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THE GABELLI
EQUITY TRUST INC.
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First Quarter Report
March 31,1998
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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.
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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.
This report is printed on recycled paper.
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To Our Shareholders,
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THE GABELLI
EQUITY TRUST INC.
After a brief retreat in early January, stocks regained their momentum and
indices across the market capitalization spectrum closed the quarter at or near
record highs. The favorable economic backdrop for stocks--low inflation, low
interest rates and decent corporate earnings growth--continued to buoy the
market. However, the greatest driving force for the stock market continues to be
liquidity. Deals, restructurings and share repurchase programs proved powerful
factors underneath the market's strength. With the relatively uninspiring
returns available from traditional equities alternatives, cash continued to flow
into U.S. equities.
As evidenced by the Dow Jones Industrial Average's and Standard & Poor's
500's (S&P 500) lead over smaller capitalization indices, big continued to be
most beautiful. However, small and mid cap stocks delivered excellent absolute
returns.
Investment Performance
For the first quarter ended March 31, 1998, The Gabelli Equity Trust
Inc.'s ("Equity Trust" or "Fund") net asset value (NAV) per share increased
11.2% to $12.60, after adjusting for the $0.25 per share distribution on March
26, 1998. This compares to the Value Line Composite Index's 11.6% and the
Russell 2000 Index's 10.1% returns over the same period. The S&P 500 gained
13.9%. Each is an unmanaged indicator of stock market performance. For the
twelve months concluded March 31, 1998, the Equity Trust appreciated 42.7% after
adjusting for the $1.04 per share in distributions, versus 43.0%, 42.0% and
48.0% gains for the Value Line Composite, Russell 2000 and S&P 500,
respectively.
For the five year period ended March 31, 1998, the Equity Trust's return
averaged 17.1% annually, compared to average annual returns of 18.2%, 17.7% and
22.4% for the Value Line Composite, Russell 2000 and S&P 500. Total return
includes adjustments of $6.91 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 March 31, 1998, the Equity Trust achieved a total
return of 309.3%, including adjustments of $13.13 per share in distributions,
which equates to an average annual return of 15.1%. This compares to 15.5%,
14.9% and 18.9% average annual returns over the same time period for the Value
Line Composite, Russell 2000 and S&P 500.
Since its inception on August 21, 1986 through March 31, 1998, the Equity
Trust has had a total return of 418.9%, including adjustments of $14.21 per
share in distributions, which equates to an average annual return of 15.2%.
The Equity Trust's common shares ended the quarter at $12.3125 per share
on the New York Stock Exchange, an increase of 7.5% for the quarter. For the
twelve months ended March 31, 1998, the common shares are up 43.9%, 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. We are tracking both goals.
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What We Do
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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 11 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 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.
10% Distribution Policy -
The Equity Trust Raises Quarterly Dividend To $0.27 Per Share From $0.25 Per
Share
The Board of Directors of The Gabelli Equity Trust Inc. is pleased to
announce an increase in the quarterly dividend to $0.27 per share from $0.25 per
share. In our recent survey of shareholders, highlights of which were in our
Annual Report, well over 90% of those who responded told us we should continue
the Equity Trust's 10% Policy, which was instituted in August of 1988. Since
then, the Trust has paid distributions equivalent to 10% of its average net
assets each year. The following chart summarizes the total distributions made by
the Equity Trust since inception:
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<TABLE>
<CAPTION>
1987 1988 1989 1990 1991(a) 1992(b) 1993(c) 1994(d) 1995(e) 1996 1997
---- ---- ---- ---- ------- ------- ------- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
($)1.08 0.55 1.31 1.18 1.09 1.06 1.11 1.89 1.00 1.00 1.04
</TABLE>
(a) On October 21, 1991, the Trust distributed Rights equivalent to $0.42 per
share upon subscription of all issued shares.
(b) On September 28, 1992, the Trust distributed Rights equivalent to $0.36
per share upon subscription of all issued shares.
(c) On July 14, 1993, the Trust distributed Rights equivalent to $0.50 per
share upon subscription of all issued shares.
(d) On November 15, 1994, the Trust distributed shares of The Gabelli Global
Multimedia Trust Inc. valued at $0.80625 per GAB share.
(e) On October 19, 1995, the Trust distributed Rights equivalent to $0.37 per
share upon subscription of all issued shares.
In light of the response to our survey of shareholders, the investment
performance of the Equity Trust and our belief that a steady stream of
predictable payouts is better than an irregular payout, the Board has authorized
an increase in the regular quarterly dividend amounts paid in the first three
quarters of each year pursuant to the Policy. Under the terms of the amended
Policy, beginning with the second quarterly distribution expected in June 1998,
the Trust intends to pay $0.27 per share (up from $0.25 per share) for each of
the first three quarters of each year with an adjusting distribution in December
to meet the requirements of the 10% Distribution Policy.
The total distribution fixed for each year will continue to be equal to
the greater of 10% of the average of the net asset value per share of the Trust,
as of the last day of the four preceding calendar quarters, or the minimum
distribution requirements of the Internal Revenue Code.
Preferred Stock 101 - Q&A
The Board of Directors of The Gabelli Equity Trust Inc. is moving ahead
with an offering of preferred stock. The Equity Trust, as authorized by the
Board of Directors, filed a registration statement on February 11, 1998 for an
offering of cumulative preferred stock. The actual amount of capital to be
raised, the dividend rate and the timing of the offering have not been
determined and will be announced at a later date. The proceeds raised will be
used for investment purposes and the offering will be made only by means of a
prospectus. We thought we would share with you a Q&A on preferred stock.
Q. What is a common stock?
A common stock is a unit of ownership (equity) of a public corporation.
Owners of common stock typically are entitled to vote on the selection of
directors and other important matters as well as to receive dividends on their
holdings.
Q. What is a bond?
A bond is any interest-bearing or discounted government or corporate
security that obligates the issuer to pay the bondholder a specified sum of
money, usually at specific intervals, and to repay the principal amount of the
loan at maturity. Bondholders do not have corporate ownership privileges, as
stockholders do.
