings growth. Corporate
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managers are realizing that by shedding non-related divisions through direct
sale or spin-off to shareholders, they are getting much better valuations for
their core businesses. In short, investors are willing to pay more for the sum
of the parts than for the whole. Corporate chieftains like Harvey Golub of
American Express Company (AXP - $44.625 - NYSE), Tom Hays at American Brands,
Inc. (AMB - $45.375 - NYSE) and Bob Allen at AT&T Corp. (T - $62.00 - NYSE) have
already demonstrated the positive impact that consolidation has on stock prices.
Westinghouse Electric Corp.'s (WX - $18.75 - NYSE) Michael Jordan appears to be
following their lead with the acquisition of Infinity Broadcasting Corporation
(INF - $30.00 - NYSE) to compliment the CBS radio network and the revelation
that he is considering spinning off the company's industrial businesses.
There is another type of consolidation creating enthusiasm on Wall Street.
Consolidators are buying competitors, lowering expenses through enlarged buying
power, eliminating corporate overhead and driving growth rates in the process.
Consolidators are looking for fragmented industries where this strategy is most
effective. A prominent consolidator is Wayne Huzienga, who made his first
fortune consolidating the fragmented trash hauling industry with Waste
Management International Inc. (WME - $11.125 -NYSE). He repeated the pattern in
the video rental business via Blockbuster Entertainment. Now, under the
corporate banner of Republic Industries, Inc. (RWIN - $29.125 - NASDAQ), he is
consolidating the used car and electronic security businesses. We believe that
by buying smaller competitors, consolidating operations, and creating a national
brand name franchise, Mr. Huzienga will once again make a lot of money for
himself and Republic Industries shareholders. Other industries where this is
occurring are broadcasters, banks, brokers and, of course, health care.
The Exciting World of Food Retailing
Food retailers are dull. Who in their right mind would want to invest in a
business with such modest revenue growth and paper thin margins? Right now, we
do. There are several positive dynamics unfolding in the retail food industry,
which, for the value investor, make supermarket stocks more exciting than in the
past.
The first is wholesale food inflation. Grain prices are rising. Meat and
poultry prices will follow. Your friendly neighborhood grocer is going to pass
these higher costs on to you and tack on a little extra in the bargain. Yes,
supermarket margins generally rise during periods of wholesale food inflation.
Secondly, like most American industries, supermarkets are successfully reducing
costs through automation. More importantly, expansion has been curtailed.
Finally, just like the American banking industry, food retailing is ripe for
consolidation. Stronger supermarket chains are buying weaker chains, and this is
occurring as international food giants move into the U.S. (most recently, Royal
Ahold buying Stop & Shop) and are either operating them more cost efficiently or
simply closing the doors to eliminate unprofitable locations and increase
margins.
The end result is that the skinny margins in the industry are becoming a
little fatter. With current net after-tax margins averaging around 2% of
revenues, even modest margin improvement produces enormous earnings gains. To
wit, a 0.5% expansion in margins translates into a 25% earnings gain. That's why
smart people like Kohlberg, Kravis, and Roberts bought Bruno's, Inc. (BRNO -
$13.875 - NASDAQ) and why Royal Ahold NV of the Netherlands is buying Stop &
Shop Companies, Inc. (SHP - $33.375 - NYSE). That's why your Fund owns Giant
Food Inc. (GFS'A - $35.875 - AMEX). Margins and earnings for these companies
should improve, and if current management can't make substantial progress in
this favorable environment, a stronger operator will step in.
Cats - The Purr-fect Pet
No, not the long running Broadway play, but the pet of convenience for
increasingly busy American families. Cats are great. They don't chew the
furniture, they make their own fun, and you don't have to take them for walks.
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Currently there are about 65 million cats in American households. The US
cat population is projected to grow at 5% per annum to about 83 million by the
year 2000. Total spending on cats (food, litter, toys, veterinary care and
medicine) is growing at slightly better than 10% per year. In short, the cat
industry is purring along quite nicely.
We are investing in both ends of the cat. Ralston Purina Group (RAL -
$64.125 - NYSE) is the largest producer of pet food in North America, with cat
food contributing an increasing percentage of total sales. Ralston's pet food
division provided a 39% return on assets in 1995 with cash flow margins in
excess of 20% of sales. Also, Ralston's Golden Cat currently has 25% of the
clumping cat litter market, the fastest growing and highest margin segment of
the category. Ralston's other big business, Eveready Batteries, should also keep
going and going and going . . . Leading market franchises in two strong
industries, combined with shareholder sensitive management which has jettisoned
less profitable businesses, and share repurchases which have halved equity float
in the last ten years, make Ralston Purina a terrific long term opportunity.
Another portfolio company, First Brands Corporation (FBR - $27.00 - NYSE), was
one of the first into the box with its Johnny Cat clumping cat litter product,
which currently enjoys a 35% share of the business.
Place Your Bets
Gaming stocks were among the Fund's best performers in the first half of
1996. We are betting they will continue to do well as gaming industry
consolidation gains momentum. Anti-gaming forces in state and city governments
have successfully contained the geographical spread of gaming. Disappointing
results from riverboat casinos in New Orleans and further up the Mississippi
have refocused the industry's attention on the traditional gambling meccas of
Atlantic City and Las Vegas. The game now becomes increasing market share in
these gambling havens via building new hotel/casinos or acquiring the weaker
operators. Mirage Resorts, Incorporated (MIR - $54.00 - NYSE) favors the former,
with two new properties planned for Atlantic City, while its new Bellagio nears
completion in Las Vegas. With a healthy balance sheet and plenty of cash, the
new ITT Corporation (ITT - $66.25 -NYSE) will either follow Hilton Hotels
Corporation (HLT - $112.50 - NYSE) and will look for complementary properties in
Las Vegas and Atlantic City, or will spend some money to build more of their
own.
With its strong balance sheet and excellent casino operating record, Hilton
will expand and improve the Bally's franchise. The UK's Ladbroke Group plc
(LADGY - $2.77 - NASDAQ), owner and operator of hotels under the Hilton brand
outside the U.S., could be new Hilton CEO Stephen Bollenbach's next target. The
end result is that there will be larger, better managed, and more profitable
gaming companies within the next several years.
Shareholder Meeting - May 13, 1996
The annual meeting of shareholders was held on May 13, 1996 at the
Greenwich Library in Greenwich Connecticut. At that meeting, shareholders
elected Bill Callaghan and Salvatore J. Zizza as Directors of the Equity Trust.
A total of 91,977,132 and 92,076,888 votes were cast in favor of each Director
and 1,632,838 and 1,533,083 votes were withheld for each Director, respectively.
In addition, the shareholders elected Price Waterhouse LLP as the
independent accountants of the Equity Trust for the year ending December 31,
1996. 92,141,429 votes were cast in favor of the approval of this proposal,
581,612 votes were cast against the proposal and 886,939 votes abstained. We
thank you for your participation in the meeting and appreciate your continued
support.
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BARRON'S 75th Special Anniversary Issue
BARRON'S asked our Chief Investment Officer, Mario J. Gabelli, to discuss his
investment themes in its 75th Special Anniversary Issue. While these comments
were written in mid-February, we believe they are still valid today. Discussion
of individual companies is not necessarily reflective of the fund's entire
portfolio.
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BARRON'S
===================================== 75th =====================================
Grand Slam Hitting
The new international middle class will be taking
to the friendly skies, for business and pleasure.
By Mario Gabelli
[Photo]
The ancient Greek dramatist Euripides said, "The best of seers is he who guesses
well." Each year since 1980, Barron's has given me the opportunity to sit down
with a distinguished group of good guessers at the annual Roundtable and divine
what the economy, the markets and some individual stocks would do in the year
ahead. Now, in honor of Barron's 75th Anniversary, I've been invited to stick my
neck out even further and discuss several investment themes that will
theoretically enrich readers over the next five years. Fair enough.
I will begin with the confession that over the past 20 years, our annual
macroeconomic and market forecasts haven't always been right. Fortunately for
our clients and Barron's readers, our investment methodology is not built upon
accurately predicting interest-rate trends or timing the market, but rather on
picking stocks, and many of our picks have fared quite well.
One reason is that we've had a good batting average identifying trends - we
call them catalysts - that have unlocked value in selected industry groups. A
catalyst can be a change in regulatory standards such as the original cable
television deregulation bill of 1984 that led us to lucrative investments in
cable stocks. It can be consolidation within an industry. The scramble for
filmed entertainment assets engendered by expanding distribution systems
throughout the 1980s and early 1990s inspired us to take substantial and
ultimately quite profitable positions in Warner Communications, MCA and
Paramount prior to their acquisitions by Time Inc., Matsushita and Viacom,
respectively.
Catalysts can also be corporate restructurings. The recent trend to heap
realize shareholder value through the sale or spinoff of businesses has helped
us earn good returns from "Humpty Dumpty" companies as all the king's horses and
all the king's men help break conglomerates into pieces again. Among them have
been Tenneco, American Brands, American Express, ITT and, now, AT&T.
Over the next five years, the most powerful trend we see is the explosive
growth of the international marketplace for American goods and services. This
traces its roots to two major catalysts: the rejuvenation of American industry
spawned by a declining cost of capital and enormous productivity gains, and the
victory of global capitalism symbolized best by the crumbling of the Berlin
Wall. Good old-fashioned Yankee ingenuity has made us more than competitive with
Japan and Germany. We are now in a terrific position to conquer new
international economic frontiers.
