[GRAPHIC OMITTED]
[LOGO]
THE GABELLI
EQUITY TRUST INC.
Third-Quarter Report
September 30,1998
<PAGE>
To Our Shareholders,
In the third quarter of 1998, ongoing international economic distress,
diminished corporate earnings prospects, our prime time political crisis and the
collapse of one of the world's largest hedge funds combined to send the stock
market sharply lower. Somewhat uncharacteristically, the richly priced large cap
growth stocks that dominate the Standard & Poor's 500 stock index held up better
than more reasonably valued market sectors. The yield on the 30 year Treasury
bond dropped below 5.0% as international and U.S. investors sought the safety of
the world's most secure credit.
[PHOTO OMITTED]
[LOGO]
THE GABELLI
EQUITY TRUST INC.
Investment Performance
For the third quarter ended September 30, 1998, The Gabelli Equity Trust
Inc.'s ("Equity Trust") net asset value (NAV) per share decreased 14.5% to
$10.30, after adjusting for the $0.27 per share distribution on September 28,
1998. This compares to the Value Line Composite Index's decline of 17.2%, the
Russell 2000 Index's decline of 20.2% and the Standard & Poor's ("S&P") 500
Index's decline of 9.9% over the same period. Each index is an unmanaged
indicator of stock market performance. Year-to-date the Equity Trust declined
4.7% through September 30, 1998. The Value Line Composite and the Russell 2000
were down 10.4% and 16.2%, respectively and the S&P 500 was up 6.0% during the
same period. For the twelve months concluded September 30, 1998, the Equity
Trust depreciated 1.7% after adjusting for the $1.08 per share in distributions,
versus declines of 11.4% and 19.0% for the Value Line Composite and the Russell
2000, respectively and a gain of 9.1% for the S&P 500. Our own benchmark of 10
percent real was 11.5% for this time frame.
For the five year period ended September 30, 1998, the Equity Trust's
return averaged 10.8% annually, compared to average annual returns of 12.4%,
9.1% and 19.9% for the Value Line Composite, Russell 2000 and S&P 500,
respectively. Total return includes adjustments of $6.70 per share for the
reinvestment of dividends and distributions, rights offerings and the spin-off
of the Gabelli Global Multimedia Trust.
For the ten years ended September 30, 1998, the Equity Trust achieved a
total return of 223.7%, including adjustments of $13.71 per share in
distributions, which equates to an average annual return of 12.5%. This compares
to 12.4%, 11.2% and 17.3% average annual returns over the same time period for
the Value Line Composite, Russell 2000 and S&P 500, respectively.
Since its inception on August 21, 1986 through September 30, 1998, the
Equity Trust has had a total return of 344.3%, including adjustments of $15.05
per share in distributions, which equates to an average annual return of 13.1%.
The Equity Trust's common shares ended the quarter at $10.375 per share on
the New York Stock Exchange, a decrease of 5.1% for the first nine months of the
year. For the twelve months ended September 30, 1998, the common shares are up
4.6%, after adjusting for all distributions.
Our long-term performance goal is to grow our net asset value by a real
rate of return of 10% per year. In addition, our goal is to have the publicly
traded market price track the net asset value.
<PAGE>
[LOGO]
THE GABELLI
EQUITY TRUST INC.
Our cover icon represents the underpinnings of Gabelli. The Teton mountains in
Wyoming represent what we believe 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.
[50 STATE FLAGS OMITTED]
Investment Objective:
The Gabelli Equity Trust Inc. is a closed-end, non-diversified management
investment company whose primary objective is long-term growth of capital, with
income as a secondary objective.
This report is printed on recycled paper.
<PAGE>
Preferred Stock - An Investment for the Future
On June 9, 1998, the Equity Trust successfully completed its offering of
7.25%, tax advantaged, cumulative preferred stock which was rated `aaa' by
Moody's Investors Service, Inc. Shareholder response has been positive and we
appreciate the efforts of Salomon Smith Barney, Gabelli & Company, Inc.,
PaineWebber Incorporated and Prudential Securities Incorporated, the
underwriters, and wish to thank and welcome all those investors who
participated.
The Equity Trust issued 5,400,000 Preferred Shares at $25 per share with
an annual dividend rate of $1.8125 per share paying quarterly starting in
September 1998. The Preferred Shares are trading on the New York Stock Exchange
under the symbol "GAB Pr". Consistent with our conservative approach, the Equity
Trust issued the Preferred Shares in a cost effective manner at less than $0.045
per share.
How would Preferred Shares benefit Common Shareholders? The Equity Trust
has earned a 13.1% average annual return from inception on August 21, 1986
through September 30, 1998. The Preferred Shares were issued with a dividend
rate of 7.25%. Any return earned in excess of the stated dividend rate would
directly benefit Common Shareholders; however, any shortfall from the stated
rate would impact the Common Shareholder in the opposite fashion. Therefore, by
taking advantage of the current relatively low interest rate environment and
achieving our long-term investment objectives, the Preferred Share issuance
offers what we believe is a method of adding wealth for our Common Shareholders.
With the completion of the preferred offerings, the Adviser has agreed to waive
the management fee on the incremental assets if the net asset value total return
on the Equity Trust does not exceed the stated dividend rate on the Preferred
Shares.
Furthermore, Common Shareholders stand to receive certain tax benefits as
a result of the Preferred Stock offering. Since taxable income is allocated to
the Preferred Shareholders before Common Shareholders, taxable distributions to
Common Shareholders would not be required to the extent they would be if the
Preferred Shares were not outstanding.
What We Do
The success of momentum investing in recent years and investors' desire
for instant gratification have combined to make value investing appear dull. At
the risk of being dull, we will once again describe the "boring" value approach
that has seen us through both good and bad markets over the last 12 years at The
Gabelli Equity Trust and for over 20 years at Gabelli Asset Management Company.
In past reports, we have tried to articulate our investment philosophy and
methodology. The following graphic further illustrates the interplay among the
four components of our valuation approach.
Our focus is on free cash flow; earnings before interest, taxes,
depreciation and amortization (EBITDA) minus the capital expenditures necessary
to grow the business. We believe free cash flow is the best barometer of a
business' value. Rising free cash flow often foreshadows net earnings
improvement. We
[GRAPHIC OMITTED]
2
<PAGE>
also look at earnings per share trends. Unlike Wall Street's ubiquitous earnings
momentum players, we do not try to forecast earnings with accounting precision
and then trade stocks based on quarterly expectations and realities. We simply
try to position ourselves in front of long-term earnings uptrends. In addition,
we analyze on and off balance sheet assets and liabilities such as plant and
equipment, inventories, receivables, and legal, environmental and health care
issues. We want to know everything and anything that will add to or detract from
our private market value (PMV) estimates. Finally, we look for a catalyst;
something happening in the company's industry or indigenous to the company
itself that will surface value. In the case of the independent telephone stocks,
the catalyst is a regulatory change. In the agricultural equipment business, it
is the increasing world-wide demand for American food and feed crops. In other
instances, it may be a change in management, sale or spin-off of a division or
the development of a profitable new business.
Once we identify stocks that qualify as fundamental and conceptual
bargains, we then become patient investors. This has been a proven long-term
method for preserving and enhancing wealth in the U.S. equities market. At the
margin, our new investments are focused on businesses that are well-managed and
will benefit from sustainable long-term economic dynamics. These include macro
trends, such as the globalization of the market in filmed entertainment and
telecommunications, and micro trends, such as an increased focus on productivity
enhancing goods and services.
COMMENTARY
Through the Looking Glass
What do investors see as they peer through the looking glass? Like Alice
after she has eaten the mushroom, is the market still shrinking or ready to
grow? Should savvy investors be heading through the keyhole or smiling like the
Cheshire cat? What do we see happening in the stock market Wonderland?
Equity valuations pivot on the outlook for earnings and on the multiple
accorded those earnings. The earnings picture has been muddied by global
economic turmoil. However, we continue to believe that on a longer term secular
basis, U.S. corporations can grow earnings at high single digit rates. In light
of this favorable long term secular earnings forecast and the positive outlook
for inflation and interest rates, we believe at current prices, most stocks are
now quite reasonably valued. So, going forward, we believe the outlook for
equity owners is favorable.
The Four M's
In the third quarter of 1998, consumers and investors focused on the Four
M's:
Market
McGwire
Monica
Meriwether
3
<PAGE>
M as in Market
The sharp crack in U.S. equities during the third quarter raises several
questions. Will the economy be impacted either through a reduction in consumer
spending or a cutback in corporate expenditures? Since the U.S. economy has been
the engine of global growth, will a slow-down accentuate a global spiral?
Our answer to the first is, yes, lower spending on behalf of consumers and
corporations will cause an economic and profit slow-down. However, we believe
the odds favor just that, a slow-down, not a recession. The Russell 2000 Index,
Wall Street jargon for the average U.S. company, has already discounted a
recession. Should we avoid one, stocks will recover sharply.
Our answer to the second question is also yes. U.S. economic weakness will
have a negative impact on the rest of the world. But, we see some very positive
signs as well. The Japanese are finally addressing their economic problems.
Stimulation in Japan should buttress overall economic activity, particularly in
Southeast Asia. The same applies to Euroland (the new name for the countries
participating in European Monetary Union), where economic cooperation is
supporting economic growth prospects. Moreover, part of the global economic
disequilibrium we have been experiencing has stemmed from the strong dollar.
With the dollar weakening against the mark and the yen, some global economic
balance will be restored.
McGwire
Mark McGwire and Sammy Sosa's heroics put baseball back on the front
pages. In places other than New York, Boston, Los Angeles and San Francisco,
most people were more captivated by the historic home run record chase than what
was occurring in the economy and the stock market. Will they continue to focus
on the day-to-day elements that impact their lives and their own individual
economic expectations? Job security, low inflation, low interest rates
(resulting in much lower mortgage payments) and the prospects of reduced taxes
should make most people feel relatively good.