Q. What is a preferred stock?
Preferred stock is a form of equity investment which has certain rights
that differ from those of common stock. In our case, the Preferred Stock would
typically be issued at $25 per share with a fixed dividend rate. The
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Trust is obligated to pay this dividend to the Preferred Shareholders
before any dividends are paid to the common shares. Thereafter, any return
earned in excess of this dividend rate would work to benefit the Common
Shareholders.
Q: How would Preferred Shares benefit Common Shareholders?
Through March 31, 1998, the Equity Trust has earned a 15.2% average annual
return. The only obligation that the Trust would have to the Preferred
Shareholders is to pay the stated dividend rate. Given the current market
environment, we feel that there is an opportunity to take advantage of
relatively low long-term interest rates and to earn an excess return for our
Common Shareholders consistent with our conservative investment approach. We
expect that the Preferred Shares will be issued with a dividend rate which is
less than the Trust's 15.2% average annual return. 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 investment objectives, a Preferred
Share issuance offers what we believe is a conservative method of adding wealth
for our Common Shareholders.
Furthermore, Common Shareholders stand to receive certain tax benefits as
a result of a 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.
Q: Does the issuance of Preferred Shares affect the 10% Distribution Policy?
The issuance of Preferred Shares does not affect the 10% Distribution
Policy. Under present conditions, there are no plans to change the percentage
payout of the 10% Distribution Policy. If the Equity Trust were to issue
Preferred Shares, the Board of Directors would continue to review the 10% Policy
on a regular basis.
Q: Why is the Equity Trust considering Preferred Shares right now?
Right now, long-term interest rates are at relatively low levels. The
dividend rate that the Equity Trust would be required to pay on the Preferred
Shares is directly related to long-term rates. In this environment, we have a
great opportunity to create value by earning a return in excess of the
Preferred's dividend rate over the long term. Therefore, we believe this
represents an opportunistic time for the Equity Trust to take advantage of these
low rates at a relatively low cost.
In addition, the Adviser does not intend to receive a management fee on
the incremental assets raised unless the total return of the Equity Trust
exceeds the stated dividend rate of the Preferred Stock.
COMMENTARY
It Just Keeps Going, Going and Going!
Despite being targeted by evil forces such as the Asian economic meltdown,
some high profile earnings disappointments in the technology sector, and
off-the-historical chart valuations, the stock market, like the
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Energizer Bunny, just keeps going, going and going. We clearly underestimated
the market's potential. That's the news. The bad news is that based on about any
valuation benchmark you choose, stocks are currently in historically
unprecedented territory and the margin of safety is razor thin.
Granted, it would be hard to imagine a better economic scenario for
stocks. Economists are pegging inflation at 2% or lower. Interest rates are low.
Despite selected earnings dislocations resulting from Asian economic weakness,
domestic corporate profits are meeting consensus expectations and Wall Street
economists are predicting even better earnings growth in 1999. On the supply and
demand front--remember stocks go up in the short run when there are more buyers
than sellers--continued strong merger and acquisition activity and substantial
share repurchase programs are shrinking supply at a time when demand for stocks
keeps rising. Put it all together, and it makes sense that stocks are advancing.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Flow of Funds
($ Billions)
Sources 1993 1994 1995 1996 1997
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
U.S. Deals $ 234 $ 340 $ 511 $ 652 $ 919
Stock Buybacks 37 46 99 176 179
Equity Mutual Funds Net 130 119 128 222 232
Dividends 204 230 274 309 333
----- ----- ------ ------ ------
Sources: 605 735 1,012 1,359 1,663
----- ----- ------ ------ ------
Uses
- ----
IPOs 103 62 82 115 118
U.S./International Equity Capital Flow
U.S. Purchases of Non-U.S. Equities 309 434 396 514 762
International Purchases of U.S. Equities 246 387 346 457 723
----- ----- ------ ------ ------
Net Flow: 63 47 50 57 39
----- ----- ------ ------ ------
Uses: 166 109 132 172 157
----- ----- ------ ------ ------
Net Flow of Funds: $ 439 $ 626 $ 880 $1,187 $1,506
===== ===== ====== ====== ======
Sources: Securities Data Corp, Investment Company Institute, Birinyi Associates.
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</TABLE>
Bear Watch
Today, the two questions confronting equities investors are: What could
happen to disrupt this ideal economic environment for stocks? And, even if the
economic news continues to be good, isn't it already more than fully reflected
in stock prices? In our last report to you, we shared a laundry list of our
investment anxieties, which included problems in Asia spilling into Latin
American currencies and economies, wage inflation not matched by productivity
gains, oil prices rising significantly from today's low levels, a prospective
crisis in confidence with Treasury Secretary Rubin leaving and the possibility
that Fed Chairman Greenspan may step down at the end of his current term, and
last, but not least, high equities valuations and a low margin of safety.
We have many of the same worries today and our concern over equities
valuations has been heightened by the market's sharp rise in the first quarter.
As we have stated many times in the past, we believe valuations do matter and
that ultimately stocks will trade at rational relationships to their economic
value. We have to question whether
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even the best companies in this "best of all possible worlds" for stocks should
trade at 50+ times earnings and three to four times annual earnings growth
rates. We are sure value investors share this concern. However, money continues
to flow into arguably the most overvalued sectors of the market--the mega-cap
growth stocks. It is somewhat of a reverse panic. Investors are afraid not to
own these stocks. Mr. Market remains at work. It is hard for us to find bargains
in this environment.
One would think professional investors (i.e.: mutual fund managers) would
be exhibiting more restraint. Unfortunately, with mutual fund investors
increasingly focused on short-term performance, portfolio managers holding cash
in a rising market have the life expectancy of fast dogs that chase cars. Many
are holding their noses, closing their eyes, crossing their fingers and making
investments that are difficult to justify on a fundamental basis. They may
continue to be rewarded for throwing in the valuation towel. But, at some point,
they and their shareholders will receive a painful reminder that the market will
not suffer fools indefinitely.