With free-markets economies evolving in China and the former Soviet bloc,
and the middle classes rapidly expanding in developing nations in Latin America
and the Pacific Rim, there will be 2.5 billion to three billion new consumers by
the turn of the century. How is this emerging international middle class going
to spend its money? If past is prologue - and we can learn something by looking
back at the economic evolution of the great American middle class - the new
international middle class
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Mario Gabelli, a regular member of
Barron's Roundtable since 1980, is
chairman and chief investment officer
of Gabelli Funds Inc.
[Drawings]
Photograph: Merry Alpern/Jim Lukoski for Barron's;
Illustration: Jessie Hartland for Barrons
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will upgrade their food consumption habits; if it is made available, they will
buy telephone service; they will spend money on entertainment, and they will
travel.
Investors of our persuasion - stockpickers, if you will - can't talk about
investment trends without naming some names. Unlike the Roundtable, where we are
constantly prodded both by Barron's and our colleagues to fill in the
fundamental blanks on individual stock selections, I won't be providing hard
data on the companies I mention in this article. Nor will I make predictions
about short-term earnings and cash flow. That said, consistent with our
Graham-and-Dodd-oriented value philosophy, we would like to own the businesses
named here for the long term.
It's Not Chickenfeed: Let's start in, of all places, Iowa. The American grains
farmer is the most productive in the world. Iowa is agriculturally
state-of-the-art. Let me give you a hypothetical example. There are seven ounces
of grain needed to produce one ounce of meat at market. If chicken or pork
consumption in China were to increase by one ounce per capita, and Iowa were to
produce all the grain used to fatten these Chinese chickens and hogs, on a gross
national product basis, Iowa would be among the richest countries in the world.
This may be perceived as a silly example. But its purpose is to call attention
to the tremendous upside potential for American grain farmers and vendors to
those farmers. Agricultural equipment manufacturers like John Deere, companies
that move grains to shipping centers, like Archer-Daniels-Midland, and
irrigation-equipment makers like Lindsay Manufacturing should all be long-term
beneficiaries of the increased role the American farmer will play in feeding the
world.
Dialing for Dollars: Once the new international consumer puts some more meat on
the table, what else would make his or her life better? Being able to call
friends and family on the telephone would be a big step forward. In fact, you
could argue that telecommunications is both the engine and the caboose in the
emergence of the international middle class. To compete on the global stage,
businesses in developing countries need healthy stock markets to attract global
capital. Modern telecommunications systems are a prerequisite. As efficient
telecommunications systems further enhance economic growth and expand the middle
class, the demand for more universal telephone service increases. Here, we need
to tip our hat to Craig McCaw's evolutionary theory of time and space, which
effectively jump-started the cellular telephone industry. And when it comes to
developing countries, it is wireless service that will help bring
telecommunications services at reasonable prices.
Arguably, telecommunications is the No. 1 global growth industry for the
next decade or more. Consequently, long-term investors will not have to be
terribly discriminating to earn pretty good returns in this sector. But rather
than take a scattershot approach, investors might maximize their returns by
focusing on those segments of the industry that will grow the fastest and the
dominant players therein. The big three U.S. long distance companies, AT&T, MCI
and Sprint, are rapidly developing the strategic alliances with national and
local carriers around the world that should allow them to dominate the
international long-distance market. Telecommunications equipment manufacturers
like Lucent, the spinoff from AT&T, and Northern Telecom will play a big role in
wiring the world. Suppliers of advanced cable equipment like Scientific Atlanta
also have terrific international growth prospects. On the wireless side,
cellular-phone makers like Motorola and Nokia should thrive. A special mention
should go to AirTouch, which has done a terrific job winning joint-venture
cellular-telephone franchises throughout Europe. Two other cellular investments
worth considering are 360 Communications, which is the domestic cellular spinoff
from Sprint, and Britain's Vodafone.
If you favor a more focused "special situation" approach, the Canadian
telephone giant BCE should benefit when it sells off its substantial investment
in Northern Telecom and as Canadian deregulation catches up to the rest of the
world. On a per-capital basis, the Vancouver metropolitan area has the highest
concentration of expatriate Chinese in North America. This could prove to be a
great "gateway to China."
Global Eyeballs: No American products travel better than filmed entertainment
and pre-recorded music. Several years ago, the investor relations people at Time
Warner were kind enough to give us a tape of Warner cartoon characters providing
a global geography lesson dubbed in a dozen foreign languages. We've used this
tape at our annual client meeting to illustrate the global reach of the American
entertainment industry. There is simply no place you can go in the world without
American film being a staple of cinematics, cable TV or broadcast entertainment.
The same goes for music. Just look at the convergence of the computer, telephone
and cable television industries in the U.S. Overseas opportunities beckon as
well. In the past five years alone, the number of satellite dishes in India has
gone from 400,000 to 10 million. As the distribution channels expand worldwide,
the value of entertainment will continue to increase.
With the consolidation we've already experienced in the filmed
entertainment industry, there are fewer ways to participate. Time Warner is a
dominant global company in both filmed entertainment and pre-recorded music.
Assuming the marriage with Turner Broadcasting is consummated, Time could become
an international cable TV powerhouse as well. The stock price has been
restrained by concerns about Time's debt, the unwinding of what has become an
acrimonious relationship with US West, and the uncertain prospects for Time
Warner's huge cable television operations. Investors are currently blind to the
forest through the trees on this one. In the long run, however, we are confident
the market will recognize Time Warner's pre-eminent global position in
entertainment software.
Other beneficiaries of this favorable long-term trend for entertainment
software producers and packagers also include Viacom - the world wants its MTV;
Seagram, the new owner of MCA, and Liberty Media, John Malone's combination of
Tele-Communications Inc.'s cable network investments.
Up, Up and Away: Air traffic is tremendously sensitive to increases in personal
income. The new international middle class will be taking to the friendly skies.
They will fly for business, and they will fly for pleasure. Over the next five
years, you could probably make a lot of money investing in international airline
stocks. But it will be less complicated and perhaps just as profitable investing
in Boeing, which along with Europe's Airbus consortium will build the foreign
fleets to accommodate increasing air traffic abroad.
We are almost right at the bottom of a five-year down cycle in the aircraft
industry. Industry studies indicate that in the next 20 years, there will be
12,000 new aircraft built to satisfy incremental global demand and 4,000 to
replace aircraft that will be retired because they are too old or
fuel-inefficient or don't meet new noise-control requirements. That's 16,000 new
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airplanes to be built over the next two decades. Boeing, which is a
technological leader, will get the lion's share of orders.
Another option is to invest in vendors to Boeing. There are very few pure
plays in this arena, but companies deriving a material volume of revenues from
commercial aerospace include Ametek, Precision Castparts, Moog, Crane, SPS
Technologies, Honeywell and Curtiss-Wright. Sequa Corp., whose Chromalloy
division is a leader in jet engine maintenance and repair, would be a good
"aging of the existing fleet" play.
The Deal: Another global dynamic that isn't new, but is far from finished, is
strategic merger-and-acquisition activity. At the 1995 Roundtable, I said there
would be a ton of deals done in the year ahead. It worked out to be $458 billion
in deals in the U.S. and $866 billion globally. I don't know that we will see
that kind of record volume this year, but you will see some big numbers. Why?
The world is awash in liquidity, rising equity markets make stock a more
valuable currency and, most importantly, it is still cheaper to buy businesses
on global stock markets than it is to build them from scratch.
How do you take advantage of this long-term trend? I am going to
unabashedly preach for my own church here. As Benjamin Graham and his successor
at Columbia, Roger Murray, instructed us, and as Warren Buffett has put so
profitably into practice, you approach stocks as if they were pieces of a
business you want to buy at a discount to what Graham called intrinsic value,
others call economic value, and what years ago was termed "private market
value."
How do you go about quantifying value? We believe free cash flow, defined
as earnings before interest, taxes and depreciations (EBITD), or a slight
variation, EBITDA, both minus the capital expenditures necessary to grow the
business, is the best barometer of a company's value. Most corporate
merger-and-acquisition people look at the very same thing. When the informed
industrialist is evaluating a business for purchase, he or she is not going to
put a lot of weight on stated book value. That's for accountants, not for savvy
buyers of business. They probably don't care much about net earnings. Clever
corporate managements can be creative in booking earnings. What that informed
industrialist wants to know is: How much cash is this business throwing off
today and how much is he going to have to invest in this business to sustain or
grow this stream of cash in the future?
There are other factors in determining a stock's private market value. Cost
of capital always affects a company's values. That's why stocks tend to be
valued lower when interest rates rise. Cash flow growth rates will alter values,
too. Just as growth-stock investors will pay a higher price-to-earnings ratio
for higher earnings growth, private-market-value investors will pay a higher
multiple of cash flow for faster cash-flow growth. Finally, sophisticated
business buyers will look beyond the balance sheet for hidden assets - valuable
land on the books at original cost or an overfunded pension plan - as well as
hidden liabilities, like unfunded health-care responsibilities or potentially
costly environmental problems.