Monica
The histrionics associated with the President's current predicament have
also taken center stage. Will the U.S. be in a position to provide moral
leadership on such issues as nuclear armaments? (Most of us now understand
Kashmir is not a sweater). Will President Clinton be able to energize the new
Congress and focus on critical economic issues in a timely fashion? Will Robert
Rubin and Alan Greenspan resign if Clinton is not in power?
We have long maintained the view that a great democracy like ours has many
flaws. But, the underpinnings of our system, being rooted in personal freedom
and ownership of capital, will survive flaws and sometimes even flourish in the
absence of credible leadership.
4
<PAGE>
Meriwether
We, like virtually everyone in the financial community, were surprised by
the extent of leverage that an organization could accomplish and the extent of
damage that leverage could have on the financial system. A shutdown in lending,
so vital to both domestic and global growth, is occurring. We have a liquidity
crisis, but one different than past "credit crunches". When asked how to become
a millionaire, Warren Buffett quipped, "Start with $1 billion and buy an
airline." We now offer our version, "Start with $1 billion and give it to a
hedge fund manager who focuses on emerging market debt with leverage."
While the first chapter is still being written on the Long Term Capital
Management debacle, we will wait for the smoke to clear, the floor boards to be
lifted and the foundation inspected before commenting further. However, we
believe global cooperation will help curtail the damage.
The Four Legged Market Stool -- Now a Rocking Chair!
In previous market discussions, we described low inflation, low interest
rates, a powerful flow of funds and strong corporate profit growth as the four
legs supporting the stock market stool. Three of these legs remain stable, but
the fourth is wobbling considerably. Inflation is low and with deflationary
forces at work overseas if not yet here, inflation may go even lower. Long term
government bond yields are already at lows not seen in a generation, and if the
Federal Reserve drops short term rates again, long rates could recede even
farther. Individual investors' increased use of 401(k)s and IRAs continues to
provide a relatively steady flow of funds into stocks, seemingly irrespective of
market gyrations. However, corporate profit growth is endangered by weak Asian
markets and the possibility that the American consumer, who now has a
substantial portion of his/her savings invested in the stock market, may lose
confidence and stop spending.
The outlook for the domestic economy and corporate profits is further
complicated by the spreading international currency crisis. As more light is
shed on Japan's inability to crank its economic engine, the focus has shifted
from Asian currencies and the Russian ruble to Latin American currencies, in
particular the Brazilian real. Brazil's currency has been under pressure and
their government's chosen remedy of much higher interest rates may send the
Brazilian economy into recession. U.S. and international financial authorities
appear committed to supporting Brazil and doing everything in their power to
make sure Brazil and our other important Latin American trading partners do not
go the way of emerging market economies in Southeast Asia. It is too early to
tell whether they will succeed. Serious economic problems for our Latin American
trading partners would have a far greater impact on the American economy and
corporate profits than did economic disruption in Southeast Asia. We had looked
to Asia for future growth -- the prospect of millions of new consumers for
American goods and services. We depend on Latin America for sustenance --
millions of people already buying our products.
Hedge Funds -- The "Card Counters" in the Global Financial Casino
In general, we are in favor of free markets and are confident that the
free market system can control and ultimately correct speculative excesses.
However, in recent years, some new players have come to the table -- large
5
<PAGE>
hedge funds employing sophisticated and highly leveraged investment strategies.
Many view them as the "card counters" in the global financial casino. Few
people, including many of the banks and brokerage firms that stake them, fully
understand how they operate. But one thing is abundantly clear, the hedge funds
play to win and do not appear concerned about how their strategies may impact
the financial health of the "house" (the free market system itself). Perhaps,
even Adam Smith would agree to limit their presence.
The collapse of Long Term Capital Management ("LTCM"), the most visible of
these hedge funds, has potentially severe ramifications not only for their
partners, but for the entire global financial community. In recent testimony to
Congress explaining the Federal Reserve Bank of New York's role in helping to
arrange a bail out of Long Term Capital Management, Federal Reserve Board
Chairman Alan Greenspan said, "Had the failure of LTCM triggered the seizing up
of markets, substantial damage could have been inflicted on many market
participants, including some not directly involved with the firm, and could have
potentially impaired the economies of many nations, including our own."
In his testimony before Congress, Mr. Greenspan concludes that direct U.S.
regulation of hedge funds is probably not practical because they would simply
move offshore. He does not advocate further policing of banks and brokerage
firms but encourages them to more adequately evaluate the risks inherent in
highly leveraged, derivatives-based trading strategies. He reminds them of one
of the great investment truths, "No matter how skillful the trading scheme, over
the long haul, abnormal returns are sustained only through abnormal exposure to
risk." We think the dangers of hedge funds are best mitigated by the losses that
will be sustained by their backers.
Where Do We Go From Here?
Is the stock market bottoming or has the retreat from equities just begun?
We have opinions, not answers. Bear markets generally anticipate either a
recession or a serious crack in the financial infrastructure. While the U.S.
economy is starting to slow, it is still advancing at a respectable pace. If
Latin America remains stable -- as aforementioned, a very big and critical IF --
and if the American consumer shrugs off the market decline and continues to
spend, the U.S. economy should continue to expand, albeit at a slower pace than
in recent years. High "real interest rates" (the spread between interest rates
and inflation) would indicate the Federal Reserve has room to lower rates to
provide some stimulus if it sees the economy weakening. But, timing is an issue.
This would augur against recession.
Despite volatility and the sharp decline from this year's highs, the
market has retreated in a relatively orderly fashion -- essentially doing what
it is supposed to do, respond to changing economic circumstances, most notably
diminished earnings prospects. We have not seen panic selling. If we were to
experience a real jolt to the financial infrastructure such as a major hedge
fund collapse sending shock waves through the banking system, this could change.
6
<PAGE>
If the economy keeps chugging along and financial institutions remain
relatively healthy, the market should stabilize. If this is a correction, one
would argue it is long overdue and may be setting the stage for the next leg up
in the bull market. Even if the market continues to drift, we could see
accelerated merger and acquisition activity buoying returns for value oriented
investors.
Finally, Some Margin of Safety
We leave it to others to forecast the short to intermediate term direction
of the market. We have a longer term perspective. We are encouraged by the fact
that Ben Graham's "margin of safety" has returned to the market. We now see many
more good companies trading at much more reasonable valuations relative to their
intrinsic value. This does not necessarily mean they have bottomed, as stocks
can go from being substantially overvalued to significantly undervalued. But,
the long term investor should take some comfort in the fact that some of the
speculative excess has departed many stocks, if not those in the S&P 500 Index.
Whether the investing public will take comfort in this is another question. Thus
far, despite the market's sharp decline and continued volatility, we have not
seen substantial redemptions from equity mutual funds. Investors have been
conditioned by the extended bull market to buy on dips. However, if the pain
gets more severe, they may react differently. For those who are tempted to walk
away from equities, we point out that the stocks you loved six months ago are
now a lot less expensive. We think this improves the odds for achieving
respectable long term returns going forward.
Is the Takeover Wave Cresting?
Is this the end of what we have dubbed "the third great takeover wave"?
Like any other market, the market for businesses is impacted by liquidity (How
much money is available to go shopping?), prices (Are there appealing
bargains?), and necessity (Do prospective corporate buyers merely want a
business or do they really need it?). The liquidity that has fueled merger and
acquisition activity may be shrinking. With the quality of their loan portfolios
declining, banks may take a more cautious approach to financing deals. Stock has
lost some of its purchasing power as a deal currency and the market may prove
less receptive to secondary issues underwritten for the purpose of corporate
acquisitions.
However, there are now many more true business bargains available,
particularly in the beaten down small cap sector, and we believe financially
robust companies will continue to snap up bargains in their own and related
industries. Also, deals are being done in some industries (telecommunications is
a prime example) due to necessity rather than simply a desire for growth. A
telecommunications company that does not offer a full range of services (long
distance and local telephony, Internet access and transmission and home
entertainment services) will likely have a very bleak future. Going forward, due
to diminishing liquidity, we expect that deal activity may slow somewhat from
the feverish pace we have experienced over the last several years. But, we
believe the great takeover wave is still far from cresting.
7
<PAGE>
Telecommunications, Media, and Energy -- Ports in the Market Storm
On a relative basis, telecommunications stocks performed extraordinarily
well in the third quarter of 1998. Several of our portfolio holdings in the
telecommunications group finished the quarter in the black and a few, including
Southern New England Telecommunications, SBC Corporation, USWest and COMSAT,
posted high double digit gains. Ongoing industry consolidation free from the
interference of antitrust regulators is providing a tailwind for the group.
Cable television holdings such as Comcast and MediaOne Group (the cable spin-off
from US West) performed well, while the proposed AT&T/Tele-Communications Inc.
merger made it quite clear that cable companies will be major players in the
telecommunications revolution. Entertainment and information software stocks
like Time Warner also delivered respectable gains. Energy holdings like Chevron
held up well as oil prices stabilized.
High End Retailers, Capital Goods, Agriculture and Energy Services Companies
Stocks Get Battered
High end retailers like Neiman Marcus were hurt as investors began
anticipating a crisis in consumer confidence. Agricultural and energy services
companies like Deere and Halliburton declined with falling grain and oil prices.
Capital goods producers like Aeroquip-Vickers and IDEX sold off as capital
spending slowed as a result of global economic weakness.