Finding Value in an Overvalued Stock Market
With the stock market at current levels, true investment bargains are
getting harder to come by. We don't have a philosophical problem keeping some
powder dry when values become more scarce. Our Fund's cash position is
approximately 9.6% of assets at the end of the quarter.
We believe the biggest pocket of value contains strong franchises in
consolidating industries. This quarter, we have received premium bids on three
portfolio holdings:
o Southern New England Telephone (SNG - $72.3125 - NYSE) is being
acquired by SBC Communications (SBC - $43.625 - NYSE)
o 360(degree) Communications (XO - $31.25 - NYSE) is being bought by
Alltel (AT - $43.6875 - NYSE)
o Echlin (ECH - $52.4375 - NYSE) is being pursued by SPX Corp. (SPW -
76.3125 - NYSE)
When we review the portfolio, we see dozens of small and mid-sized
franchises in a range of industries that we believe would be attractive
acquisitions for larger companies looking to grow their businesses.
We also think we can continue to make good money on restructuring
candidates. This quarter, Whitman (WH - $19.75 - NYSE) spun-off Hussmann
International, Inc. (HSM - $18.75 - NYSE) its commercial refrigeration business,
and Midas Muffler (MDS - $20.625 - NYSE) to shareholders. The three pieces are
now trading well above Whitman's price prior to the spin-offs. ITT Industries
(IIN - $38.0625 - NYSE) has announced it is considering selling its auto parts
business. If they do, we think we will see a better appraisal for the company's
much more profitable pump and valve and defense electronics businesses. The
Equity Trust owns many more companies whose parts are, in our view, worth
considerably more than the current market value of the whole. We believe
corporate managements will continue to restructure their companies in ways that
make strategic and financial sense.
In addition, there are several industry groups that, despite strong
performance over the last year or so, still look quite reasonable to us. Looking
ahead, we think investors will more fully appreciate industries and companies in
which the cash flow and earnings picture is not clouded by uncertainties over
the impact of foreign operations and currency turmoil. True to our stock picking
discipline, we have and will continue to be selective in these and other
industry groups--as always, focusing on quality companies trading at a discount
to our appraisal of economic value.
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Patience Rewarded
In our 1997 Annual Report, we highlighted Seagrams (VO - $38.1875 - NYSE)
and Viacom (VIA - $53.125 - ASE) as relatively large portfolio holdings that did
not perform well in 1997 in what was quite a good year for the Equity Trust. We
reviewed our assessment of the values, talked about some of the positive things
going on at each company and reaffirmed our commitment to these loaded laggards.
Our patience has been rewarded with Seagrams stock gaining 18.2% and
Viacom stock climbing 30.0% in first quarter of 1998. In the case of Seagrams,
we can't isolate any single event responsible for the stock's excellent
performance this quarter. We think Wall Street finally did its homework and came
to the conclusion that the rather complex transaction with Home Shopping Network
and the purchase of the additional 50% of USA Network made good financial and
strategic sense.
The move in Viacom was quite literally "Titanic". This blockbuster will
certainly boost parent company Viacom's 1998 earnings. However, in our opinion,
the turnaround in the other Blockbuster (Blockbuster Entertainment, Viacom's
huge video rental business), will provide even greater benefits for the company
going forward. Especially important, the company continues to pare debt - with a
big paydown coming from the sale of Simon & Schuster's publishing operations.
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 our new Gabelli Global Opportunity Fund. Below are Caesar's
thoughts on international markets and global economies:
The Trust's exposure to European equities is finally paying off and in the
first quarter, European equity markets built on the solid gains made last year.
Many of Europe's smaller equity markets benefited from the expectation that
Europe's new currency, the Euro, would be launched successfully on January 1,
1999. This resulted in further interest rate reductions in countries such as
Spain and Italy. As interest rates have fallen in these countries, domestic
investors have moved assets from bonds and cash accounts into equities.
The introduction of the Euro and the single currency will be a vehicle for
spreading Anglo Saxon capitalism across Europe. This is probably not what the
European leaders who signed the Maastricht Treaty in 1991 expected. Following
the introduction of the Euro, savings will be able to flow across frontiers to
those investments that offer investors the best return. This in turn will focus
the minds of corporate managements who will have to compete more aggressively
for funds. Additionally, governments will be under pressure to harmonize tax
requirements, merger and acquisition rules and accounting considerations.
We believe the pursuit of shareholder value, better corporate governance
and hostile takeovers will become standard fare in most European markets. Of
course, there are risks to the creation of the Euro. It is an experiment.
After a strong fourth quarter, the Trust's international financial
holdings continued their strong performance. Banca Commerciale Italiana, Mapfre
and Banco Pastor in Spain and Safra Republic in Switzerland were among the
Trust's best performing stocks in the first quarter. Each of these investments
appreciated by more than 45%. Commercial Union, announced a merger with another
U.K.-based insurance company and the stock continued its strong performance. We
expect further corporate activity in the financial services industry in Europe.
Other stellar performers
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in Europe included Renault, the French auto company, Mondadori and Simint in
Italy and Vodafone in the U.K.
Some of the Trust's European holdings that were hard hit due to their
Asian exposure recovered during the quarter. These include Rieter and Richemont
in Switzerland and Christian Dior in France.
After the recent powerful performance of many European stocks, some
caution is probably warranted in the short term. Looking ahead, the outlook
remains positive. Inflation remains low, interest rates are still declining and
corporate earnings should grow in double-digits in 1998 as the "core" European
economies recover. We will continue to invest in quality businesses and pay
close attention to valuations.
Among major markets, Japan continues to be a major disappointment, rising
by only four percent during the quarter. Much of this gain was due to a powerful
rebound in a number of stocks including banks, which suffered badly towards the
end of 1997. We chose not to participate in this rally and our limited exposure
to the Japanese market did not make a positive contribution to the quarter's
performance. Indeed, only one of the Trust's holdings, namely Matsushita
Electronic Industrial (M.E.I.), outperformed the local index. M.E.I's stock
price reacted positively to news of management reorganization and a share
buyback.