By doing this kind of analysis of income statements and balance sheets, and
checking out all those little footnotes attached, and keeping an eye on the
prices businesses are being bought and sold at every day out there in the real
world, you can quantify the value of a business or group of businesses. You can
usually find fundamental bargains - stocks selling at substantial discounts to
private market value. Then you have to ask the subjective questions: Who might
want to own this company? Would management be receptive to a takeover proposal?
Are the target company's assets so unique that someone might pay well above fair
value?
If you can come up with some positive answers to questions like these, you
may well have found yourself a terrific takeover candidate.
Don't Expect Too Much: Lastly, some comments on the longer-term prospects for
equities. I'm not talking about what is going to happen to the market over the
next quarter or even the next several years. However, I do think investors
should have some perspective on what they can expect. The average annualized
return on equities over the last 15 years, as measured by the S&P 500, is 14.8%.
That's almost 50% above the historical return on stocks on an annualized basis.
When you compound this out 10 years, the differential is staggering. Will we see
the same kind of returns from stocks over the next 15 years? I wouldn't bet the
ranch on it. Sooner or later, this roaring bull market will end, either with a
substantial correction or a bear market or, preferably, an extended period of
much more modest returns.
How should today's investor prepare for this? I would start by adjusting
expectations. When making financial planning assumptions, use conservative
return figures for equities, and save and invest accordingly. In other words, if
you are putting a given amount of dollars into equities and assuming that it
will compound at 15% a year over the next 10-20 years, you will likely find your
children's college fund or your retirement nest egg more than a little short.
Secondly, you might want to look at alternative investment strategies.
Market-neutral disciplines like risk arbitrage, which is capable of delivering
low- to mid-double-digit annualized returns regardless of the direction of the
broad equities market, should be considered. This will be particularly rewarding
if what we have characterized as the third great wave of mergers continues as
long as we expect it to.
Finally, although one can play many global trends from the relative comfort
of the New York Stock Exchange, investors should internationalize their
portfolios. Twenty-five years ago, U.S. equities represented 66% of the
capitalization of the total global equities market. Today it is 38%. Twenty
years ago, only the most adventurous Americans would invest in places like Spain
or Italy. Today, there are billions of American dollars in emerging markets in
Latin American and the Pacific Rim. It has always been my inclination to
challenge the conventional wisdom. But I do think there is some legitimacy to
the idea that many foreign economies will grow faster than the U.S., and that
returns from foreign equities markets will trend higher than our own.
- --------------------------------------------------------------------------------
8
<PAGE>
Let's Talk Stocks
The following are stock specifics on selected holdings of the Equity
Trust'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 - $44.625 - NYSE), founded in 1850, is a
diversified travel and financial services company operating in 160 countries
around the world. The company is best known for its American Express charge card
and travel-related services. Another 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 "green" charge card and
investment management businesses. The company has significantly expanded the
range of merchants who welcome its cards. Management's objective is virtual
parity with bankcard networks. An electronic interactive service was introduced
last year that enables cardmembers to make travel arrangements, check the status
of their accounts, pay their bills and purchase catalogue merchandise. We
believe the company has been repositioned to enjoy double-digit earnings growth
over the balance of this decade.
-----------------------
Chris Craft Industries
-----------------------
|
74% |
|
-----------------------
BHC Communications
-----------------------
|
57% |
|
-----------------------
United Television
-----------------------
Chris-Craft Industries, Inc. (CCN - $44.00 - NYSE), through its 74% ownership of
BHC Communications, Inc., is primarily a television broadcaster. BHC owns and
operates UPN-affiliated TV stations in New York (WWOR), Los Angeles (KCOP) and
Portland (KPTV). BHC also controls over 57% of United Television, Inc., which
operates an NBC affiliate, an ABC affiliate and three UPN affiliates. BHC also
currently owns 100% of United Paramount Network (UPN), but Viacom has an option
to purchase 50% of UPN by January 1997. CCN, with over $1.5 billion in cash and
marketable securities, is strongly positioned to expand its operations. CCN is
the eighth-largest TVstation group owner in the U.S. and covers almost 20% of TV
households.
GTE Corporation (GTE - $44.75 - NYSE) is the fourth-largest publicly-owned
telecommunications company in the world. The company owns the largest non-Bell
telecommunications system, serving 19 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-telephone businesses
growing at more than 20% per year. Chairman Charles Lee has prepared the company
for accelerated growth.
Media General, Inc. (MEG'A - $37.25 - ASE) is a Richmond, VA-based company,
publishing daily newspapers in Tampa, Winston-Salem and throughout Virginia.
Media General owns three network television stations in Tampa, Charleston, and
Jacksonville and a cable television franchise in Fairfax County, VA. The
relaxation of broadcast station ownership restrictions provided by The
Telecommunications Act of 1996 is driving industry consolidation and is
increasing the franchise values of strong, well-positioned media properties such
as those owned by Media General.
Pittway Corporation (PRY - $44.00 - ASE) has undergone significant changes over
the past few years, selling or spinning off businesses representing half its
sales volume and over 60% of its income. The company has two remaining core
businesses: manufacturing and distributing professional burglar and fire alarm
equipment and
9
<PAGE>
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 37% interest in Cylink (Pittway owns 8.9
million shares), a leading manufacturer of encryption equipment, and a 4.5%
equity interest in U.S. Satellite Broadcasting (Pittway owns 4.2 million
shares), a direct-to-the-home (DTH) satellite broadcast company.
Sprint Corporation (FON - $42.00 - NYSE) is the third largest long-distance
carrier and the second largest independent local telephone company in the U.S.
The company completed the spin-off of its cellular unit, 360(degree)
Communications Co., in March 1996. Sprint has positioned itself on a global
basis through a joint venture with France Telecom/Deutsche Telekom, which
purchased a 20% stake in Sprint (excluding the cellular unit) in January for
$3.5 billion. Our interest in Sprint stems from its promising national
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 the prospective
new entrants in the long distance business offset by the PCS venture and its own
pursuit of the $100 billion local telephone market.
Telecomunicacoes Brasileiras SA (Telebras) (TBR - $69.625 - NYSE) is the
Brazilian government-controlled monopoly telecommunications holding company
consisting of 28 subsidiaries serving 13.3 million telephone lines and 1.5
million cellular customers in a country with a population of 160 million. The
penetration rate is only 8.4% for telephone and 1% for cellular. The stock is
attractively valued at less than four times our estimate of 1996 cash flow.
Future opportunities include the prospects of privatization, strong line growth
and improvements in efficiency. The company is benefiting from an improved rate
structure which allows the company to recoup inflation-related cost increases on
a more consistent basis.
Time Warner Inc. (TWX - $39.25 - NYSE), in a bold and brilliant tactic, is
endeavoring to acquire Turner Broadcasting Systems Inc. for $7.5 billion.
Management is currently working to obtain governmental approval of the
transaction. At the same time, efforts are underway to restructure TWX's
partnership with U.S. West Media Group. The acquisition would make TWX the
largest diversified media and publishing company in the world, adding a wealth
of programming to a company already rich in entertainment content. Time Warner
is redirecting its operations into two general areas: copyright and creativity,
which includes publishing, music and filmed entertainment, and distribution,
which is mostly cable. Its two summer movie hits are Twister and Eraser. Under
the aegis of Gerald M. Levin, investors can expect significant returns over the
rest of the decade.
United Television, Inc. (UTVI - $98.00 - 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 57%-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 $120 per share, $23 of which is cash. UTVI's PMV is expected
to approach $200 by the year 2000.
Viacom Inc. (VIA - $38.125 - ASE; VIA'B - $38.875 - 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 divesting non-core assets to
reduce debt and is focusing on the global expansion of its media franchises. The
company is endeavoring to split off its cable properties in a transaction with
Tele-Communications Inc. which would reduce Viacom's debt by $1.7 billion.
10
<PAGE>
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 Equity Trust pays out 10% of its average net assets each year. Pursuant to
this policy, the Equity Trust distributed $0.25 per share on June 24, 1996. The
next distribution is scheduled for payment in September 1996.
Internet
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Funds, Inc., the
Gabelli Mutual Funds, quarterly reports, closing prices, IRAs, 401(k)s and other
current news. You can also send us e-mail at [email protected].
In Conclusion
At the beginning of 1996, we forecast that higher than expected inflation
and rising long-term interest rates would restrain stock returns. Our economic
forecast has proved remarkably accurate. Thus far, the market has largely
ignored these economic signs and marched steadily forward. Whether it will
continue to do so in the second half is questionable.
As always, we are focusing on the individual stocks in the Equity Trust's
portfolio. By concentrating on niche industry groups and individual companies
that can do well independent of prevailing economic and broad market trends, we
believe we are well positioned to prosper, even in a less generous market
environment. Our investment philosophy is simple and straightforward: buying
good businesses cheap will generate consistently superior returns.
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
August 1, 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.