Although agricultural companies are currently under pressure, we believe
there is a diversified company in the industry poised for growth. We would like
to provide an overview of Deere & Co. which categorizes its operations into six
business segments. The worldwide agricultural equipment segment manufacturers
and distributes a full line of farm equipment (tractors, combines and cotton
harvesters). The worldwide construction equipment segment, formerly the
worldwide industrial equipment segment, manufactures and distributes a broad
range of machines used in construction, earthmoving and forestry (backhoe
loaders, crawler dozers and loaders, excavators and log skidders). This segment
also includes the manufacture and distribution of engines and drivetrain
components for the original equipment manufacturer ("OEM") market. The worldwide
commercial and consumer equipment segment manufactures and distributes equipment
for commercial and residential uses (small tractors for lawn, garden, commercial
and utility purposes, riding and walk-behind mowers, golf course equipment and
snowblowers). The products produced by the equipment segments are marketed
primarily through independent retail dealer networks and major retail outlets.
The credit segment primarily finances sales and leases by John Deere dealers of
new and used equipment. The insurance segment issues policies primarily for
general and specialized lines of commercial property and casualty insurance. The
health care segment provides health management programs and related
administrative services. The company's agricultural equipment operations are
cyclical. Worldwide farm commodity prices are on a downward course. U.S. crop
conditions are generally good, with federal financial assistance expected to
offset some of the drought-related losses being experienced in the South. The
company is well-positioned to show solid results despite the current slowdown in
the farm economy.
When we are confronted by temporary weakness in industries and individual
companies we believe have favorable long term prospects, we have the option of
diving overboard or riding out the storm. Our long term perspective and focus on
quality companies generally biases us toward the latter. Owning good companies
in out-
8
<PAGE>
of-favor industries is an integral part of the value discipline. We note that
some of our best performing stocks in 1997 and 1998 were those that most had
abandoned in 1994 and 1995. Our investment loyalty to dominant franchise
companies has generally worked in our favor over the longer term.
International Segment
A portion of the Equity Trust's portfolio continues to be managed by
Caesar Bryan. Caesar also manages the Gabelli International Growth Fund and is a
co-manager of the newly launched Gabelli Global Opportunity Fund. Below are
Caesar's thoughts on international markets and global economies:
The third quarter saw quite an unusual swing among equity investors from
near euphoria to despair. And all of this occurred in about two months. So what
happened? Put simply, it appears that the emerging market crisis, which had been
largely limited to very far away places, finally moved a little closer to home.
For European equity investors, that meant Russia. During the middle of August,
the Russian economic crisis became front page news as the country defaulted on
its debt and devalued the ruble. Markets were shocked because investors felt
that Russia would not be permitted to fail.
The emerging market contagion then spread to South America, with Brazil
under the spotlight. This unnerved American investors due to South America's
close economic links to the U.S. On top of this came the disclosure that Long
Term Capital Management, a very large hedge fund based in Greenwich,
Connecticut, had effectively gone bust. What shocked investors about this
disclosure was that the hedge fund was so heavily leveraged and that no less
than eight foreign government owned agencies were investors in the Fund. So far,
only the central bank of Italy has gone public and admitted to having been
involved. So much for prudent central banking. As other investment portfolios
found trouble, credit spreads between Treasuries and other fixed income
securities widened significantly.
While all of this was occurring, equity markets weakened considerably.
Very few markets or sectors were spared. In general, those markets that had
performed best recently suffered most while some of the Far East markets that
had already been very hard hit held up quite well. With investor fears focused
on recession, economically sensitive sectors did particularly poorly and, of
course, financial stocks, especially banks, fell sharply.
The Chairman of the Federal Reserve Board, Alan Greenspan, appears to be
fully aware of the stress within the financial system and lowered the Federal
Funds rate by 25 basis points to 5.25% at the end of September. This was
followed by another reduction by the same amount in early October. Other major
countries, such as Japan and the United Kingdom, also have reduced interest
rates. During this period, bond yields in most markets have fallen significantly
as investors have sought less risky investments and inflationary expectations
have been reduced. For example, German 10 year government bond yields fell from
4.78% at the end of June to 3.83% by the end of September 1998. This represents
a major move.
One of the causes of stress among emerging markets has been the strong
dollar. However, the dollar weakened following the Federal Reserve Board's
interest rate cuts. This should help many emerging countries service their debt.
Indeed, the dollar's recent decline against the yen was as rapid as anything
most veteran currency
9
<PAGE>
traders had ever witnessed. The chronic weakness of the Japanese
banking system is now getting the full attention of the government authorities
who have finally put a credible plan for solving the problem in place. Still,
the Japanese economy is contracting at an annual rate of about 4.0% and further
action by the government is required.
Equity market valuations should continue to be supported by historic low
bond yields. However, investors have become very concerned about corporate
earnings growth over the next year. This concern has resulted in a rise in the
equity risk premium. Our strategy is to remain focused on high quality
businesses, which are fairly valued and have financial strength. We look to
avoid companies that have little or no pricing power.
Let's Talk Stocks
The following are stock specifics on selected holdings of the Equity
Trust. Favorable EBITDA prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time.
American Express Co. (AXP - $77.625 - NYSE) is a global travel, financial and
network services provider. Founded in 1850, the company operates in 160
countries around the world. Best known for its "green" charge card and its
travel-related services, American Express also offers financial planning,
brokerage services, mutual funds, insurance and other investment products.
Harvey Golub, Chairman and CEO, has refocused AXP on its core charge card and
investment management businesses. The company continues to expand the
competitive reach of its credit card operations which should benefit if the U.S.
Department of Justice prevails in its antitrust suit against the Visa and
MasterCard associations.
BetzDearborn Inc. (BTL - $69.125 - NYSE) has agreed to be acquired by Hercules
Inc. (HPC - $30.0625 - NYSE), a U.S. specialty chemicals maker, for $3.1 billion
in cash and assumed debt, creating one of the world's biggest makers of
chemicals used in paper-making, water-treatment and other industrial processes.
Hercules, which had $1.87 billion in 1997 sales, is offering $72 per
BetzDearborn share. BetzDearborn is the number two U.S. producer of
water-treatment and industrial process chemicals, with $1.3 billion in 1997
sales. The purchase allows Wilmington, Delaware-based Hercules to resume its
worldwide expansion amid industry consolidation. The companies have set October
8, 1998 for BetzDearborn shareholders to approve the merger. They expect to
close the transaction in October 1998.
Cablevision Systems Corp. (CVC - $43.1875 - AMEX), based in Woodbury, NY, is one
of the nation's leading telecommunications and entertainment companies, with
operations including high speed multimedia delivery, subscription cable
television services, professional sports teams and national cable television
program networks. Cablevision serves over 3.3 million cable customers primarily
in three core media markets: New York, Boston and Cleveland. CVC's revenue per
subscriber is the highest in the cable industry. CVC has exercised its option to
purchase ITT's 50% stake in MSG (Madison Square Garden) Properties, including
the NY Knicks and NY Rangers. In March, Cablevision purchased
Tele-Communications Inc.'s New York area cable properties with 829,000
subscribers by issuing almost 24.5 million shares (adjusted for the March 30,
1998 two-for-one stock split) and assuming $670 million of TCI's debt. These
shares represent a one-third stake in CVC. The company's new, vigorous activity
includes the sale of a 40% stake in Rainbow Sports to a News Corp./TCI joint
venture with the proceeds used to pay down a significant portion of MSG's debt.
With its upgraded cable systems, CVC is well-positioned to offer telephony, high
speed data and enhanced video services.
10
<PAGE>
Chris-Craft Industries Inc. (CCN - $44.1875 - NYSE), through its 79.9% ownership
of BHC Communications (BHC - $117.00 - AMEX), is primarily a television
broadcaster. BHC owns and operates UPN affiliated stations in New York (WWOR),
Los Angeles (KCOP) and Portland (KPTV). BHC also owns 58.6% of United Television
(UTVI - $106.75 - Nasdaq), which operates an NBC affiliate, an ABC affiliate and
four UPN affiliates. United Television has purchased WHSW in Baltimore for $80
million. The station's call letters were changed to WUTB and the station became
a UPN affiliate. UTVI has an agreement to purchase WRBW, a UPN affiliate in
Orlando, for $60 million. Chris-Craft's television stations constitute one of
the nation's largest television station groups, reaching approximately 22% of
U.S. households. The Chris-Craft complex is debt free and strongly positioned to
expand its operations with roughly $1.4 billion in cash and marketable
securities.
Chris-Craft Industries
|
79% |
|
BHC Communications
|
59% |
|
United Television
DeKalb Genetics Corp. (DKB - $92.00 - NYSE), an agricultural genetics and crop
biotechnology company, develops and sells hybrid seeds and is the second largest
supplier of hybrid seed corn. Monsanto (MTC - $56.25 - NYSE), which controls 40%
of DeKalb's outstanding shares, won a three-month-long auction by agreeing to
pay $100 in cash for each of the remaining shares, or $2.5 billion. The
transaction is expected to be completed by year-end.
Giant Food Inc. (GFS'A - $43.1875 - AMEX) operates a chain of over 170
supermarkets, mostly food and drug combination stores, primarily in the
Washington, DC and Baltimore metropolitan areas. The company is expanding from
this base into New Jersey, Pennsylvania and Delaware. J. Sainsbury plc, one of
the largest supermarket retailers in the United Kingdom, was the owner of a
non-controlling 50% of Giant's voting shares, in addition to approximately 20%
of the non-voting shares. The Dutch food retailer Royal Ahold NV (AHO - $29.0625
- - NYSE) paid Sainsbury $613 million for its Giant Food stake and is purchasing
the remaining Giant Food shares for $43.50 per share.
Sprint Corp. (FON - $72.00 - NYSE) is the third largest long distance carrier
and the second largest independent local telephone company in the U.S. Sprint
has positioned itself globally through a joint venture called GlobalOne. Its
joint venture partners, France Telecom and Deutsche Telekom, also have a direct
20% stake in Sprint. The company has a promising national personal
communications services ("PCS") and wireless joint venture with three major
cable operators: Tele-Communications Inc., Comcast and Cox Communications. FON
faces risks from prospective new entrants in its long distance business which
may be offset by the PCS venture and its own pursuit of the $100 billion local
telephone market.