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 - $91.8125 - 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 has significantly expanded the
range of merchants who welcome its cards. As evidenced by an increase in per
share earnings exceeding 16% in 1997, we believe that American Express has been
repositioned to enjoy double digit earnings growth over the balance of this
decade.
BCE Inc. (BCE - $41.75 - NYSE), the holding company for Bell Canada, is Canada's
largest telecommunications company. BCE has controlling interests in Northern
Telecom (NT - $64.625 - NYSE) and BCEMobile Communications (BCX - $29.85 - TSE).
There are substantial values in BCE. For example, "behind" each share of BCE
there are 0.4 shares of Northern Telecom. This NT interest, marked to market, is
worth over $25 per BCE share. The company is a possible candidate for break-up.
In the interim, the Canadian Radio and Television Commission is providing a more
attractive operating environment in which BCE is becoming more competitive.
Cablevision Systems Corp. (CVC - $65.75 - ASE), based in Woodbury, NY, is a
major cable TV operator serving 2.9 million subscribers, including managed
systems. 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. Cablevision has also
purchased Tele-Communications Inc.'s ten New York area cable properties with
roughly 820,000 subscribers by issuing over 12.2 million shares (a one-third
interest in the company) and assuming about $670 million of TCI's debt. 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
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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.
Chris-Craft Industries Inc. (CCN - $58.9375 - NYSE), through its 79% ownership
of BHC Communications (BHC - $141.125 - ASE), 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 owns 59% of United
Television (UTVI - $108.375 - Nasdaq), which operates an NBC affiliate, an ABC
affiliate and four UPN affiliates. United Television has purchased WHSW in
Baltimore for $80 million and has an agreement to purchase WRBW, a UPN affiliate
in Orlando, for approximately $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 $1.6 billion in cash
and marketable securities.
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Chris-Craft Industries
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|
|
78% |
|
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BHC Communications
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|
|
59% |
|
|
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United Television
----------------------
Deere & Co. (DE - $61.9375 - NYSE) is the world's largest manufacturer of farm
equipment. The company's products include tractors and planting, harvesting and
crop handling equipment. With the U.S. government no longer restricting
plantings, acreage under cultivation is likely to be increased by the nation's
farmers. With weather accommodating, bountiful harvests are likely and farm
incomes should show substantial increases. Global demand for U.S. wheat and
other crops further increases farm incomes. Long-term prospects for farm
equipment manufacturers like Deere are attractive as global incomes, diets and
standards of living improve, notwithstanding recent financial turmoil in
Southeast Asia. Deere also makes industrial equipment used in the construction
and forestry industries and a range of consumer products, including lawn and
garden tractors and outdoor power equipment. Overseas sales account for roughly
one-quarter of Deere's revenues.
Media General Inc. (MEG'A - $49.1875 - ASE) is a Richmond, VA-based
communications company, publishing 21 daily newspapers throughout the Southeast.
Media General operates fourteen network television stations in Southeastern
markets, including Birmingham, Tampa and Jacksonville and two cable television
systems in Virginia. The relaxation of broadcast station ownership restrictions
provided by The Telecommunications Reform Act of 1996 is driving industry
consolidation and is increasing the franchise values of strong, well-positioned
media properties such as those owned by Media General. The company also produces
newsprint from recycled newspapers at its Garden State Paper Co.
Telecomunicacoes Brasileiras SA (Telebras) (TBR - $129.8125 - NYSE) is the
Brazilian, government-controlled, monopoly telecommunications holding company
consisting of 28 subsidiaries serving more than 14 million telephone lines and
two million cellular customers in a country with a population of 160 million.
The penetration rate is less than 9% for telephone and 1% for cellular. Future
opportunities include the prospects of privatization, strong line growth and
improvements in efficiency. In October 1997, the Brazilian Ministry of
Communications announced the breakup of the company into three regional, nine
cellular and one long distance company.
Time Warner Inc. (TWX - $72.00 - NYSE), having completed its acquisition of
Turner Broadcasting, is the global leader in media and entertainment. The
combined companies have more than $24 billion in revenues and almost $5.4
billion in EBITDA. Together they control a host of powerful media brands, such
as CNN, Warner Brothers, HBO, Cinemax and Time and People magazines. Under the
leadership of Chairman Gerald Levin and Vice
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Chairman Ted Turner, Time Warner is now focused on reducing its almost $12
billion in debt and simplifying its capital structure.
United Television Inc. (UTVI - $108.375 - Nasdaq) is a television broadcasting
company which owns and operates five television stations: one ABC, one NBC and
three UPN affiliates. UTVI has purchased WHSW in Baltimore for $80 million. The
purchase of WRBW, a UPN affiliate in Orlando, for approximately $60 million is
pending. UTVI stations will cover approximately eight percent of the U.S.
population. UTVI is a 59%-owned subsidiary of BHC Communications (BHC - $141.125
- - ASE). Strong advertising demand, prospects for favorable regulatory changes in
the industry and corporate cost controls will increase EBITDA growth going
forward. Our 1998 PMV is estimated at $140 per share, $34 of which is cash.
UTVI's PMV is expected to reach $163 by the year 2000.
Viacom Inc. (VIA - $53.125 - ASE), long a major provider of entertainment
"content", has evolved into one of the world's dominant media companies.
Following its acquisitions of Paramount Communications and Blockbuster
Entertainment, the company is now divesting non-core assets to reduce its debt
of approximately $10 billion and is focusing on the global expansion of its
media franchises. The company divested its cable systems subsidiary in a
transaction with Tele-Communications Inc. which reduced Viacom's debt by $1.7
billion and the number of common shares outstanding by about four percent. Its
radio group, Evergreen Media, is being sold for $1.1 billion in cash. Its
publishing business, Simon & Schuster, has been put up for sale. Viacom is
well-positioned in music (notably MTV) and cable networks such as Nickelodeon.