11
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
Quarter Ended June 30, 1996
(Unaudited)
Ownership at
June 30,
Shares 1996
-------- ----------
NET PURCHASES
Common Stocks
BCE Inc. ....................................... 180,000 260,000
Boeing Co. ..................................... 45,000 70,000
Catellus Development Corporation ............... 54,500 74,500
Coltec Industries Inc. ......................... 135,800 321,300
Community Health Systems, Inc. ................. 191,675 191,675
Cooper Industries, Inc. ........................ 10,000 20,000
Electronic Data Systems Corp. (a) .............. 105,585 105,585
Gaylord Entertainment Company,
Class A (b) ................................... 7,500 157,500
Giant Food Inc., Class A ....................... 3,000 20,000
Golden Books Family
Entertainment, Inc. (c) ...................... 230,000 230,000
Independent Newspapers plc
ORD (b) (d) .................................. 35,111 85,111
ITT Corporation, New ........................... 2,000 102,000
Johnson & Johnson (e) .......................... 70,000 140,000
Ladbroke Group plc ............................. 1,000,000 1,000,000
Loral Space & Communications
Ltd. (f) ...................................... 70,000 70,000
Mark IV Industries, Inc. (b) ................... 8,500 178,500
McGraw-Hill Companies, Inc. (e) ................ 12,000 24,000
PepsiCo, Inc. (e) .............................. 300,000 400,000
Precision Castparts Corp. ...................... 6,500 31,500
Quaker Oats Company ............................ 17,500 162,500
Ralston Purina Group ........................... 35,000 170,000
Revco D.S. Inc., New ........................... 20,000 100,000
Securicor Group plc ORD ........................ 249,491 290,491
Sequa Corporation, Class A ..................... 9,000 50,000
Stop & Shop Companies, Inc. .................... 475,000 475,000
SunTrust Banks, Inc. (e) ....................... 10,000 20,000
Telecomunicacoes de Sao Paulo
SA (Telesp) (g) ............................... 91,314 91,314
Tootsie Roll Industries, Inc. (b) .............. 2,000 24,660
Common Stock Warrants and Rights
Independent Newspapers plc,
Rights, expires 07/12/1996 (h) ................ 17,022 17,022
Telecomunicacoes de Sao Paulo
SA (Telesp), Rights,
expires 06/19/1996 (i) ......................... 91,314 --
NET SALES
Common Stocks
AptarGroup, Inc. ............................... 9,100 30,900
Coca-Cola Enterprises Inc. ..................... 50,000 --
Donaldson Company, Inc. ........................ 2,700 225,000
General Motors Corporation ..................... 5,000 285,000
General Motors Corporation,
Class E (a) ................................... 105,585 --
GTE Corporation ................................ 4,100 425,000
Guardsman Products, Inc. (j) .................. 40,000 --
IDEX Corporation ............................... 800 333,200
Kaneb Services, Inc. ........................... 60,000 90,000
Loral Corporation (k) .......................... 70,000 --
Minnesota Mining and
Manufacturing Company ......................... 10,000 100,000
Pacific Telesis Group Inc. ..................... 50,000 --
Philips Electronics N.V.,
New York ...................................... 5,000 45,000
Revlon Inc., Class A ........................... 2,000 --
Securicor Group plc, Class A
ORD ........................................... 4,000 --
Smith's Food & Drug Centers Inc.,
Class B (l) ................................... 63,000 --
Sprint Corporation ............................. 60,000 420,000
STET-Societa Finanziaria
Telefonica SpA, Sponsored ADR ................. 39,000 246,000
Telecomunicacoes Brasileiras SA
(Telebras), Sponsored ADR ..................... 5,000 244,073
Varity Corporation, New ........................ 20,000 160,000
Western Publishing Group, Inc. (c) ............. 230,000 --
Wynn's International, Inc. ..................... 35,000 10,000
Common Stock Warrants and Rights
Telecomunicacoes de Sao Paulo
SA (Telesp), Rights, expires
06/19/1996 (g) ................................ 91,314 --
- -------------------
(a) Mandatory exchange - 1 share of Electronic Data Systems Corp. for each
share of General Motors Corporation, Class E.
(b) Stock dividend.
(c) Name change from Western Publishing Group, Inc. to Golden Books Family
Entertainment, Inc.
(d) 2 for 3 bonus issue.
(e) 2 for 1 stock split.
(f) Spinoff - 1 share of Loral Space and Communications Ltd. for each share of
Loral Corporation.
(g) Rights exercised - 1 share of Telecomunicacoes de Sao Paulo SA (Telesp) for
each Right of Telecomunicacoes de Sao Paulo SA (Telesp), exercised
06/06/1996.
(h) Rights distribution - 0.33333333 Rights for each share of Independent
Newspapers plc ORD.
(i) Rights distribution - 4.28561470 Rights for every 100 shares of
Telecomunicacoes de Sao Paulo SA (Telesp), Pfd., Registered.
(j) Tendered all shares @$23.00.
(k) Tendered all shares @$38.00.
(l) Tendered all shares @$36.00.
12
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS
June 30, 1996 (Unaudited)
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 85.3%
Industrial Equipment And Supplies -- 11.9%
220,000 AMETEK, Inc. .................. $3,241,129 $4,785,000
180,000 Ampco-Pittsburgh
Corporation................. 2,386,035 2,115,000
30,900 AptarGroup, Inc................ 449,036 927,000
7,000 Caterpillar Inc................ 191,305 474,250
66,000 CLARCOR Inc.................... 1,202,150 1,633,500
20,000 Cooper Industries, Inc......... 774,737 830,000
71,925 Crane Co....................... 1,852,074 2,948,925
75,000 CTS Corporation ............... 1,905,571 3,525,000
370,000 Deere & Company................ 3,575,003 14,800,000
225,000 Donaldson Company, Inc......... 2,601,843 5,793,750
19,125 Duriron Company, Inc........... 109,331 459,000
5,000 Franklin Electric Company...... 160,575 175,000
60,000 Gerber Scientific, Inc......... 460,407 967,500
47,000 Goulds Pumps,
Incorporated +.............. 1,084,835 1,204,375
240,000 Greif Bros. Corporation,
Class A..................... 4,285,781 7,530,000
3,400 Greif Bros. Corporation,
Class B..................... 69,824 106,675
333,200 IDEX Corporation .............. 3,294,783 12,661,600
35,000 Keystone International, Inc. .. 717,913 726,250
50,000 Lufkin Industries, Inc......... 908,349 1,025,000
40,000 Manitowoc Company, Inc......... 870,450 1,435,000
178,500 Mark IV Industries, Inc. ...... 1,944,406 4,038,563
15,000 Martin Marietta Materials,
Inc......................... 322,688 363,750
400,000 Navistar International
Corporation +............... 7,286,553 3,950,000
130,000 Nortek, Inc. +................. 808,129 1,511,250
5,000 Nortek, Inc., Special
Common + (a)................ 72,155 65,000
10,000 PACCAR Inc..................... 450,000 490,000
67,500 Pittway Corporation ........... 985,804 2,970,000
463,750 Pittway Corporation, Class A... 4,789,840 21,564,375
20,000 Scientific-Atlanta, Inc. ...... 319,775 310,000
50,000 Sequa Corporation,
Class A +................... 1,864,465 2,156,250
48,000 Sequa Corporation,
Class B +................... 2,239,935 2,400,000
84,000 SPS Technologies, Inc. +....... 2,830,863 5,922,000
95,000 St. Joe Corp................... 3,163,016 6,127,500
111,250 TransPro Inc................... 991,546 764,844
160,000 Varity Corporation, New +...... 3,389,991 7,700,000
20,000 Watts Industries,
Inc., Class A............... 415,830 372,500
----------- -----------
62,016,127 124,828,857
----------- -----------
Telecommunications -- 10.6%
65,000 AT&T Corp. .................... 2,813,695 4,030,000
100,000 BC TELECOM Inc................. 1,788,094 1,944,699
260,000 BCE Inc. ...................... 9,487,668 10,270,000
11 BHI Corporation .............. 176 161
7,000 British Telecommunications
plc, Sponsored ADR.......... 450,422 376,250
70,000 Cable & Wireless plc,
Sponsored ADR .............. 1,453,923 1,382,500
35,000 Cincinnati Bell Inc............ 692,188 1,824,375
10,000 Compania de
Telecomunicaciones de
Chile SA, Sponsored ADR....... 719,250 981,250
130,500 C-TEC Corporation + ........... 2,643,433 3,882,375
30,000 C-TEC Corporation,
Class B + .................. 463,817 881,250
425,000 GTE Corporation ............... 8,566,589 19,018,750
40,000 Hong Kong
Telecommunications Ltd.,
Sponsored ADR............... 693,550 725,000
1,020,000 Jamaica Telephone Ltd.
ORD......................... 101,641 81,835
40,000 Lincoln Telecommunications
Company .................... 593,225 655,000
10,000 Maritime Telegraph and
Telephone Company,
Limited..................... 162,919 154,550
12,000 Motorola, Inc.................. 225,900 754,500
45,000 NYNEX Corporation.............. 1,823,695 2,137,500
175,000 SBC Communications Inc. ....... 3,157,016 8,618,750
10,000 Singapore
Telecommunications
Limited ORD ................ 23,114 26,648
420,000 Sprint Corporation ............ 4,762,159 17,640,000
See Notes to Financial Statements.