Time Warner Inc. (TWX - $87.5625 - NYSE), with its 1996 acquisition of Turner
Broadcasting System, is further entrenched as the global leader in media and
entertainment with interests in filmed entertainment, television production and
broadcasting, recorded music, cable television programming, magazine and book
publishing, direct marketing and cable television systems. The combined
companies have more than $24 billion in revenues and nearly $5.5 billion in
EBITDA. Time Warner controls a host of powerful brands, such as CNN, Warner
Brothers, HBO, Cinemax and Time and People magazines. Under the leadership of
Chairman Gerald Levin and Vice Chairman Ted Turner, the company is now focused
on reducing its almost $10 billion in debt and simplifying its capital
structure.
11
<PAGE>
United Television Inc. (UTVI - $106.75 - Nasdaq), headquartered in Beverly
Hills, California, is a television broadcasting group which owns and operates
the six stations (one ABC, one NBC and four UPN affiliates) that comprise
Chris-Craft's (CCN - $44.1875 -NYSE) television division. In January, UTVI
purchased WHSW in Baltimore for $80 million. The station began broadcasting as
WUTB, a UPN affiliate, immediately following completion of the acquisition. The
$60 million purchase of WRBW, a UPN affiliate in Orlando (the country's 22nd
largest and fastest growing television market over the past decade), is pending
FCC approval. UTVI stations cover approximately eight percent of the U.S.
population. UTVI is 58.9%-owned by BHC Communications (BHC - $117.00 - AMEX).
Strong advertising demand, prospects for favorable regulatory changes in the
industry and corporate cost control enhance EBITDA prospects.
Viacom Inc. (VIA - $57.50 - AMEX; VIA'B - $58.00 - AMEX), long a major provider
of entertainment "content", has evolved into one of the world's dominant media
companies. Paramount Communications and Blockbuster Entertainment were acquired.
Non-core assets are being divested and debt has been reduced to approximately $8
billion. Viacom is focusing on global expansion of its media franchises. Viacom
is particularly well-positioned in music (notably MTV) and cable networks (such
as Nickelodeon).
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, IRAs, 401(k)s, quarterly reports, closing prices and other
current news. You can send us e-mail at [email protected].
Shareholders will soon be able to receive quarterly reports from Gabelli
Funds via e-mail. We anticipate that this service will be available in early
1999. If you are interested in receiving your quarterly report via e-mail,
please send an e-mail to [email protected] with your name and address and
we will provide you with the appropriate forms. Our investor representatives are
available at 1-800-GABELLI (1-800-422-3554) to assist you as well.
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 $0.27 per share on September 28, 1998.
The next distribution is scheduled for December 1998.
In Conclusion
We have gone from a "best of all possible worlds" economic backdrop for
stocks to a world of economic and market uncertainty. There are plenty of real
things to worry about, with growth in corporate profits and the unraveling of
hedge funds being at the top of our list. And, some far less critical issues,
such as our current political soap opera, are unnerving investors. We would not
describe stocks in general as being inexpensive. However, they
12
<PAGE>
are no longer grossly overvalued. We believe there is once again a "margin of
safety" in the equity market. In the midst of the current market storm, we are
keeping a level head and focusing on quality companies trading at substantial
discounts to our appraisal of their present and future values. This value
discipline has helped preserve shareholder assets during these troubled times
and will ultimately contribute to satisfactory long term results.
Sincerely,
/s/ Mario J. Gabelli
Mario J. Gabelli
President and Chief Investment Officer
October 30, 1998
-----------------------------------------------------------
Top Ten Holdings
September 30, 1998
Chris-Craft Industries, Inc. United Television Inc.
Cablevision Systems Corp. Viacom Inc.
Giant Food Inc. American Express Co.
Time Warner Inc. BetzDearborn Inc.
Dekalb Genetics Corp. Sprint Corp.
-----------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio managers
only through the end of the period of this report as stated on the cover. The
managers' views are subject to change at any time based on market and other
conditions.
13
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
Quarter Ended September 30, 1998
(Unaudited)
Ownership at
September 30,
Shares 1998
------ -------------
NET PURCHASES
Common Stocks
Aeroquip-Vickers Inc.................... 130,000 160,000
Allegiance Telecom Inc.................. 1,000 5,000
Allied Group Inc........................ 9,200 80,000
Alltel Corp. (a)........................ 65,000 65,000
American Bankers Insurance Group Inc. .. 38,000 90,000
AMETEK Inc.............................. 2,200 87,200
AMP Inc. ............................... 93,000 180,000
AMP Limited ............................ 25,000 25,000
Ampco-Pittsburgh Corp................... 2,700 192,700
Anglogold Ltd-Spon ADR.................. 10,000 10,000
Archer-Daniels-Midland Co. (b).......... 44,500 369,500
Argonaut Group Inc...................... 12,000 20,000
Ascent Entertainment Group Inc.......... 2,000 105,768
Audiofina .............................. 8,000 8,000
Aztar Corp.............................. 5,000 90,000
Banca Nazionale Lavoro RNC (c) ......... 140,000 140,000
Banco Pastor SA......................... 21,000 21,000
Banco Santander SA, ADR (d,e)........... 68,640 134,640
Barrick Gold Corp....................... 10,000 10,000
Betzdearborn Inc........................ 300,000 300,000
Brau und Brunnen........................ 1,300 18,000
Boeing Co............................... 35,000 120,000
Burlington Resources Inc................ 5,000 70,000
Cablevision Systems Corp., Cl. A (d).... 383,000 813,000
Carter-Wallace Inc...................... 20,000 525,000
Catellus Development Corp............... 40,000 340,000
Cendant Corporation .................... 30,000 55,000
Centennial Cellular Corp., Cl. A........ 10,000 60,000
CheckFree Corp.......................... 20,000 22,000
Cincinnati Bell Inc..................... 38,000 40,000
CLARCOR Inc............................. 5,300 110,000
Coca-Cola Co. .......................... 10,000 10,000
Colonial Limited (f).................... 47,497 284,979
Compagnie Financiere Richemont AG,
Cl. A ................................ 300 1,000
Cooper Industries Inc. ................. 8,000 8,000
Corn Products International Inc......... 6,000 34,250
Crane Co. (h)........................... 47,000 147,000
CRH plc ORD............................. 10,000 80,000
Dana Corp (g)........................... 102,223 102,223
Deutsche Babcock AG..................... 7,000 7,000
Donaldson, Lufkin & Jenrette Inc. ...... 3,000 3,000
Eastern Enterprises..................... 5,000 35,000
Energy East Corporation ................ 10,000 10,000
Fairchild Corporation, Cl. A............ 5,000 105,000
Ferro Corp.............................. 2,000 242,000
Flowserve Corp.......................... 22,500 45,000
Frontier Corp........................... 15,000 70,000
Gaylord Entertainment Co., Cl. A........ 15,500 125,500
General Cigar Holdings Inc.............. 10,000 60,000
Giant Food Inc., Cl. A.................. 320,000 800,000
Golden Books Family Entertainment
Inc. ................................. 15,000 230,000
Gray Communications Systems Inc. (h).... 12,500 37,500
Grupo Televisa S.A., GDR................ 5,000 280,000
H&R Block Inc........................... 2,000 94,000
Halliburton Co.......................... 5,000 55,000
Harmony Gold Mining Co Ltd.............. 60,000 60,000
Hilton Hotels Corp...................... 105,000 450,000
Hussmann International Inc.............. 19,250 250,000
Independent Newspapers Ltd., ORD........ 40,000 278,000
Kansas City Southern Industries Inc. ... 3,000 15,000
Keebler Foods Co........................ 2,000 4,000
Leucadia National Corporation .......... 2,000 8,000
Liberty Corp............................ 46,468 101,000
Lihir Gold Ltd ......................... 150,000 150,000
Loewen Group Inc........................ 47,000 150,000
Mellon Bank Corporation................. 1,000 3,000
Merrill Lynch & Co. .................... 50,000 50,000
Modine Manufacturing Co................. 10,000 300,000
Moevenpick Holding AG................... 210 950
N2K Inc................................. 2,000 12,000
14
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES -- (Continued)
Quarter Ended September 30, 1998
(Unaudited)
Ownership at
September 30,
Shares 1998
------ -------------
NET PURCHASES (continued)
Common Stocks (continued)
National Service Industries Inc. ....... 2,000 102,000
New York Times Co., Cl. A (d)........... 71,000 155,000
Newmont Mining Corp..................... 20,000 20,000
Northrop Grumman Corp. ................. 10,000 10,000
Park-Ohio Holding Corp.................. 2,000 32,715
Pathe SA................................ 500 3,500
Pennzoil Co............................. 20,000 110,000
Penton Media Inc. (i) .................. 295,000 295,000
PepsiCo Inc............................. 15,000 350,000
Pittway Corp. (d)....................... 205,000 410,000
Pittway Corp., Cl. A (d,i).............. 89,500 172,000
Placer Dome Inc......................... 20,000 40,000
Ralston Purina Co. (j).................. 315,000 460,000
Reader's Digest Association Inc.,
Class A .............................. 8,000 20,000
Reader's Digest Association Inc.,
Class B .............................. 10,000 140,000
Reckitt & Colman PLC.................... 20,000 30,000
Republic Industries Inc................. 18,000 33,000
Rollins Inc............................. 53,000 500,000
Schering AG............................. 7,000 7,000
Superior Industries International
Inc. ................................. 1,000 6,000
Sybron Chemicals Inc. .................. 92,000 92,000
Telephone and Data Systems Inc.......... 30,000 350,000
Tootsie Roll Industries Inc. (d)........ 45,195 90,390
Ucar International Inc. ................ 38,000 60,000
Walt Disney Co. (j)..................... 60,000 90,000
Watts Industries Inc., Cl. A............ 3,000 23,000
Wynn's International Inc................ 6,000 60,000
Zeneca Group plc........................ 8,000 33,000
Preferred Stocks
Citizens Utilities Co., Conv. Pfd.