Quips on Management
The Trust's Chief Investment Officer was recently interviewed by a leading
investor relations consulting firm on how we as securities analysts evaluate
corporate managements. We thought this might be an interesting topic to share
with our shareholders.
"Ideally, we like to own great companies with great management. Our second
choice is great companies with mediocre management. Occasionally, we will take a
chance on mediocre companies with talented new management that we believe can
dramatically improve the business. Our rational is simple--we believe a prince
who kisses a frog is more likely to turn into a frog than the frog turn into a
princess.
We don't feel we ask too much from corporate managements. We want them to
have vision as to how the world is changing and a sensible plan to position
their companies to take advantage of change rather than be overwhelmed by it. We
want them to be focused on competitive issues in their industry and be proactive
rather than reactive in meeting challenges from their competitors. We expect
CEOs and CFOs, who in our opinion, should be joined at the hip, to know their
companies intimately. If I or another one of our analysts spots something
unusual in an annual report or 10k, I expect management to be able to explain
it. We want management to be honest with us. We always ask them to detail their
company's strengths and weaknesses. When we hear a lot about the former and
virtually nothing about the latter, we tend to be a little suspicious. Finally,
and most importantly, we expect them to serve the interest of their companies'
real owners--the shareholders. Managements that build a wall around themselves
and their companies' values are betraying shareholders.
We are not for nor against corporate managements. We are for
shareholders--our clients. We don't encourage managements to run their companies
to maximize short-term returns and sacrifice long-term value. In fact, we
respect managers that are willing to suffer through a few bad quarters for the
greater long-term good of
10
<PAGE>
their companies. Unlike many Wall Street research teams, we don't ask management
to assess the value of their companies or to forecast future cash flows and
earnings. That's our job. We ask only that they do their jobs--build the value
of their businesses in a manner that benefits long term shareholders."
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].
In Conclusion
The Gabelli Equity Trust has enjoyed another good quarter in what we
believe will be another year in which we achieve our long-term goal of
generating a real rate of return in excess of ten percent. We are concerned
about equity valuations, but believe the portfolio is positioned in industries
and companies that still offer good fundamental value. We think the portfolio
will continue to benefit from ongoing merger and acquisition and restructuring
activity. We thank you for your loyalty and as always, pledge our best efforts
on your behalf.
Sincerely,
/s/ Mario J. Gabelli
Mario J. Gabelli
President and Chief Investment Officer
April 30, 1998
- --------------------------------------------------------------------------------
Top Ten Holdings
March 31, 1998
--------------
Chris-Craft Industries, Inc. Viacom Inc.
United Television Inc. BCE Inc.
Cablevision Systems Corp. Telecomunicacoes Brasileiras SA (Telebras)
Time Warner Inc. Deere & Co.
American Express Co. Media General Inc.
- --------------------------------------------------------------------------------
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.
11
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
Quarter Ended March 31, 1998 (Unaudited)
Ownership at
March 31,
Shares 1998
------- ------------
NET PURCHASES
Common Stocks
Advantica Restaurant Group, Inc. ............... 28,108 28,108
American Bankers Insurance
Group, Inc. .................................. 10,000 10,000
Ampco-Pittsburgh Corp. ......................... 10,000 190,000
Archer-Daniels-Midland Co. ..................... 25,000 325,000
Argonaut Group, Inc. ........................... 6,000 6,000
Aztar Corp. .................................... 47,000 80,000
Banca Commerciale Italiana ..................... 40,000 400,000
Bestfoods Inc. ................................. 15,000 15,000
Cable & Wireless plc,
Sponsored ADR ................................ 5,000 75,000
Cablevision Systems Corp.,
Cl. A(a) ..................................... 216,000 440,000
Catellus Development Corp. ..................... 150,000 300,000
CheckFree Corp. ................................ 1,000 2,000
Cheung Kong (Holdings) Ltd. .................... 15,000 74,000
Chris-Craft Industries Inc.(b) ................. 9,947 341,523
Chris-Craft Industries Inc., Cl. B (b) ......... 16,278 558,866
Coldwater Creek Inc. ........................... 5,000 5,000
Colonial Limited ............................... 57,482 237,482
Commercial Union plc ........................... 7,000 75,342
Compagnie Financiere Richemont
AG, Cl. A .................................... 700 700
Computer Sciences Corporation(a) ............... 170,000 170,000
Contextvision AB ............................... 10,000 10,000
Corn Products International, Inc. .............. 19,000 19,000
Crown Books Corp. .............................. 5,000 30,000
Culligan Water Technologies Inc. ............... 1,900 25,000
DDI Corp. ...................................... 20 70
Donaldson Co. Inc.(a) .......................... 155,000 312,000
Dundee Bancorp Inc., Cl. A ..................... 5,000 30,000
Dynatech Corporation ........................... 5,000 15,000
Eastman Kodak Co. .............................. 5,000 30,000
Elsag Bailey Process
Automation N.V ............................... 20,000 20,000
Gaylord Entertainment Co., Cl. A ............... 8,000 108,000
General Cigar Holdings Inc. .................... 5,000 120,000
Gerber Scientific Inc. ......................... 7,500 107,500
Glaxo Wellcome plc ORD ......................... 9,000 49,000
Granada Group plc ORD .......................... 5,000 65,000
Gray Communications Systems Inc. ............... 4,500 25,000
Honeywell Inc. ................................. 3,000 60,000
HSBC Holdings plc .............................. 4,000 30,695
Hussmann International, Inc.(l) ................ 230,750 230,750
Illinois Central Corporation ................... 873 873
Indus Holding AG ............................... 5,000 5,000
Invik & Co. AB, Cl. B .......................... 4,000 20,666
Istituto Nazionale delle
Assicurazioni ................................ 125,000 125,000
ITT Industries Inc. ............................ 20,000 200,000
Kansas City Southern
Industries, Inc. ............................. 12,000 12,000
Kellogg Co. .................................... 10,000 100,000
Lawter International Inc. ...................... 40,000 100,000
Leucadia National Corporation .................. 5,000 5,000
Lillian Vernon Corp. ........................... 15,000 100,000
Loewen Group Inc. .............................. 100,000 100,000
Manitowoc Co. Inc. ............................. 1,200 31,200
Matsushita Electric Industrial Co.