13
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1996 (Unaudited)
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Telecommunications (Continued)
246,000 STET-Societa Finanziaria
Telefonica SpA,
Sponsored ADR............... $ 5,081,380 $ 8,425,500
4,000 Telecom Argentina
Stet-FranceTelecom S.A.,
Sponsored ADR............... 189,158 187,500
2,500,000 Telecom Italia SpA, ORD........ 2,893,657 5,377,836
244,073 Telecomunicacoes
Brasileiras SA (Telebras),
Sponsored ADR............... 4,324,534 16,993,583
5,927 Telecomunicacoes Brasileiras
SA (Telebras), Sponsored
ADR, 144A (c)............... 333,613 412,667
91,314 Telecomunicacoes de Sao
Paulo SA (Telesp) +......... 14,675 19,551
10,000 Telefonica de Argentina S.A.,
ADR, Class B................ 274,045 296,250
55,000 Telefonica de Espana,
Sponsored ADR .............. 1,880,319 3,031,875
20,000 Telefonos De Mexico SA,
Class L, ADR................ 733,042 670,000
----------- -----------
56,346,897 110,800,155
----------- -----------
Broadcasting -- 8.8%
8,300 Ackerley Communications,
Inc......................... 151,477 226,175
55,000 BHC Communications, Inc.,
Class A .................... 3,000,947 5,376,250
325,802 Chris-Craft Industries, Inc. .. 4,690,339 14,335,288
526,791 Chris-Craft Industries, Inc.,
Class B..................... 8,836,324 23,178,804
300,000 Grupo Televisa S.A., GDR +..... 6,403,421 9,225,000
125,000 Havas, Sponsored ADR........... 2,399,506 2,593,750
50,000 Liberty Corporation............ 1,449,401 1,587,500
7,000 LIN Television
Corporation +............... 148,927 252,000
25,000 Paxson Communications
Corporation, Class A +...... 400,000 265,625
100,000 Television Broadcasting
Ltd. ORD.................... 396,239 375,287
340,000 United Television, Inc......... 9,771,669 33,320,000
80,000 Westinghouse Electric Corp..... 1,365,838 1,500,000
----------- -----------
39,014,088 92,235,679
----------- -----------
Financial Services -- 5.7%
550,000 American Express Company ...... 9,980,310 24,543,750
24,000 Banco Santander SA, ADR........ 1,024,016 1,113,000
260 Berkshire Hathaway Inc.,
Class A + .................. 824,299 7,982,000
30,000 Berliner Bank
Aktiengesellschaft.......... 6,004,015 6,382,139
18,000 Commerzbank AG,
Sponsored ADR............... 715,857 747,000
150,000 Deutsche Bank AG,
Sponsored ADR............... 6,224,445 7,012,500
13,432 Financial Security Assurance
Holdings Ltd................ 335,800 367,701
25,000 Hibernia Corporation........... 198,750 271,875
40,000 H&R Block Inc. ................ 1,454,871 1,305,000
140,000 Lehman Brothers
Holdings Inc................ 3,183,783 3,465,000
36,300 Midland Company ............... 1,133,208 1,524,600
12,000 Morgan (J.P.) & Co.
Incorporated ............... 752,350 1,015,500
60,000 Riggs National Corporation..... 552,538 727,500
20,000 SunTrust Banks, Inc............ 419,333 740,000
45,000 Unitrin, Inc................... 1,536,895 2,115,000
----------- -----------
34,340,470 59,312,565
----------- -----------
Wireless Communications -- 4.9%
245,000 AirTouch Communications
Inc. + ..................... 5,604,056 6,921,250
100,000 Allen Group Inc................ 1,166,791 2,175,000
67,500 Associated Group, Inc.,
Class A +................... 354,616 2,041,875
67,500 Associated Group, Inc.,
Class B +................... 354,616 2,016,563
15,000 BCE Mobile
Communications Inc. +....... 435,205 487,273
20,000 Centennial Cellular Corp.,
Class A +................... 334,320 337,500
175,000 Century Telephone
Enterprises, Inc............ 947,557 5,578,125
110,000 COMSAT Corporation,
Series 1.................... 2,150,688 2,860,000
70,000 Loral Space &
Communications Ltd. +....... 822,500 953,750
See Notes to Financial Statements.
14
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1996 (Unaudited)
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Wireless Communications (Continued)
30,000 NEXTEL Communications,
Inc.,Class A + ............. $ 388,497 $ 571,875
290,491 Securicor Group plc ORD........ 657,486 1,180,737
3,500,000 Telecom Italia Mobile SpA...... 3,245,693 7,826,016
322,000 Telephone and
Data Systems, Inc........... 3,135,658 14,490,000
160,000 360(degree)Communications
Company +................... 1,219,062 3,840,000
----------- -----------
20,816,745 51,279,964
----------- -----------
Entertainment -- 4.3%
25,000 Ascent Entertainment Group
Inc. + ..................... 375,000 631,250
29,000 Bay Meadows Operating
Company..................... 498,410 496,625
157,500 Gaylord Entertainment
Company, Class A ........... 3,840,641 4,449,375
50,000 GC Companies, Inc. +........... 952,487 1,862,500
10,000 GTECH Holdings
Corporation +............... 170,269 296,250
12,000 PolyGram NV.................... 315,663 703,500
120,000 THORN EMI plc,
Sponsored ADR............... 1,752,187 3,324,000
290,000 Time Warner Inc................ 7,915,338 11,382,500
67,179 Todd-AO Corporation,
Class A..................... 183,215 1,108,454
310,000 Viacom Inc., Class A + ........ 4,260,108 11,818,750
110,000 Viacom Inc., Class B +......... 2,753,953 4,276,250
73,452 Walt Disney Company............ 3,120,450 4,618,295
----------- -----------
26,137,721 44,967,749
----------- -----------
Consumer Products -- 4.3%
250,000 American Brands, Inc........... 9,665,519 11,343,750
490,500 Carter-Wallace, Inc............ 7,070,868 7,173,562
75,000 Church & Dwight Co., Inc....... 1,605,940 1,565,625
27,100 Culbro Corporation + .......... 788,480 1,615,837
10,000 Duracell International Inc. ... 271,927 432,500
30,000 Eastman Kodak Company.......... 1,775,864 2,332,500
60,000 First Brands Corporation ...... 775,625 1,620,000
24,000 Gillette Company............... 691,975 1,497,000
9,000 National Presto
Industries, Inc............. 327,028 342,000
26,715 Park-Ohio Industries, Inc.+ ... 310,560 517,603
170,000 Ralston Purina Group........... 6,499,101 10,901,250
50,000 Scotts Company, Class A +...... 833,295 875,000
50,000 Tambrands Inc. ................ 2,020,265 2,043,750
100,000 Whitman Corporation............ 1,082,376 2,412,500
----------- -----------
33,718,823 44,672,877
----------- -----------
Food And Beverage -- 4.0%
11,540 Brau und Brunnen............... 2,286,087 1,206,629
30,000 Campbell Soup Company.......... 870,925 2,115,000
40,000 Dole Food Company, Inc. ....... 1,017,385 1,720,000
200,000 Fomento Economico
Mexicano SA, ADR............ 607,500 566,000
34,000 General Mills, Inc. ........... 729,062 1,853,000
20,000 Guinness plc, Sponsored
ADR......................... 729,363 716,800
45,000 Kellogg Company................ 2,393,384 3,296,250
11,000 LVHM Moet Hennessy
LouisVuitton, Sponsored
ADR .......................... 416,625 521,125
400,000 PepsiCo, Inc. ................. 10,265,756 14,150,000
162,500 Quaker Oats Company............ 5,084,253 5,545,313
40,000 Ralcorp Holdings, Inc. +....... 1,737,776 825,000
100,000 Seagram Company Ltd............ 2,713,688 3,362,500
24,660 Tootsie Roll Industries, Inc... 817,190 878,513
100,000 Wrigley (Wm.) Jr. Company...... 4,409,114 5,050,000
----------- -----------
34,078,108 41,806,130
----------- -----------
Cable -- 3.3%
110,000 Cablevision Systems
Corporation, Class A + ..... 6,262,938 5,087,500
40,000 CANAL + , Sponsored ADR........ 1,355,000 1,955,000
65,000 Comcast Corporation,
Class A..................... 1,009,207 1,194,375
68,125 Comcast Corporation,
Class A Special ............ 655,333 1,260,312
30,000 General Instrument
Corporation +............... 798,063 866,250
253,795 International Family
Entertainment, Inc.,
Class B+.................... 3,359,503 4,695,207
50,000 Shaw Communications Inc.,
Class B, Conv............... 444,218 353,415
462,125 Tele-Communications, Inc.,
Class A +................... 6,987,472 8,376,016
See Notes to Financial Statements.