(EPPICS) ............................. 10,000 10,000
Sealed Air Corp., Pfd................... 20,000 35,000
Volkswagen AG, Pfd. (c)................. 13,500 15,000
Common Stock Warrants and Rights
Commonwelth Telephone Enterprises,
Rights (k) ........................... 20,000 20,000
NET SALES
Common Stocks
360(degree)Communications Co. (a)....... (95,000) --
Alliance et Gestion..................... (6,525) 1,100
American Express Co..................... (5,000) 280,000
American Stores Co...................... (130,000) 90,000
AMR Corp................................ (8,000) 90,000
AptarGroup Inc. (d)..................... (5,000) --
Arco Chemical Co. (l)................... (196,000) --
Banca Commerciale Italiana.............. (235,000) 165,000
Bank of Scotland........................ (20,000) 100,782
Bruno's Inc............................. (115,000) --
Caterpillar Inc......................... (2,000) 10,000
Century Telephone Enterprises Inc....... (9,500) 208,000
Chevron Corp............................ (5,000) 5,000
Church & Dwight Co. Inc................. (5,000) 70,000
Department 56 Inc....................... (5,000) 15,000
Deutsche Bank AG, Sponsored ADR......... (13,000) 150,000
Dow Jones & Co. Inc..................... (2,000) 83,000
Dundee Bancorp Inc., Cl. A.............. (30,000) --
Eastman Kodak Co........................ (8,000) 22,000
Echlin Inc. (g)......................... (110,000) --
Elsag Bailey Process Automation N.V. ... (5,000) 10,000
Exel Limited............................ (4,000) --
First Brands Corp....................... (2,000) 55,000
Fomento Economico Mexicano SA,
ADR 144A (m) (200,000) --
Fortune Brands Inc...................... (2,000) 168,000
Gallaher Group plc...................... (20,000) 220,000
Hartwall Oy AB.......................... (45,000) --
Havas, Sponsored ADR (n)................ (120,000) --
Hong Kong Telecommunications Ltd.,
Sponsored ADR......................... (3,000) 32,000
HSBC Holdings plc....................... (30,695) --
Invik & Co. AB, Cl. B................... (3,000) 17,666
15
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
Quarter Ended September 30, 1998
(Unaudited)
Ownership at
September 30,
Shares 1998
------ -------------
ITT Industries Inc...................... (210,000) 50,000
Johnson Controls Inc.................... (5,000) 120,000
Lehman Brothers Holdings Inc............ (13,000) 56,000
Media General Inc., Cl. A............... (3,500) 356,500
Mercantile Stores Co. Inc. (o).......... (100,000) --
Monsanto Company........................ (5,000) --
Navistar International Corp............. (1,500) 497,000
Nomura Securities Company Ltd........... (35,000) --
Paxson Communications Corp., Cl. A. .... (5,000) 120,000
Pegasus Gold Inc........................ (70,000) 844,000
Pheonix AG.............................. (21,000) 26,500
Quaker Oats Co.......................... (40,000) 200,000
Republic Services Inc., Cl. A........... (3,000) --
SAS Norge ASA........................... (25,000) 35,000
SBC Communications Inc.................. (1,000) 55,000
Sealed Air Corp......................... (65,000) 15,000
Skandinaviska Enskilda Banken........... (74,000) --
Southern New England
Telecommunications Corp. ............. (2,000) 28,000
Swedish Match AB........................ (150,000) 100,000
Telecom Italia Mobile SPA .............. (100,000) 1,395,000
Telecom Italia SpA, Sponsored ADR....... (2,000) 168,000
Telefonica de Espana, Sponsored ADR .... (500) 50,500
Telefonos De Mexico SA, Cl. L, ADR...... (2,000) 18,000
Triangle Pacific Corp. (p).............. (16,000) --
Trimark Financial Corporation........... (8,000) --
U.S. WEST Inc........................... (1,330) 7,000
UBS AG.................................. (2,000) --
United Television Inc................... (19,400) 259,706
USA Networks, Inc....................... (2,600) 210,000
Viacom Inc., Cl. A...................... (3,000) 477,000
NET SALES (continued)
Preferred Stocks
ProSieben Media AG...................... (4,000) 3,750
Common Stock Warrants and Rights
Colonial Limited Inc, Rights (f)........ (47,497) --
Oriental Press Group, Warrants,
expires 10/02/1998.................... (29,900) --
- ----------
(a) Merger -- 0.74 shares of Alltel Corp. for every 1 share of
360(degree)Communications Co.
(b) Stock Dividend -- additional .05 shares per share held.
(c) 10 for 1 stock split.
(d) 2 for 1 stock split.
(e) Stock Dividend -- additional .02 shares per share held.
(f) Rights exercised.
(g) Merger-- 0.9293 shares of Dana Corp. for every 1 share of Echlin Inc.
(h) 3 for 2 stock split.
(i) Spinoff -- 1 share of Penton Media Inc. for every 1 share of Pittway
Corp., Cl A.
(j) 3 for 1 stock split.
(k) Rights offer-- received 1 right for every 5 shares owned.
(l) Tender offer at $57.75 per share.
(m) Tender offer at $498.9024 per ADR.
(n) Cash merger at $20.3376 per ADR.
(o) Tender offer at $80.00 per share.
(p) Tender offer at $55.50 per share.
16
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS
September 30, 1998 (Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS -- 87.1%
Telecommunications -- 9.0%
40,000 Aliant Communications Inc................. $ 990,000
5,000 Allegiance Telecom Inc.................... 41,875
65,000 Alltel Corp............................... 3,079,375
67,000 AT&T Corp................................. 3,915,313
87,000 BC TELECOM Inc............................ 2,079,794
545,000 BCE Inc................................... 15,225,935
75,000 Cable & Wireless plc, Sponsored ADR ...... 2,057,813
2,040,000 Cable & Wireless Jamaica Ltd.............. 102,000
40,000 Cincinnati Bell Inc....................... 1,040,000
80,000 Commonwealth Telephone
Enterprises, Inc.+...................... 1,915,000
20,000 Commonwealth Telephone Enterprises,
Inc. Cl. B+............................. 525,000
35,000 Compania de Telecomunicaciones de
Chile SA, Sponsored ADR+ ............... 669,375
70 DDI Corp.................................. 155,869
70,000 Frontier Corp............................. 1,916,250
265,000 GTE Corp.................................. 14,575,000
32,000 Hong Kong Telecommunications Ltd.,
Sponsored ADR........................... 612,000
10,000 Maritime Telegraph and Telephone Co.
Ltd..................................... 203,546
10,000 Motorola Inc.............................. 426,875
95 Nippon Telegraph and Telephone Corp....... 692,364
295,000 RCN Corporation........................... 3,835,000
55,000 SBC Communications Inc.................... 2,444,063
28,000 Southern New England
Telecommunications Corp................. 2,187,500
250,000 Sprint Corp............................... 18,000,000
10,000 Telecom Argentina -- Stet France
Telecom S.A., Sponsored ADR ............ 296,875
400,040 Telecom Italia SpA........................ 2,756,766
168,000 Telecom Italia SpA, Sponsored ADR ........ 11,256,000
167,000 Telecomunicacoes Brasileiras SA
(Telebras), Sponsored ADR .............. 11,523,000
10,000 Telefonica de Argentina S.A., ADR,
Cl. B .................................. 294,375
50,500 Telefonica de Espana, Sponsored ADR ...... 5,450,844
18,000 Telefonos De Mexico SA, Cl. L, ADR ....... 796,500
7,000 U.S. WEST Inc.+........................... 367,063
-----------
109,431,370
-----------
Equipment And Supplies -- 8.4%
160,000 Aeroquip-Vickers Inc...................... 4,600,000
87,200 AMETEK Inc................................ 1,504,200
192,700 Ampco-Pittsburgh Corp..................... 2,818,238
137,500 Amphenol Corp., Cl. A+.................... 4,795,313
10,000 Caterpillar Inc........................... 445,625
110,000 CLARCOR Inc............................... 1,691,250
45,000 CTS Corp.................................. 1,327,500
345,000 Deere & Co................................ 10,436,249
312,000 Donaldson Co. Inc......................... 4,992,000
20,000 EG&G Inc.................................. 452,500
45,000 Flowserve Corp............................ 911,250
6,500 Franklin Electric Co...................... 411,125
107,500 Gerber Scientific Inc..................... 2,902,500
250,000 Hussmann International, Inc............... 3,546,875
350,000 IDEX Corp................................. 9,296,875
50,000 Lufkin Industries Inc..................... 1,300,000
30,000 Manitowoc Co. Inc......................... 903,750
142,000 Mark IV Industries Inc.................... 2,067,875
497,000 Navistar International Corp.+............. 11,244,625
20,000 PACCAR Inc................................ 823,750
410,000 Pittway Corp.............................. 10,198,750
172,000 Pittway Corp., Cl. A...................... 4,106,500
80,000 Sequa Corp., Cl. A+....................... 4,505,000
75,000 Sequa Corp., Cl. B+....................... 5,467,969
170,000 SPS Technologies Inc.+.................... 7,915,625
12,000 TI Group plc.............................. 72,628
37,500 US Filter Corp............................ 600,000
23,000 Watts Industries Inc., Cl. A.............. 414,000
-----------
99,751,972
-----------
Broadcasting -- 6.8%
50,000 Ackerley Group Inc........................ 987,500
8,000 Audiofina................................. 336,622
346,673 Chris-Craft Industries Inc................ 15,318,613
558,864 Chris-Craft Industries Inc., Cl. B (a).... 24,694,803
65,000 Granada Group plc ORD..................... 817,748
37,500 Gray Communications Systems Inc........... 707,813
280,000 Grupo Televisa S.A., GDR+................. 5,407,500
101,000 Liberty Corp.............................. 4,197,813
3,750 NRJ SA.................................... 609,397
3,500 Pathe SA+................................. 656,273
120,000 Paxson Communications Corp., Cl. A+....... 1,102,500