Ltd., ADR .................................... 7,000 36,500
Mellon Bank Corporation ........................ 2,000 2,000
Merkantildata .................................. 3,500 10,500
Midas, Inc. (l) ................................ 30,000 30,000
Modine Manufacturing Co. ....................... 1,500 290,000
Moevenpick Holding AG .......................... 240 240
Morgan (J.P.) & Co. Inc. ....................... 3,000 15,000
N2K Inc. ....................................... 10,000 10,000
National Presto Industries Inc. ................ 3,000 33,000
NEC Corp., Sponsored ADR ....................... 5,000 46,500
Nintendo Co. Ltd. .............................. 500 6,500
Nippon Telegraph and
Telephone Corp. .............................. 25 95
Nomura Securities Company, Ltd. ................ 35,000 35,000
Park-Ohio Industries Inc. ...................... 4,000 30,715
Pathe SA ....................................... 500 3,000
Paxson Communications Corp.,
Cl. A ........................................ 14,100 125,000
Pennzoil Co. ................................... 10,000 80,000
Pheonix AG ..................................... 47,500 47,500
Pittway Corp. .................................. 6,700 213,000
Publishing & Broadcasting Ltd. ................. 15,000 85,000
Reader's Digest Association Inc.,
Cl. B ........................................ 25,000 100,000
Republic Industries, Inc. ...................... 15,000 15,000
Response USA, Inc. ............................. 12,000 12,000
Roche Holding AG ............................... 20 120
Rollins Inc. ................................... 5,000 447,000
SBC Communications Inc.(a) ..................... 28,000 56,000
Schibsted A/A .................................. 15,000 65,000
Seagate Technology, Inc. ....................... 500 500
Seagram Co. Ltd. ............................... 20,000 120,000
Skandinaviska Enskilda Banken .................. 14,000 74,000
SMH AG ......................................... 1,200 1,200
Sony Corp., ADR ................................ 1,000 29,000
Southern New England
Telecommunications Corp. ..................... 15,000 35,000
St. Joe Corp.(c) ............................... 167,500 255,000
Superior Industries
International, Inc. .......................... 5,000 5,000
TCI Ventures Group ............................. 190,985 361,970
Telecom Italia Mobile SpA ...................... 25,000 1,495,000
Telecom Italia SpA, Sponsored ADR .............. 171,000 171,000
Tele-Communications Inc., Cl. A ................ 11,547 301,547
Tenneco Inc. ................................... 25,000 105,000
Ticketmaster Group Inc. ........................ 30,000 100,000
Tootsie Roll Industries Inc.(b) ................ 1,316 45,195
US WEST Media Group ............................ 5,000 305,000
USA Networks, Inc.(a)(d) ....................... 50,000 100,000
Veba AG ........................................ 2,000 11,000
12
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES (Continued)
Quarter Ended March 31, 1998 (Unaudited)
Ownership at
March 31,
Shares 1998
------- ------------
NET PURCHASES (Continued)
Common Stocks (Continued)
Vodafone Group plc ORD ......................... 812 115,812
Whitman Corp. .................................. 256,000 356,000
Wynn's International Inc.(e) ................... 18,000 54,000
Preferred Stocks
ProSieben Media AG ............................. 3,000 9,750
Common Stock Warrants
and Rights
Advantica Restaurant Group, Inc.,
Warrants, expires 01/07/2005 ................. 62,463 62,463
Volkswagon AG, Rights .......................... 1,500 1,500
NET SALES
Common Stocks
360 (degree)Communications Co. ................. (20,000) 100,000
AirTouch Communications Inc. ................... (15,000) 125,000
Alliance et Gestion ............................ (1,000) 8,625
American Express Co. ........................... (5,000) 285,000
AMETEK Inc. .................................... (10,000) 85,000
Amphenol Corp., Cl. A .......................... (7,000) 138,000
AMR Corp. ...................................... (12,000) 58,000
AptarGroup Inc. ................................ (10,500) 9,500
BCE Inc. ....................................... (5,000) 545,000
Boeing Co. ..................................... (10,000) 85,000
Centennial Cellular Corp., Cl. A ............... (17,000) 57,000
Clariant AG .................................... (300) 700
Colonial Limited, Options(f) ................... (180,000) --
Coltec Industries Inc. ......................... (25,000) 360,000
Compagnie Financiere Richemont
AG, Class A .................................. (650) --
Crane Co. ...................................... (5,000) 100,000
Diageo PLC, Sponsored ADR ...................... (3,400) 21,600
Dow Jones & Co. Inc. ........................... (10,000) 90,000
Eastern Enterprises ............................ (2,000) 30,000
Echlin Inc. .................................... (10,000) 110,000
Ferro Corp. .................................... (6,750) 240,000
Fortune Brands Inc. ............................ (10,000) 170,000
Gallaher Group plc ............................. (60,000) 240,000
General Motors Corp. ........................... (5,000) 210,000
Genuine Parts Co. .............................. (25,000) 55,000
Grupo Televisa S.A., GDR ....................... (5,000) 275,000
GTE Corp. ...................................... (1,000) 270,000
GTECH Holdings Corp. ........................... (5,000) 5,000
Handy & Harman ................................. (25,000) 95,000
Harcourt General Inc. .......................... (5,000) 50,000
Hellenic Telecommunications
Organization S.A. OTE ........................ (24,000) --
H&R Block Inc. ................................. (3,000) 92,000
Imation Corp. .................................. (5,000) --
ITT Industries Inc. ............................ (175,000) --
Johnson Controls Inc. .......................... (10,000) 125,000
Lavipharm S.A .................................. (70,000) --
Lehman Brothers Holdings Inc. .................. (6,700) 80,300
Liberty Corp.(g) ............................... (468) 54,532
LIN Television Corp. (h) ....................... (285,000) --