15
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1996 (Unaudited)
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Cable (Continued)
350,000 Tele-Communications, Inc./
Liberty Media Group,
Class A +................... $ 8,114,871 $ 9,275,000
25,000 Tele-Communications
International, Inc.,
Class A +................... 596,594 440,625
85,000 US WEST Media Group + ......... 1,583,987 1,551,250
---------- ----------
31,167,186 35,054,950
---------- ----------
Automotive: Parts And Accessories -- 3.3%
34,000 APS Holding Corporation,
Class A +................... 527,000 748,000
85,000 Echlin Inc. ................... 2,034,174 3,219,375
103,000 GenCorp Inc.................... 1,298,087 1,557,875
110,000 Genuine Parts Company.......... 4,078,485 5,032,500
225,000 Handy & Harman ................ 3,219,241 3,825,000
105,000 Johnson Controls, Inc.......... 2,974,577 7,297,500
320,000 Modine Manufacturing
Company .................... 3,471,765 8,480,000
12,000 Quaker State Corporation....... 170,738 180,000
25,000 Republic Automotive Parts,
Inc. +...................... 185,983 368,750
40,000 SPX Corporation................ 866,938 980,000
120,000 Standard Motor Products, Inc... 818,500 2,145,000
10,000 Wynn's International, Inc...... 103,367 282,500
----------- -----------
19,748,855 34,116,500
----------- -----------
Publishing -- 3.2%
230,000 Golden Books Family
Entertainment, Inc. +....... 3,633,014 2,760,000
85,111 Independent Newspapers plc
ORD......................... 247,438 396,877
24,000 McGraw-Hill Companies, Inc. ... 707,700 1,098,000
470,000 Media General, Inc., Class A.... 9,040,714 17,507,500
80,000 Meredith Corporation........... 2,469,007 3,340,000
180,002 New York Times Company,
Class A..................... 2,473,406 5,872,565
5,000 News Corporation Limited,
ADS......................... 54,120 117,500
299,000 Oriental Press Group ORD....... 161,077 160,301
46,000 Reader's Digest Association,
Inc., Class B............... 1,806,980 1,811,250
200,000 South China Morning Post
Holdings ORD................ 117,763 136,938
----------- -----------
20,711,219 33,200,931
----------- -----------
Diversified Industrial -- 3.0%
40,000 GATX Corporation............... 673,434 1,930,000
150,000 ITT Industries Inc............. 2,433,989 3,768,750
400,000 Lamson & Sessions Co. + ....... 2,511,294 4,750,000
60,000 Lawter International, Inc. .... 632,883 750,000
100,000 Minnesota Mining and
Manufacturing Company....... 5,671,004 6,900,000
105,000 National Service Industries,
Inc......................... 2,325,133 4,108,125
100,000 Tenneco Inc.................... 4,600,898 5,112,500
43,000 Thomas Industries Inc.......... 617,782 822,375
100,000 Trinity Industries, Inc. ...... 1,891,414 3,400,000
100,000 Tyler Corporation +............ 354,618 275,000
----------- -----------
21,712,449 31,816,750
----------- -----------
Health Care -- 2.2%
18,000 Amgen Inc. +................... 324,394 972,000
6,500 Biogen, Inc. + ................ 181,025 356,687
191,675 Community Health Systems,
Inc. +...................... 9,925,283 9,919,181
140,000 Johnson & Johnson.............. 3,110,849 6,930,000
24,000 Mallinckrodt Group, Inc........ 710,919 933,000
20,000 Pfizer Inc..................... 639,063 1,427,500
54,000 Sandoz Ltd., Sponsored ADR..... 973,438 3,078,000
----------- -----------
15,864,971 23,616,368
----------- -----------
Business Services -- 2.2%
80,000 BBN Corporation + ............. 2,798,668 1,730,000
105,585 Electronic Data Systems
Corp........................ 3,750,000 5,675,194
20,000 Honeywell, Inc. ............... 926,000 1,090,000
125,000 International Business
Machines Corporation ....... 6,188,440 12,375,000
125,000 Landauer, Inc. ................ 809,065 2,640,625
----------- -----------
14,472,173 23,510,819
----------- -----------
Hotels/Casinos -- 2.2%
100,000 Hilton Hotels Corporation...... 5,464,111 11,250,000
102,000 ITT Corporation, New +......... 2,901,798 6,757,500
1,000,000 Ladbroke Group plc ............ 3,108,141 2,774,514
See Notes to Financial Statements.
16
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1996 (Unaudited)
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Hotels/Casinos (Continued)
50,000 Mirage Resorts,
Incorporated + ............ $ 532,231 $ 2,700,000
----------- -----------
12,006,281 23,482,014
----------- -----------
Energy -- 1.8%
34,000 Apache Corporation............. 844,013 1,117,750
40,000 Atlantic Richfield Company..... 4,327,841 4,740,000
52,500 British Petroleum
Company plc, ADR ........... 2,431,319 5,610,937
113,000 Burlington Resources Inc....... 5,238,284 4,859,000
10,000 Chevron Corporation............ 427,525 590,000
25,000 Halliburton Company............ 1,064,376 1,387,500
90,000 Kaneb Services, Inc. +......... 476,538 292,500
50,000 Santa Fe Energy
Resources, Inc. +........... 478,875 593,750
----------- -----------
15,288,771 19,191,437
----------- -----------
Retail Food And Drug -- 1.8%
20,000 Giant Food Inc., Class A....... 659,338 717,500
100,000 Revco D.S. Inc., New +......... 2,630,000 2,387,500
475,000 Stop & Shop Companies,
Inc. +...................... 15,707,834 15,853,125
----------- -----------
18,997,172 18,958,125
----------- -----------
Automotive -- 1.5%
285,000 General Motors Corporation..... 8,955,233 14,926,875
30,000 Harley Davidson, Inc........... 298,350 1,233,750
----------- -----------
9,253,583 16,160,625
----------- -----------
Aviation: Parts And Services -- 1.5%
70,000 Boeing Co...................... 5,317,303 6,098,750
321,300 Coltec Industries Inc. +....... 4,233,124 4,578,525
50,000 Curtiss-Wright Corporation..... 2,491,103 2,700,000
145,000 Hi-Shear Industries Inc. +..... 2,317,757 888,125
2,500 Moog, Inc., Class A +.......... 43,250 61,250
31,500 Precision Castparts Corp....... 1,241,900 1,354,500
14,000 Rohr Inc. +.................... 235,162 292,250
----------- -----------
15,879,599 15,973,400
----------- -----------
Retail -- 1.2%
25,000 Crown Books Corporation +...... 284,112 337,500
65,000 Earl Scheib, Inc. +............ 630,956 483,438
1,000 Fred Meyer Inc. +.............. 25,050 29,375
90,980 General Host Corporation ...... 528,313 250,195
40,000 Lillian Vernon Corporation..... 506,149 510,000
420,000 Neiman Marcus Group,
Inc. +...................... 6,013,445 11,340,000
----------- -----------
7,988,025 12,950,508
----------- -----------
Consumer Services -- 1.1%
450,000 Rollins, Inc................... 4,479,713 10,575,000
15,000 Sierra On-Line, Inc. +......... 121,798 658,125
----------- -----------
4,601,511 11,233,125
----------- -----------
Airlines -- 0.7%
82,000 AMR Corporation +.............. 5,409,579 7,462,000
----------- -----------
Specialty Chemical -- 0.6%
39,000 E.I. du Pont de Nemours
and Company ................ 2,554,500 3,085,875
107,000 Ferro Corporation.............. 2,159,912 2,835,500
----------- -----------
4,714,412 5,921,375
----------- -----------
Country/Closed-End Funds -- 0.3%
60,263 Central European Equity
Fund Inc.................... 757,375 1,077,201
70,000 Emerging Germany
Fund Inc. +................. 512,662 516,250
25,000 France Growth Fund, Inc........ 246,844 256,250
34,250 Italy Fund, Inc. .............. 300,170 303,969
72,229 New Germany Fund .............. 796,048 911,891
43,600 Royce Value Trust, Inc. ....... 482,367 539,550
----------- -----------
3,095,466 3,605,111
----------- -----------
Electronics -- 0.3%
2,000 Hitachi, Ltd., ADR............. 171,183 187,500
1,500 Matsushita Electric Industrial
Co. Ltd., ADR .............. 178,325 279,000
1,500 NEC Corp., ADR................. 43,625 81,000
45,000 Philips Electronics N.V.,
New York.................... 623,779 1,468,125
20,000 Sony Corporation, ADR.......... 1,057,068 1,322,500
----------- -----------
2,073,980 3,338,125
----------- -----------
Metals And Mining -- 0.2%
15,000 Barrick Gold Corporation....... 403,375 406,875
20,000 Newmont Gold Company........... 800,047 1,007,500
70,000 Pegasus Gold Inc. +............ 1,131,666 857,500
10,000 Placer Dome Inc................ 175,163 238,750
----------- -----------
2,510,251 2,510,625
----------- -----------
See Notes to Financial Statements.
17
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1996 (Unaudited)
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Agriculture -- 0.2%
130,000 Archer-Daniels-Midland Co...... $ 2,276,163 $ 2,486,250
----------- -----------
Transportation -- 0.1%
11,000 Florida East Coast Industries,
Inc......................... 523,108 913,000
----------- -----------
Real Estate -- 0.1%
74,500 Catellus Development
Corporation +............... 631,394 679,812
----------- -----------
TOTAL COMMON STOCKS............................ 535,395,127 896,085,826
----------- -----------
PREFERRED STOCKS -- 0.3%
Consumer Products -- 0.2%
34,000 Fieldcrest Cannon, Inc.,
Series A, 6.000%,
Conv. Pfd., 144A (c) ....... 1,877,500 1,547,000
----------- -----------
Telecommunications -- 0.1%
15,000 Sprint Corporation, 8.250%,
Conv. Pfd................... 478,125 603,750
2,130,723 Telecomunicacoes de Sao
Paulo SA (Telesp), Pfd.,
Registered.................. 261,253 456,212
----------- -----------
739,378 1,059,962
----------- -----------
Cable -- 0.0%
8,000 Tele-Communications, Inc.,
Class B, 6.000%, Ex. Jr.