85,000 Publishing & Broadcasting Ltd............. 300,085
17
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 1998 (Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Broadcasting (Continued)
100,000 Television Broadcasting Ltd. ORD $ 255,523
259,706 United Television Inc......... 27,723,616
-----------
83,115,805
-----------
Financial Services -- 6.8%
80,000 Allied Group Inc.......................... 3,845,000
280,000 American Express Co. (d).................. 21,734,999
20,000 Argonaut Group, Inc....................... 510,000
165,000 Banca Commerciale Italiana................ 992,109
140,000 Banca Nazionale Lavoro RNC................ 356,223
21,000 Banco Pastor SA........................... 1,109,663
134,640 Banco Santander SA, ADR................... 2,044,845
300,000 Bankgesellschaft Berlin AG ............... 5,137,878
80,631 Bank of Ireland........................... 1,434,294
100,782 Bank of Scotland.......................... 962,071
260 Berkshire Hathaway Inc., Cl. A+........... 15,496,000
284,979 Colonial Limited Inc...................... 804,807
46,000 Commerzbank AG, Sponsored ADR............. 1,247,750
150,000 Deutsche Bank AG, Sponsored ADR .......... 7,687,500
3,000 Donaldson, Lufkin & Jenrette Inc.......... 76,688
25,000 Hibernia Corp............................. 360,938
94,000 H&R Block Inc............................. 3,889,250
56,000 Lehman Brothers Holdings Inc.............. 1,582,000
8,000 Leucadia National Corporation............. 234,500
3,000 Mellon Bank Corporation................... 165,188
50,000 Merrill Lynch & Co........................ 2,368,750
116,700 Midland Co................................ 2,647,631
15,000 Morgan (J.P.) & Co. Inc................... 1,269,375
60,000 Riggs National Corp....................... 1,470,000
14,000 Safra Republic Holdings SA................ 581,000
15,000 Schroders, Plc............................ 246,089
40,000 State Street Corp......................... 2,182,500
20,000 SunTrust Banks Inc........................ 1,240,000
26,000 Unitrin Inc............................... 1,668,875
-----------
83,345,924
-----------
Cable -- 6.1%
40,125 Cable Michigan............................ 1,394,344
813,000 Cablevision Systems Corp., Cl. A+......... 35,111,437
40,000 Comcast Corp., Cl. A...................... 1,865,000
40,000 Comcast Corp., Cl. A Special.............. 1,877,500
305,000 MediaOne Group Inc........................ 13,553,438
50,000 Shaw Communications Inc.,
Cl. B, Conv............................. 846,598
301,547 Tele-Communications Inc., Cl. A........... 11,798,026
55,000 Tele-Communications International Inc.,
Cl. A+.................................. 1,141,250
361,970 TCI Ventures Group+....................... 6,492,837
-----------
74,080,430
-----------
Entertainment -- 6.0%
105,768 Ascent Entertainment Group Inc.+.......... 846,144
40,000 CANAL + , Sponsored ADR................... 1,944,633
23,288 EMI Group plc............................. 143,620
108,000 EMI Group plc, Sponsored ADR.............. 1,350,000
125,500 Gaylord Entertainment Co., Cl. A.......... 3,741,469
65,000 GC Companies Inc. +....................... 2,510,625
20,000 PolyGram NV............................... 1,135,000
295,000 Time Warner Inc........................... 25,830,937
65,000 Todd-AO Corp., Cl. A...................... 479,375
210,000 USA Networks Inc.+........................ 4,081,875
477,000 Viacom Inc., Cl. A+....................... 27,427,500
90,000 Walt Disney Co............................ 2,278,125
-----------
71,769,303
-----------
Wireless Communications -- 4.6%
125,000 AirTouch Communications Inc.+ ............ 7,125,000
133,000 Associated Group Inc., Cl. A+ ............ 4,389,000
133,000 Associated Group Inc., Cl. B+ ............ 4,189,500
60,000 Centennial Cellular Corp., Cl. A+......... 1,920,000
208,000 Century Telephone Enterprises Inc......... 9,828,000
100,000 COMSAT Corp., Series 1.................... 3,525,000
100,000 Loral Space & Communications Ltd.+........ 1,475,000
5,000 NEXTEL Communications Inc., Cl. A+........ 100,938
250,000 Securicor Group plc ORD................... 1,643,783
80,000 TCI Satellite Entertainment Inc., Cl. A+.. 230,000
1,395,000 Telecom Italia Mobile SPA................. 8,130,070
350,000 Telephone and Data Systems Inc............ 12,206,249
115,813 Vodafone Group plc ORD.................... 1,344,783
-----------
56,107,324
-----------
Food And Beverage -- 4.6%
28,108 Advantica Restaurant Group Inc.+.......... 133,513
30,000 Bestfoods Inc............................. 1,453,125
18,000 Brau und Brunnen+......................... 1,940,178
10,000 Coca-Cola Co.............................. 576,250
34,250 Corn Products International Inc.+......... 864,813
18
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 1998 (Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Food And Beverage (Continued)
21,600 Diageo PLC, Sponsored ADR................. $ 783,000
450,000 Foster's Brewing Group Ltd................ 981,263
40,520 General Mills Inc......................... 2,836,400
4,000 Keebler Foods Co.......................... 104,000
100,000 Kellogg Co................................ 3,293,750
11,000 LVHM Moet Hennessy Louis Vuitton,
Sponsored ADR........................... 299,750
700 Nestle SA................................. 1,396,552
350,000 PepsiCo Inc............................... 10,303,123
200,000 Quaker Oats Co............................ 11,800,000
40,000 Ralcorp Holdings Inc.+.................... 560,000
120,000 Seagram Co. Ltd........................... 3,442,500
90,390 Tootsie Roll Industries Inc............... 3,186,248
356,000 Whitman Corp.............................. 5,673,750
73,000 Wrigley (Wm.) Jr. Co...................... 5,543,438
-----------
55,171,653
-----------
Consumer Products -- 4.0%
525,000 Carter-Wallace Inc........................ 8,235,938
9,500 Christian Dior SA......................... 763,420
70,000 Church & Dwight Co. Inc................... 2,056,250
1,000 Compagnie Financiere Richemont AG,
Cl. A................................... 1,282,237
22,000 Eastman Kodak Co.......................... 1,700,875
55,000 First Brands Corp......................... 1,199,688
168,000 Fortune Brands Inc. (d)................... 4,977,000
220,000 Gallaher Group plc........................ 6,462,500
60,000 General Cigar Holdings Inc.+.............. 386,250
105,000 General Cigar Holdings Inc. Class B+...... 675,938
54,000 Harley Davidson Inc....................... 1,586,250
35,000 Matsushita Electric Industrial Co. Ltd.,
ORD..................................... 475,554
1,500 Matsushita Electric Industrial Co. Ltd.,
ADR..................................... 202,500
33,000 National Presto Industries Inc............ 1,237,500
6,500 Nintendo Co. Ltd.......................... 611,793
30,000 Reckitt & Colman PLC...................... 443,981
460,000 Ralston Purina Co......................... 13,455,000
20,000 Sony Corp., ADR........................... 1,375,000
9,000 Sony Corp................................. 625,600
1,200 Swatch Group AG, Bearer................... 722,399
100,000 Swedish Match AB.......................... 311,284
-----------
48,786,956
-----------
Publishing -- 3.7%
30,000 Arnoldo Mondadori Editore SpA+............ 348,772
1,500 Central Newspapers Inc., Cl. A............ 85,500
83,000 Dow Jones & Co. Inc....................... 3,859,500
230,000 Golden Books Family Entertainment Inc.+... 35,938
50,000 Harcourt General Inc...................... 2,418,750
278,000 Independent Newspapers Ltd., ORD ......... 997,131
50,000 McGraw-Hill Companies Inc................. 3,962,500
356,500 Media General Inc., Cl. A................. 13,814,373
140,000 Meredith Corp............................. 4,480,000
155,000 New York Times Co., Cl. A................. 4,262,500
140,000 News Corp. Ltd............................ 902,572
5,000 News Corp. Ltd., ADR...................... 128,125
60,000 Pearson plc ORD........................... 1,116,965
295,000 Penton Media Inc.......................... 4,019,375
20,000 Reader's Digest Association Inc.,
Class A................................. 382,500
140,000 Reader's Digest Association Inc.,
Class B................................. 2,660,000
65,000 Schibsted A/A............................. 808,764
1,500,000 Seat Pagine Gialle SpA+................... 1,102,293
200,000 South China Morning Post Holdings
ORD..................................... 78,722
-----------
45,464,280
-----------
Agriculture -- 2.8%
369,500 Archer-Daniels-Midland Co................. 6,189,125
310,000 Dekalb Genetics Corp. Class B............. 28,520,000
-----------
34,709,125
-----------
Retail Food And Drug -- 2.8%
800,000 Giant Food Inc., Cl. A.................... 34,550,000
-----------
34,550,000
-----------
Diversified Industrial -- 2.5%
8,000 Cooper Industries Inc..................... 326,000
147,000 Crane Co.................................. 3,454,500
7,000 Deutsche Babcock AG....................... 368,873
10,000 Elsag Bailey Process Automation N.V....... 210,625
118,044 GATX Corp................................. 3,902,830
60,000 Honeywell Inc............................. 3,843,750
10,000 Indus Holding AG.......................... 383,245
50,000 ITT Industries Inc........................ 1,693,750
390,000 Lamson & Sessions Co.+.................... 1,779,375
100,000 Lawter International Inc.................. 725,000
102,000 National Service Industries Inc........... 3,251,250
19
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 1998 (Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Diversified Industrial (Continued)