Media General Inc., Cl. A ...................... (35,000) 360,000
Mitsubishi Estate Co Ltd ....................... (30,000) --
Navistar International Corp. ................... (5,000) 500,000
Neiman Marcus Group Inc. ....................... (18,000) 332,000
New York Times Co., Cl. A ...................... (2,000) 85,000
Newmont Gold Co. ............................... (10,000) 20,000
Pegasus Gold Inc. .............................. (85,000) 749,000
Phoenix AG ..................................... (55,000) --
Pittway Corp., Cl. A ........................... (25,500) 78,000
Placer Dome Inc. ............................... (10,000) 20,000
Raytheon Company Class A ....................... (13,711) --
RCN Corporation ................................ (8,500) 152,000
Reuters Holdings plc, Cl. B,
Sponosred ADR ................................ (1,667) 10,833
SAS Norge ASA .................................. (10,000) 60,000
Seat SpA ....................................... (99,000) 1,500,000
Smedvig ASA .................................... (20,000)
Sun Hung Kai Properties Ltd. ................... (51,000) --
Sydney Harbour Casino
Holdings Ltd. ................................ (285,000) --
Tejas Gas Corp.(i) ............................. (150,000) --
Telecom Italia SpA ORD ......................... (219,400) 400,040
Telecomunicacoes Brasileiras SA
(Telebras), Sponsored ADR .................... (1,500) 167,000
Time Warner Inc. ............................... (77,000) 295,000
Trinity Industries Inc. ........................ (2,000) 50,000
United Television Inc. ......................... (36,494) 274,506
Unitrin Inc. ................................... (3,000) 27,000
USX-Delhi Group(j) ............................. (71,000) --
Walt Disney Co. ................................ (4,000) 30,000
Corporate Bonds
Flagstar Companies Inc., Conv. Jr ..............
Sub. Deb., 10.000%
due 11/01/2014 ................................. (1,550,000) --
General Host Corp., Class D, Conv ..............
Sub. Note, 8.000%
due 02/15/2002(k) .............................. (50,000) --
- ----------
(a) 2 for 1 stock split
(b) Stock dividend - additional .03 shares per share held.
(c) 3 for 1 stock split
(d) Name change from HSN Inc. to USA Networks, Inc.
(e) 3 for 2 stock split
(f) Options exercised at a strike price of $0.40 AUD on February 2, 1998.
(g) Tender offer-tender @ $52 per share
(h) Tender offer-tender @ $55.19 per share
(i) Tender offer-tender @ $61.50 per share
(j) Tender offer-tender @ $21.60 per share
(k) Entire issure called @ 102% effective 3/30/98
(l) Spinoff -- 1 share of Hussman International Inc. for every 2 shares of
Whitman Corp.; 1 share of Midas, Inc. for every 6 shares of Whitman Corp.
13
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS
March 31, 1998 (Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS -- 89.3%
Equipment And Supplies -- 10.7%
30,000 Aeroquip-Vickers Inc. ................................ $ 1,734,422
85,000 AMETEK Inc. .......................................... 2,544,688
190,000 Ampco-Pittsburgh Corp. ............................... 3,515,000
138,000 Amphenol Corp., Cl. A+ ............................... 7,960,875
9,500 AptarGroup Inc. ...................................... 570,594
12,000 Caterpillar Inc. ..................................... 660,750
69,800 CLARCOR Inc. ......................................... 2,320,850
50,000 CTS Corp. ............................................ 1,696,875
25,000 Culligan Water Technologies Inc.+ .................... 1,489,063
345,000 Deere & Co. (d) ...................................... 21,368,438
312,000 Donaldson Co. Inc. ................................... 8,034,000
20,000 EG&G Inc. ............................................ 581,250
15,000 Flowserve Corp. ...................................... 489,375
6,500 Franklin Electric Co. ................................ 445,250
107,500 Gerber Scientific Inc. ............................... 2,801,719
230,750 Hussmann International, Inc. ......................... 4,326,563
350,000 IDEX Corp. ........................................... 12,731,250
5,000 Indus Holding AG ..................................... 160,746
50,000 Lufkin Industries Inc. ............................... 1,625,000
31,200 Manitowoc Co. Inc. ................................... 1,205,100
145,000 Mark IV Industries Inc. .............................. 3,298,750
500,000 Navistar International Corp.+ ........................ 17,500,000
20,000 PACCAR Inc. .......................................... 1,191,250
213,000 Pittway Corp. ........................................ 14,910,000
78,000 Pittway Corp., Cl. A ................................. 5,616,000
80,000 Sequa Corp., Cl. A+ .................................. 5,915,000
75,000 Sequa Corp., Cl. B+ .................................. 5,915,625
170,000 SPS Technologies Inc.+ ............................... 9,105,625
12,000 TI Group plc ......................................... 105,261
20,000 Watts Industries Inc., Cl. A ......................... 597,500
-----------
140,416,819
-----------
Telecommunications -- 10.2%
40,000 Aliant Communications Inc. ........................... 1,360,000
67,000 AT&T Corp. ........................................... 4,396,875
87,000 BC TELECOM Inc. ...................................... 3,383,711
545,000 BCE Inc. ............................................. 22,753,750
75,000 Cable & Wireless plc, Sponsored ADR .................. 2,831,250
2,000 Cincinnati Bell Inc. ................................. 71,250
35,000 Compania de Telecomunicaciones
de Chile SA, Sponsored ADR+ ........................ 964,688
80,000 Commonwealth Telephone Enterprises, Inc.+ ............ 2,250,000
20,000 Commonwealth Telephone Enterprises,
Inc. Cl. B+ ........................................ 552,500
70 DDI Corp. ............................................ 172,211
50,000 Frontier Corp. ....................................... 1,628,125
270,000 GTE Corp.(d) ......................................... 16,166,250
35,000 Hong Kong Telecommunications Ltd.,
Sponsored ADR ...................................... 732,813