Pfd......................... 408,017 494,000
----------- -----------
Diversified Industrial -- 0.0%
3,500 GATX Corporation,
3.875%, Conv. Pfd. ......... 185,600 203,875
----------- -----------
TOTAL PREFERRED STOCKS......................... 3,210,495 3,304,837
----------- -----------
COMMON STOCK WARRANTS AND RIGHTS -- 0.0%
17,022 Independent Newspapers plc,
Rights, expires 07/12/1996 + 745 1,813
----------- -----------
Principal
Amount
------
CORPORATE BONDS -- 1.3%
Entertainment -- 0.9%
$2,400,000 Time Warner Inc., Deb.,
8.110% due 08/15/2006 ...... 2,407,265 2,397,000
2,400,000 Time Warner Inc., Deb.,
8.180% due 08/15/2007 ...... 2,398,284 2,400,000
2,000,000 Time Warner Inc.,
Floating Rate Note,
7.975% due 08/15/2000....... 2,018,671 2,007,500
1,200,000 Time Warner Inc.,
Note, 7.975%
due 08/15/2004.............. 1,194,652 1,200,000
1,575,000 Viacom Inc., Sub. Deb.,
8.000% due 07/07/2006 ...... 1,017,844 1,452,937
----------- -----------
9,036,716 9,457,437
----------- -----------
Industrial Equipment And Supplies -- 0.2%
2,700,000 Nortek, Inc., Sr. Sub. Note,
9.875% due 03/01/2004....... 2,661,636 2,565,000
----------- -----------
Publishing -- 0.1%
200,000 News American Holdings
Incorporated, Gtd. Ex.
Sub. Note, Zero Coupon
due 03/31/2002.............. 129,517 200,750
1,000,000 Thomas Nelson Inc., Conv.
Sub. Note, 5.750% due
11/30/1999.................. 991,179 960,000
----------- -----------
1,120,696 1,160,750
----------- -----------
Automotive: Parts And Accessories -- 0.1%
500,000 GenCorp Inc., Conv. Sub.
Deb., 8.000% due
08/01/2002.................. 490,000 535,000
----------- -----------
Retail -- 0.0%
50,000 General Host Corporation,
Class D, Conv. Sub. Note,
8.000% due 02/15/2002....... 42,785 40,000
----------- -----------
Broadcasting -- 0.0%
FRF 125,000 Havas, Conv. Bonds,
Payment-in-kind,
3.000% due 12/31/1997....... 26,357 30,422
----------- -----------
TOTAL CORPORATE BONDS.......................... 13,378,190 13,788,609
----------- -----------
U.S. TREASURY BILLS -- 13.1%
$138,000,000 4.690% to 5.050%++ due
07/25/1996 -
09/26/1996 (d)................ 137,095,289 137,095,289
----------- -----------
See Notes to Financial Statements.
18
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1996 (Unaudited)
Principal Market
Amount Cost Value
------ ---- -----
REPURCHASE AGREEMENT -- 0.6%
$ 5,992,000 Agreement with Salomon
Inc., 5.450% dated
06/28/1996, to be repur-
chased at $5,994,721 on
07/01/1996, collater-
alized by $4,820,000
U.S. Treasury Note,
9.250% due 02/15/2016
(value $6,280,674)............ $ 5,992,000 $ 5,992,000
------------ -------------
TOTAL INVESTMENTS ..................... 100.6% $695,071,846(b) 1,056,268,374
============
OTHER ASSETS AND
LIABILITIES (Net) ................... (0.6) (6,212,070)
---- --------------
NET ASSETS ........................... 100.0% $1,050,056,304
==== ==============
Number of Unrealized
Contracts Appreciation
--------- ------------
FUTURES CONTRACTS -- SHORT POSITION
350 S&P 500 Index Futures,
September 1996.............. $ 835,000
==========
- -------------
(a) Security fair valued under procedures established by the Board of
Directors.
(b) Aggregate cost for Federal tax purposes was $695,084,077. Net unrealized
appreciation for Federal tax purposes was $361,184,297 (gross unrealized
appreciation was $373,719,460, gross unrealized depreciation was
$12,535,163).
(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
- --------------------------------------------------------------------------------
Top Ten Holdings
June 30, 1996
Chris-Craft Industries, Inc.
United Television, Inc.
American Express Company
Pittway Corporation
Time Warner Inc.
GTE Corporation
Sprint Corporation
Viacom Inc.
Media General, Inc.
Telecomunicacoes Brasileiras SA (Telebras)
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
19
<PAGE>
THE GABELLI EQUITY TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (Cost $695,071,846)
See accompanying portfolio:
Investment securities ............................................... $ 913,181,085
U.S. Government obligations ......................................... 137,095,289
Repurchase agreement ................................................ 5,992,000
---------------
1,056,268,374
Cash and foreign currency (Cost $717,104) ........................... 734,066
Dividends receivable ................................................ 1,766,886
Interest receivable ................................................. 378,966
Receivable for investment securities sold ........................... 356,612
---------------
Total Assets .................................................. 1,059,504,904
---------------
LIABILITIES:
Dividend payable .................................................... 6,575,695
Payable for investment advisory fee ................................. 863,992
Variation margin .................................................... 656,250
Payable for investment securities purchased ......................... 643,856
Accrued Directors' fees ............................................. 28,000
Accrued expenses and other payables ................................. 680,807
---------------
Total Liabilities ............................................. 9,448,600
---------------
NET ASSETS for 103,919,670 shares outstanding .......................... $ 1,050,056,304
===============
NET ASSETS consist of:
Common stock at par value ........................................... $ 103,920
Additional paid-in capital .......................................... 714,321,114
Accumulated net realized gain on investments sold ................... 19,261,736
Distributions in excess of net investment income earned to date ..... (45,678,956)
Net unrealized appreciation of investments .......................... 362,048,490
---------------
Total Net Assets .............................................. $ 1,050,056,304
===============
NET ASSET VALUE ($1,050,056,304 / 103,919,670 shares outstanding;
200,000,000 shares authorized of $0.001 par value) .................. $ 10.10
=======
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year
06/30/96 Ended
(Unaudited) 12/31/95
--------------- ---------------
<S> <C> <C>
Net investment income ................................................ $ 6,281,217 $ 11,411,921
Net realized gain on investments during the period ................... 19,534,689 48,989,177
Net change in unrealized appreciation of investments during the period 42,109,863 108,119,852
--------------- ---------------
Net increase in net assets resulting from operations ................. 67,925,769 168,520,950
Distributions to shareholders from:
Net investment income .............................................. (6,281,217) (11,329,129)
Distributions in excess of net investment income earned to date .... (45,678,956) --
Net realized gain on investments ................................... -- (48,989,177)
Distributions in excess of net realized gains ...................... -- (2,258,315)
Paid-in capital .................................................... -- (33,224,640)
Net increase in net assets from Equity Trust share transactions ...... -- 136,178,420
--------------- ---------------
Net increase in net assets ........................................... 15,965,596 208,898,109
NET ASSETS:
Beginning of period .................................................. 1,034,090,708 825,192,599
--------------- ---------------
End of period ........................................................ $ 1,050,056,304 $ 1,034,090,708
=============== ===============
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
THE GABELLI EQUITY TRUST INC.
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $238,390) ............. $ 7,278,518
Interest ............................................................. 5,303,204
------------
Total Investment Income ............................................ 12,581,722
------------
EXPENSES:
Investment advisory fee .............................................. 5,248,644
Shareholder communications expense ................................... 309,833
Shareholder services fees ............................................ 241,089
Custodian fees ....................................................... 165,800
Payroll .............................................................. 79,522
Legal and audit fees ................................................. 59,190
Directors' fees ...................................................... 50,362
Other ................................................................ 146,065
------------
Total Expenses ..................................................... 6,300,505
------------
NET INVESTMENT INCOME .................................................. 6,281,217
------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) on:
Securities transactions ............................................ 27,909,115
Futures transactions ............................................... (8,366,916)
Foreign currency transactions ...................................... (7,510)
------------
Net realized gain on investments during the period ................... 19,534,689
------------
Net change in unrealized appreciation of:
Securities ......................................................... 41,516,907
Futures transactions ............................................... 568,314
Foreign currency and other assets and liabilities .................. 24,642
------------
Net change in unrealized appreciation of investments during the period 42,109,863
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ........................ 61,644,552
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................... $ 67,925,769
============
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
THE GABELLI EQUITY TRUST INC.
FINANCIAL HIGHLIGHTS
Per share amount for an Equity Trust share outstanding throughout each period.