9,000 Oerlikon-Buhrle Holding AG................ $ 1,052,955
32,715 Park-Ohio Holding Corp.+.................. 445,742
15,000 Sealed Air Corp........................... 478,125
100,000 Tenneco Inc.+............................. 3,287,500
78,000 Thomas Industries Inc..................... 1,672,125
50,000 Trinity Industries Inc.................... 1,621,875
26,000 Tyco International Ltd.................... 1,436,500
100,000 Tyler Corp.+.............................. 762,500
-----------
30,696,520
-----------
Automotive: Parts And Accessories -- 2.3%
102,223 Dana Corp................................. 3,814,196
140,000 GenCorp Inc............................... 2,695,000
55,000 Genuine Parts Co.......................... 1,653,438
120,000 Johnson Controls Inc...................... 5,580,000
6,000 LucasVarity plc........................... 187,500
300,000 Modine Manufacturing Co................... 8,699,999
26,500 Pheonix AG................................ 556,993
6,500 SPX Corp.................................. 268,531
130,000 Standard Motor Products Inc............... 3,168,750
6,000 Superior Industries International, Inc.... 137,250
110,000 TransPro Inc.............................. 550,000
60,000 Wynn's International Inc.................. 1,121,250
-----------
28,432,907
-----------
Specialty Chemical -- 2.3%
300,000 BetzDearborn Inc.......................... 20,737,500
5,400 Ciba Specialty Chemicals,
ADR 144A (c)+........................... 236,925
20,000 E.I. du Pont de Nemours and Co............ 1,122,500
242,000 Ferro Corp................................ 4,809,750
92,000 Sybron Chemicals Inc...................... 1,391,500
-----------
28,298,175
-----------
Energy -- 2.1%
34,000 Apache Corp............................... 911,625
70,000 Atlantic Richfield Co..................... 4,965,624
90,000 British Petroleum Co. plc, ADR ........... 7,852,500
60,000 British Petroleum Co. plc, ORD ........... 918,054
70,000 Burlington Resources Inc.................. 2,616,250
5,000 Chevron Corp.............................. 420,313
35,000 Eastern Enterprises....................... 1,474,375
10,000 Energy East Corporation .................. 510,000
55,000 Halliburton Co............................ 1,570,938
110,000 Pennzoil Co............................... 3,856,875
11,000 Veba AG................................... 573,071
-----------
25,669,625
-----------
Aviation: Parts And Services -- 1.3%
120,000 Boeing Co................................. 4,117,500
360,000 Coltec Industries Inc.+................... 5,445,000
100,000 Curtiss-Wright Corp....................... 3,968,750
145,000 Hi-Shear Industries Inc................... 389,688
10,000 Northrop Grumman Corp..................... 730,000
23,000 Precision Castparts Corp.................. 948,750
-----------
15,599,688
-----------
Health Care -- 1.3%
15,000 Amgen Inc.+............................... 1,133,438
49,666 Astra AB, Cl. A........................... 849,046
13,000 Biogen Inc.+.............................. 855,563
45,000 Glaxo Wellcome plc ORD.................... 1,328,882
4,000 Glaxo Wellcome plc ADR.................... 228,500
1,150 Novartis AG, Registered+.................. 1,848,631
54,000 Novartis AG, ADR+......................... 4,336,873
15,000 Pfizer Inc................................ 1,589,063
120 Roche Holding AG.......................... 1,295,277
7,000 Schering AG............................... 724,123
33,000 Zeneca Group plc+......................... 1,166,948
-----------
15,356,345
-----------
Paper And Forest Products -- 1.2%
252,000 Greif Bros. Corp., Cl. A.................. 8,316,000
3,400 Greif Bros. Corp., Cl. B (a).............. 124,525
255,000 St. Joe Company........................... 6,088,125
-----------
14,528,650
-----------
Hotels/Gaming -- 1.1%
90,000 Aztar Corp.+.............................. 348,750
5,000 GTECH Holdings Corp.+..................... 132,813
450,000 Hilton Hotels Corp........................ 7,678,124
1,016,949 Ladbroke Group plc........................ 3,786,322
100,000 Mirage Resorts Inc.+...................... 1,675,000
950 Moevenpick Holding AG..................... 380,234
-----------
14,001,243
-----------
Consumer Services -- 1.1%
55,000 Cendant Corporation....................... 639,375
15,000 Department 56 Inc.+....................... 405,000
20
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 1998 (Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Consumer Services (Continued)
150,000 Loewen Group Inc.......................... $ 2,212,500
30,000 Midas, Inc.+.............................. 727,508
12,000 N2K Inc.+................................. 86,250
33,000 Republic Industries, Inc.+................ 480,563
12,000 Response USA, Inc.+....................... 60,000
500,000 Rollins Inc............................... 8,875,000
-----------
13,486,196
-----------
Automotive -- 1.1%
210,000 General Motors Corp. (d).................. 11,484,375
28,000 Renault SA................................ 1,120,040
20,000 Toyota Motor Corp......................... 446,805
-----------
13,051,220
-----------
Retail -- 1.0%
90,000 American Stores Co........................ 2,896,875
18,000 Coldwater Creek Inc.+..................... 342,000
80,000 Earl Scheib Inc.+......................... 430,000
2,000 Fred Meyer Inc.+.......................... 77,750
100,000 Lillian Vernon Corp....................... 1,356,250
330,000 Neiman Marcus Group Inc.+................. 7,136,250
10,425 Syratech Corp.+........................... 208,500
-----------
12,447,625
-----------
Financial Services: Insurance -- 0.7%
90,000 American Bankers Insurance Group, Inc..... 3,825,000
25,000 AMP Ltd................................... 302,941
75,342 CGU PLC................................... 1,167,530
125,000 Istitute Nazionale delle Assicurazioni ... 318,057
14,400 Mapfre Corp............................... 286,610
20,000 SCOR SA................................... 1,189,328
115,000 Skandia Forsakrings AB.................... 1,496,460
-----------
8,585,926
-----------
Electronics -- 0.7%
180,000 AMP Inc................................... 6,434,999
2,000 Hitachi Ltd., ADR......................... 86,750
1,500 NEC Corp., ADR............................ 49,313
12,000 Philips Electronics N.V., New York ....... 640,500
60,000 Ucar International Inc.................... 1,080,000
-----------
8,291,563
-----------
Transportation -- 0.5%
90,000 AMR Corp.+................................ 4,989,374
15,000 Kansas City Southern Industries, Inc...... 525,000
31,273 MIF Ltd.+................................. 634,427
35,000 SAS Norge ASA............................. 355,018
-----------
6,503,819
-----------
Real Estate -- 0.5%
340,000 Catellus Development Corp.+............... 4,420,000
44,000 Florida East Coast Industries Inc......... 1,276,000
50,000 Griffin Land & Nurseries Inc.+. .......... 553,125
-----------
6,249,125
-----------
Housing Related -- 0.3%
140,000 Nortek Inc.+.............................. 3,815,000
5,000 Nortek Inc., Special Common+.............. 136,250
-----------
3,951,250
-----------
Country/Closed-End Funds -- 0.3%
59,000 Central European Equity Fund Inc.......... 649,000
70,000 Emerging Germany Fund Inc.+............... 848,750
25,000 France Growth Fund Inc.................... 293,750
40,250 Italy Fund Inc............................ 462,875
68,000 New Germany Fund.......................... 964,750
45,942 Royce Value Trust Inc..................... 591,503
-----------
3,810,628
-----------
Communications Equipment -- 0.3%
100,000 Allen Telecom Inc.+....................... 668,750
30,000 Dynatech Corporation...................... 88,125
33,000 Lucent Technologies Inc................... 2,279,063
20,000 Scientific-Atlanta Inc.................... 422,500
-----------
3,458,438
-----------
Business Services -- 0.3%
1,100 Alliance et Gestion....................... 83,289
22,000 CheckFree Corp............................ 217,250
100,000 Landauer Inc.............................. 2,550,000
10,833 Reuters Holdings plc, Cl. B, Sponosred
ADR..................................... 538,942
500 Seagate Technology, Inc.+................. 12,531
-----------
3,402,012
-----------
21
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 1998 (Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Metals And Mining -- 0.2%
10,000 Anglogold Ltd.-Spon ADR................... $ 268,750
70,909 Antofagasta Holdings plc.................. 204,939
10,000 Barrick Gold Corp......................... 200,000
60,000 Harmony Gold Mining Co Ltd................ 283,272
150,000 Lihir Gold Ltd............................ 193,764
20,000 Newmont Gold Co........................... 511,250
20,000 Newmont Mining Corp....................... 485,000
844,000 Pegasus Gold Inc.+........................ 46,420
40,000 Placer Dome Inc........................... 552,500
40,000 Rangold and Exploration Co. Ltd.+......... 28,750
-----------
2,774,645
-----------
Building and Construction -- 0.1%
80,000 CRH plc ORD............................... 1,008,433
15,000 Martin Marietta Materials Inc............. 647,814
-----------
1,656,247
-----------
Aerospace / Defense -- 0.1%
105,000 Fairchild Corporation, Cl. A.............. 1,483,125
-----------
Conglomerates -- 0.1%
17,666 Invik & Co. AB, Cl. B..................... 1,273,367
-----------
Textiles -- 0.1%
100,000 Simint SpA................................ 720,928
-----------
Computer Software -- 0.0%
52,500 Merkantildata ASA......................... 401,170
-------------
TOTAL COMMON STOCKS....................... 1,060,414,578
-------------
PREFERRED STOCKS -- 0.6%
Telecommunications -- 0.3%
10,000 Citizens Utilities Co., Conv. Pfd.
(EPPICS)................................ 430,000
40,000 Sprint Corp., 8.250%, Conv. Pfd........... 2,700,000
2,223,575 Telecomunicacoes de Sao Paulo (Telesp),
Pfd., Registered........................ 322,624
-----------
3,452,624
-----------
Diversified Industrial -- 0.1%
3,000 KSB AG, Pfd............................... 556,903
35,000 Sealed Air Corp., Pfd..................... 1,264,375
-----------
1,821,278
-----------
Publishing -- 0.1%
43,500 News Corp. Ltd.., Sponsored ADR, Pfd...... 973,313
-----------
Cable -- 0.1%
8,000 Tele-Communications Inc., Cl. B,
6.000%, Ex. Jr. Pfd..................... 748,000
-----------
Automotive -- 0.0%
15,000 Volkswagen AG, Pfd........................ 682,655
-----------
Broadcasting-- 0.0%
3,750 ProSieben Media AG........................ 206,144
-----------
Wireless Communications -- 0.0%
2,223,575 Telecomunicacoes de Sao Paulo Celular,
Pfd., B................................. 91,910
-----------
TOTAL PREFERRED STOCKS.................... 7,975,924
-----------
COMMON STOCK WARRANTS AND RIGHTS -- 0.0%
62,463 Advantica Restaurant Group Inc.,
Warrants, expires 01/07/2005+........... 60,511
20,000 Commonwelth Telephone Enterprises,
Rights.................................. 57,500
-----------
118,011
-----------
Principal
Amount
------
CORPORATE BONDS -- 0.7%
Entertainment -- 0.6%
1,200,000 Time Warner Inc., Note,
7.975% due 08/15/2004................... 1,354,500
2,400,000 Time Warner Inc., Deb.,
8.110% due 08/15/2006................... 2,760,000
2,400,000 Time Warner Inc., Deb.,
8.180% due 08/15/2007................... 2,799,000
-----------
6,913,500
-----------
Publishing -- 0.1%
200,000 News American Holdings Inc.,
Gtd. Ex. Sub. Note,
Zero Coupon due 03/31/2002.............. 214,000
1,000,000 Thomas Nelson Inc., Conv. Sub. Note,
5.750% due 11/30/1999 144A (c).......... 981,250
-----------
1,195,250
-----------
22
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 1998 (Unaudited)
Market
Shares Value
------ -----
CORPORATE BONDS (Continued)
Cable -- 0.0%
200,000 Rogers Communications, Inc.,
7.50% due 09/01/1999.................... $ 129,142
-----------
TOTAL CORPORATE BONDS..................... 8,237,892
-----------
U.S. TREASURY BILLS -- 10.9%
133,515,000 U.S. Treasury Bills 4.47% to 4.79%++
due 11/12/1998 to 12/24/1998 (d)........ 132,777,203
-----------
REPURCHASE AGREEMENT -- 0.0%
474,000 Agreement with J.P. Morgan, 5.30%
dated 09/30/1998, to be repurchased at
$474,070 on 10/01/1998, collateralized
by $342,000 U.S. Treasury Bond,
8.50% due 02/15/20
(value $483,930) ...................... 474,000
-----------
TOTAL INVESTMENTS
(Cost $803,611,820) (b) -- 99.3% ..................... $1,209,997,607
==============
OTHER ASSETS, LIABILITIES AND
LIQUIDATION VALUE OF CUMULATIVE
PREFERRED STOCK -- (10.4%) ........................... (126,861,535)
--------------
NET ASSETS -- COMMON STOCK
(105,190,734 common shares outstanding) -- 88.9% ..... $1,083,136,072
--------------
NET ASSETS -- PREFERRED STOCK
(1,250,000 preferred shares outstanding) -- 11.1% .... 135,380,625
--------------
TOTAL NET ASSETS -- 100.0%.............................. $1,218,516,697
==============
NET ASSET VALUE PER COMMON SHARE
($1,083,136,072 / 105,190,734 shares outstanding) .... $10.30
======
FUTURES CONTRACTS -- SHORT POSITION
Number of Unrealized
Contracts Appreciation
--------- ------------
550 S&P 500 Index Futures,
December 1998........................... $ 1,232,935
===========
Number of Expiration Unrealized
Contracts Date Appreciation
--------- ---- ------------
SCHEDULE OF FORWARD FOREIGN EXCHANGE CONTRACTS
Forward Foreign Exchange Contracts to Deliver
12,100,000(e) Hong Kong Dollars in exchange
for USD $1,538,801............ 02/26/99 ($30,543)
========
- ----------
(a) Security fair valued under procedures established by the Board of
Directors.
(b) For Federal tax purposes:
Aggregate cost $804,285,834
============
Gross unrealized appreciation $445,421,220
Gross unrealized depreciation (39,709,447)
------------
Net unrealized appreciation $405,711,773
============
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. The market
value of these securities at September 30, 1998 was $1,218,175
representing 0.10% of total net assets.
(d) Securities pledged as collateral for futures contracts.
(e) Principal amount denoted in Hong Kong Dollars.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR -- American Depositary Receipt
USD -- United States Dollar
ORD -- Ordinary Share
GDR -- Global Depositary Receipt
23
<PAGE>
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
Enrollment in the Plan
It is the policy of The Gabelli Equity Trust Inc. ("Equity Trust") to
automatically reinvest dividends. As a "registered" shareholder you
automatically become a participant in the Equity Trust's Automatic Dividend
Reinvestment Plan (the "Plan"). The Plan authorizes the Equity Trust to issue
shares to participants upon an income dividend or a capital gains distribution
regardless of whether the shares are trading at a discount or a premium to net
asset value. All distributions to shareholders whose shares are registered in
their own names will be automatically reinvested pursuant to the Plan in
additional shares of the Equity Trust. Plan participants may send their stock
certificates to State Street Bank and Trust Company ("State Street") to be held
in their dividend reinvestment account. Registered shareholders wishing to
receive their distribution in cash must submit this request in writing to:
The Gabelli Equity Trust Inc.
c/o State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Shareholders requesting this cash election must include the shareholder's
name and address as they appear on the share certificate. Shareholders with
additional questions regarding the Plan may contact State Street at 1 (800)
336-6983.
Shareholders wishing to liquidate reinvested shares held at State Street
Bank must do so in writing or by telephone. Please submit your request to the
above mentioned address or telephone number. Include in your request your name,
address and account number. The cost to liquidate shares is $2.50 per
transaction as well as the brokerage commission incurred. Brokerage charges are
expected to be less than the usual brokerage charge for such transactions.
If your shares are held in the name of a broker, bank or nominee, you
should contact such institution. If such institution is not participating in the
Plan, your account will be credited with a cash dividend. In order to
participate in the Plan through such institution, it may be necessary for you to
have your shares taken out of "street name" and re-registered in your own name.
Once registered in your own name your dividends will be automatically
reinvested. Certain brokers participate in the Plan. Shareholders holding shares
in "street name" at participating institutions will have dividends automatically
reinvested. Shareholders wishing a cash dividend at such institution must
contact their broker to make this change.
The number of shares of Common Stock distributed to participants in the
Plan in lieu of cash dividends is determined in the following manner. Under the
Plan, whenever the market price of the Equity Trust's Common Stock is equal to
or exceeds net asset value at the time shares are valued for purposes of
determining the number of shares equivalent to the cash dividends or capital
gains distribution, participants are issued shares of Common Stock valued at the
greater of (i) the net asset value as most recently determined or (ii) 95% of
the then current market price of the Equity Trust's Common Stock. The valuation
date is the dividend or distribution payment date or, if that date is not a New
York Stock Exchange trading day, the next trading day. If the net asset value of
the Common Stock at the time of valuation exceeds the market price of the Common
Stock, participants will 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 business 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.
24
<PAGE>
DIRECTORS AND OFFICERS
THE GABELLI EQUITY TRUST INC.
One Corporate Center, Rye, NY 10580-1434
Directors
Mario J. Gabelli, CFA
Chairman & Chief Investment Officer,
Gabelli Funds, Inc.
Dr. Thomas E. Bratter
President, John Dewey Academy
Bill Callaghan
President, Bill Callaghan Associates
Felix J. Christiana
Former Senior Vice President,
Dollar Dry Dock Savings Bank
James P. Conn
Managing Director and Chief Investment Officer,
Financial Security Assurance Holdings Ltd.
Frank J. Fahrenkopf, Jr.
President and Chief Executive Officer,
American Gaming Association
Karl Otto Pohl
Former President, Deutsche Bundesbank
Anthony R. Pustorino
Certified Public Accountant
Professor, Pace University
Salvatore J. Zizza
Chairman, The Bethlehem Corp.
Officers
Mario J. Gabelli, CFA
President & Chief Investment Officer
Bruce N. Alpert
Vice President & Treasurer
Marc S. Diagonale
Vice President
James E. McKee
Secretary
Investment Advisor
Gabelli Funds, 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
Common 7.25% Preferred
------ ---------------
NYSE-Symbol: GAB GAB Pr
Shares Outstanding: 105,190,734 5,400,000
The Net Asset Value appears in the Publicly Traded Funds column, under the
heading "General Equity Funds," in Sunday's The New York Times and in Monday's
The Wall Street Journal. It is also listed in Barron's Mutual Funds/Closed End
Funds section under the heading "General Equity Funds".
The Net Asset Value may be obtained each day by calling (914) 921-5071.
- --------------------------------------------------------------------------------
For general information about the Gabelli Funds, call 1-800-GABELLI
(1-800-422-3554), fax us at 914-921-5118, visit Gabelli Funds' Internet homepage
at: http://www.gabelli.com or e-mail us at: [email protected]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Equity Trust may from time to time
purchase shares of its capital stock in the open market when the Equity Trust
shares are trading at a discount of 10% or more from the net asset value of the
shares.
- --------------------------------------------------------------------------------
<PAGE>
THE GABELLI EQUITY TRUST INC.
One Corporate Center
Rye, NY 10580-1434
(914) 921-5070
http://www.gabelli.com
Third-Quarter Report
September 30, 1998
GAB 09/98