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------
1986* 1987 1988 1989 1990 1991
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period ............. $ 9.35 $ 9.40 $ 9.82 $ 11.22 $ 13.34 $ 10.49
---------- ---------- ---------- ---------- ---------- ----------
Net investment income ............. 0.10 0.16 0.14 0.38 0.44 0.27
Net realized and unrealized
gain (loss) on investments ...... (0.04) 0.89 2.32+ 3.26+ (2.11) 1.37
Provision for income taxes ........ -- -- (0.09) (0.21) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations .. 0.06 1.05 2.37 3.43 (1.67) 1.64
Increase (decrease) in net asset
value from Equity Trust
share transactions .............. -- 0.01 0.02 -- -- (0.42)
Offering expenses charged to
capital surplus ................. (0.01) -- -- -- -- (0.01)
Distributions to shareholders from:
Net investment income ........... -- (0.19) (0.21) (0.29) (0.53) (0.27)
Distributions in excess of
net investment income ......... -- -- -- -- -- --
Net realized gains .............. -- (0.45) (0.78) (1.02) (0.23) (0.14)
Distributions in excess of
net realized gains ............ -- -- -- -- -- --
Paid-in capital ................. -- -- -- -- (0.42) (0.68)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ............... -- (0.64) (0.99) (1.31) (1.18) (1.09)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period .... $ 9.40 $ 9.82 $ 11.22 $ 13.34 $ 10.49 $ 10.61
========== ========== ========== ========== ========== ==========
Market value, end of period ....... $ 8.625 $ 7.625 $ 9.875 $ 14.000 $ 10.500 $ 10.125
========== ========== ========== ========== ========== ==========
Total Investment Return** ......... (13.80)% (0.90)% 37.80% 59.00% (16.70)% 10.90%
========== ========== ========== ========== ========== ==========
Net Asset Value Total Return*** ... 0.50% 17.10% 21.50% 33.20% (12.70)% 16.20%
========== ========== ========== ========== ========== ==========
Ratios to average net assets/
supplemental data:
Net assets, end of period (in 000's) $413,760 $429,490 $484,792 $589,990 $479,863 $595,151
Net investment income ........... 2.89%++ 1.50% 1.36% 2.82% 3.84% 2.34%
Operating expenses .............. 1.24%++ 1.24% 1.25% 1.18% 1.18% 1.24%
Portfolio turnover rate ........... 58.8 % 96.5 % 51.5 % 28.1 % 15.5 % 11.2 %
Average commission rate
(per share of security) (c) ..... N/A N/A N/A N/A N/A N/A
<CAPTION>
Six
Months
December 31, Ended
----------------------------------------------- 06/30/96
1992 1993 (a) 1994 (a) 1995 (a) (Unaudited)
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period ............. $ 10.61 $ 10.58 $ 11.23 $ 9.46 $ 9.95
---------- ---------- ---------- ---------- -----------
Net investment income ............. 0.19 0.14 0.14 0.13 0.06
Net realized and unrealized
gain (loss) on investments ...... 1.21 2.13 (0.08) 1.74 0.59
Provision for income taxes ........ -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Total from investment operations .. 1.40 2.27 0.06 1.87 0.65
Increase (decrease) in net asset
value from Equity Trust
share transactions .............. (0.36) (0.50) -- (0.37) --
Offering expenses charged to
capital surplus ................. (0.01) (0.01) -- (0.01) --
Distributions to shareholders from:
Net investment income ........... (0.19) (0.11) (0.14)(b) (0.13) (0.06)
Distributions in excess of
net investment income ......... -- -- -- -- (0.44)
Net realized gains .............. (0.38) (0.77) (0.37) (0.47) --
Distributions in excess of
net realized gains ............ -- (0.02) -- (0.02) --
Paid-in capital ................. (0.49) (0.21) (1.32)(b) (0.38) --
---------- ---------- ---------- ---------- -----------
Total distributions ............... (1.06) (1.11) (1.83) (1.00) (0.50)
---------- ---------- ---------- ---------- -----------
Net asset value, end of period .... $ 10.58 $ 11.23 $ 9.46 $ 9.95 $ 10.10
========== ========== ========== ========== ===========
Market value, end of period ....... $ 10.250 $ 12.125 $ 9.625 $ 9.375 $ 9.625
========== ========== ========== ========== ===========
Total Investment Return** ......... 15.90% 36.50% (5.10)% 11.70% 8.10%
========== ========== ========== ========== ===========
Net Asset Value Total Return*** ... 14.20% 22.40% 0.50% 20.60% 6.90%
========== ========== ========== ========== ===========
Ratios to average net assets/
supplemental data:
Net assets, end of period (in 000's) $725,263 $937,773 $825,193 $1,034,091 $1,050,056
Net investment income ........... 1.88% 1.25% 1.29% 1.26% 1.20%++
Operating expenses .............. 1.22% 1.20% 1.19% 1.21% 1.20%++
Portfolio turnover rate ........... 12.5 % 24.4 % 22.2 % 25.1 % 11.7 %
Average commission rate
(per share of security) (c) ..... N/A N/A N/A N/A $ 0.0397
</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.
(c) Average commission rate (per share of security) as required by amended
disclosure requirements effective September 1, 1995.
See Notes to Financial Statements.
22
<PAGE>
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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.
23
<PAGE>
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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 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.
24
<PAGE>
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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.
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 six months ended June 30, 1996, Gabelli & Company, Inc.
("Gabelli & Company") and its affiliates received $46,908 in brokerage
commissions as a result of executing agency transactions in portfolio securities
on behalf of the Equity Trust.
3. Portfolio Securities
Cost of purchases and proceeds from sales of securities, other than
short-term securities, aggregated $102,644,767 and $127,418,879, respectively,
for the six months ended June 30, 1996.
4. Capital
Common stock transactions were as follows:
Six Months Ended Year Ended
06/30/96 12/31/95
-------- --------
Shares Amount Shares Amount
------ ------ ------ ------
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
------ ------ ---------- ------------
Net increase ........................ -- -- 16,695,939 $136,178,420
====== ====== ========== ============
- ----------
* 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.
25
<PAGE>
THE GABELLI EQUITY TRUST INC.
Historical Distribution Summary (Unaudited)
Calendar Year 1996
Dividend
Total Amount Reinvestment
Payable Date Record Date Paid per share Price
----------- ----------- ------------- ------------
06/24/96 06/17/96 $0.25 $9.5679
03/25/96 03/15/96 0.25 9.6414
<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 --
- ----------
(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.
</TABLE>
26
<PAGE>
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
Enrollment in the Plan
It is the policy of The Gabelli Equity Trust Inc. ("Equity Trust") to
automatically reinvest dividends. As a "registered" shareholder you
automatically become a participant in the Equity Trust's Automatic Dividend
Reinvestment Plan (the "Plan"). The Plan authorizes the Equity Trust to issue
shares to participants upon an income dividend or a capital gains distribution
regardless of whether the shares are trading at a discount or a premium to net
asset value. All distributions to shareholders whose shares are registered in
their own names will be automatically reinvested pursuant to the Plan in
additional shares of the Equity Trust. Plan participants may send their stock
certificates to State Street Bank and Trust Company ("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
27
<PAGE>
market price of the Equity Trust's Common Stock. The valuation date is the
dividend or distribution payment date or, if that date is not a New York Stock
Exchange trading day, the next trading day. If the net asset value of the Common
Stock at the time of valuation exceeds the market price of the Common Stock,
participants will receive shares from the Equity Trust valued at market price.
If the Equity Trust should declare a dividend or capital gains distribution
payable only in cash, State Street will buy Common Stock in the open market, or
on the New York Stock Exchange or elsewhere, for the participants' accounts,
except that State Street will endeavor to terminate purchases in the open market
and cause the Equity Trust to issue shares at net asset value if, following the
commencement of such purchases, the market value of the Common Stock exceeds the
then current net asset value.
The automatic reinvestment of dividends and capital gains distributions
will not relieve participants of any income tax which may be payable on such
distributions. A participant in the Plan will be treated for Federal income tax
purposes as having received, on a dividend payment date, a dividend or
distribution in an amount equal to the cash the participant could have received
instead of shares.
The Equity Trust reserves the right to amend or terminate the Plan as
applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to written notice of the change sent to the members of the Plan
at least 90 days before the record date for such dividend or distribution. The
Plan also may be amended or terminated by State Street on at least 90 days'
written notice to participants in the Plan.
Voluntary Cash Purchase Plan
The Voluntary Cash Purchase Plan is yet another vehicle for our
shareholders to increase their investment in the Equity Trust. In order to
participate in the Voluntary Cash Purchase Plan, shareholders must have their
shares registered in their own name.
Participants in the Voluntary Cash Purchase Plan have the option of making
additional cash payments to State Street for investments in the Equity Trust's
shares at the then current market price. Shareholders may send an amount from
$250 to $10,000. State Street will use these funds to purchase shares in the
open market on or about the 15th of each month. State Street will charge each
shareholder who participates $0.75, plus a pro rata share of the brokerage
commissions. Brokerage charges for such purchases are expected to be less than
the usual brokerage charge for such transactions. It is suggested that any
voluntary cash payments be sent to State Street Bank and Trust Company, P.O. Box
8200, Boston, MA 02266-8200 such that State Street receives such payments
approximately 10 days before the 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.
28
<PAGE>
DIRECTORS AND OFFICERS
THE GABELLI EQUITY TRUST INC.
One Corporate Center, Rye, NY 10580-1434
Directors
Mario J. Gabelli, CFA
Chairman
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
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 Mondays 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 FIRST CLASS MAIL
Rye, NY 10580-1434 U.S. POSTAGE
(914) 921-5070 PAID
RYE, NY
PERMIT No. 109
----------------
Semi-Annual Report
June 30, 1996
06/96