10,000 Maritime Telegraph and Telephone Co. Ltd. ............ 276,691
10,000 Motorola Inc. ........................................ 606,250
95 Nippon Telegraph and Telephone Corp. ................. 790,924
152,000 RCN Corporation ...................................... 7,619,000
56,000 SBC Communications Inc. .............................. 2,443,000
35,000 Southern New England
Telecommunications Corp. ........................... 2,530,937
250,000 Sprint Corp.(d) ...................................... 16,921,875
10,000 Telecom Argentina Stet-France Telecom
S.A., Sponsored ADR ................................ 358,125
400,040 Telecom Italia SpA ORD ............................... 3,150,103
171,000 Telecom Italia SpA, Sponsored ADR .................... 13,583,813
167,000 Telecomunicacoes Brasileiras SA
(Telebras), Sponsored ADR .......................... 21,678,688
10,000 Telefonica de Argentina S.A., ADR, Cl. B ............. 380,625
2,040,000 Telecomunications of Jamaica Ltd. .................... 124,440
48,000 Telefonica de Espana, Sponsored ADR .................. 6,348,000
20,000 Telefonos De Mexico SA, Cl. L, ADR ................... 1,127,500
-----------
135,203,394
-----------
Financial Services -- 8.5%
10,000 American Bankers Insurance Group, Inc. ............... 645,000
285,000 American Express Co.(d) .............................. 26,166,563
6,000 Argonaut Group, Inc. ................................. 216,750
400,000 Banca Commerciale Italiana ........................... 1,994,244
10,500 Banco Pastor SA ...................................... 1,262,259
66,000 Banco Santander SA, ADR .............................. 3,262,875
80,631 Bank of Ireland ...................................... 1,592,639
120,782 Bank of Scotland. .................................... 1,428,467
260 Berkshire Hathaway Inc., Cl. A+ ...................... 17,472,000
300,000 Berliner Bank Aktiengesellschaft ..................... 7,424,017
237,482 Colonial Limited(c) .................................. 777,793
75,342 Commercial Union plc ................................. 1,470,587
46,000 Commerzbank AG, Sponsored ADR ........................ 1,673,250
14,400 Corporacion Mapfre ................................... 538,849
163,000 Deutsche Bank AG, Sponsored ADR ...................... 12,358,665
30,000 Dundee Bancorp Inc., Cl. A+ .......................... 629,164
25,000 Hibernia Corp. ....................................... 514,063
92,000 H&R Block Inc. ....................................... 4,375,750
30,695 HSBC Holdings plc .................................... 938,830
20,666 Invik & Co. AB, Cl. B ................................ 1,198,478
125,000 Istituto Nazionale delle Assicurazioni ............... 404,961
80,300 Lehman Brothers Holdings Inc. ........................ 6,012,463
5,000 Leucadia National Corporation ........................ 196,875
2,000 Mellon Bank Corporation .............................. 127,000
38,900 Midland Co. .......................................... 3,070,669
15,000 Morgan (J.P.) & Co. Inc. ............................. 2,014,688
14
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
March 31, 1998 (Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Financial Services (Continued)
35,000 Nomura Securities Company, Ltd. ...................... $ 412,151
10,833 Reuters Holdings plc, Cl. B,
Sponosred ADR ...................................... 699,406
60,000 Riggs National Corp. ................................. 1,695,000
7,000 Safra Republic Holdings SA ........................... 1,078,000
20,000 SCOR SA .............................................. 1,145,069
26,000 Skandia Forsakrings AB ............................... 1,693,038
74,000 Skandinaviska Enskilda Banken ........................ 1,077,491
40,000 State Street Corp .................................... 2,722,500
20,000 SunTrust Banks Inc. .................................. 1,507,500
8,000 Trimark Financial Corporation ........................ 304,536
27,000 Unitrin Inc. ......................................... 1,819,125
-----------
111,920,715
-----------
Broadcasting -- 7.6%
50,000 Ackerley Group Inc. .................................. 1,021,875
341,523 Chris-Craft Industries Inc. .......................... 20,128,528
558,866 Chris-Craft Industries Inc., Cl. B(a) ................ 32,938,144
25,000 Gray Communications Systems Inc. ..................... 725,000
275,000 Grupo Televisa S.A., GDR+ ............................ 10,071,875
54,532 Liberty Corp. ........................................ 2,781,132
3,250 NRJ SA ............................................... 560,842
3,000 Pathe SA+ ............................................ 612,047
125,000 Paxson Communications Corp., Cl. A+ .................. 1,390,625
100,000 Television Broadcasting Ltd. ORD ..................... 263,270
274,506 United Television Inc. ............................... 29,749,588
-----------
100,242,926
-----------
Entertainment -- 5.2%
103,768 Ascent Entertainment Group Inc.+ ..................... 1,070,108
40,000 CANAL + , Sponsored ADR .............................. 1,501,813
23,287 EMI Group plc ........................................ 193,356
108,000 EMI Group plc, Sponsored ADR ......................... 1,836,000
108,000 Gaylord Entertainment Co., Cl. A ..................... 3,861,000
60,000 GC Companies Inc.+ ................................... 3,138,750
65,000 Granada Group plc ORD ................................ 1,168,619
120,000 Havas, Sponsored ADR ................................. 2,460,000
12,000 PolyGram NV .......................................... 556,500
295,000 Time Warner Inc. ..................................... 21,240,000
65,000 Todd-AO Corp., Cl. A ................................. 686,563
100,000 USA Networks, Inc.+ .................................. 2,725,000
480,000 Viacom Inc., Cl. A+ .................................. 25,500,000
30,000 Walt Disney Co. ...................................... 3,202,500
-----------
69,140,209
-----------
Food And Beverage -- 5.2%
28,108 Advantica Restaurant Group, Inc.+ .................... 263,510
15,000 Bestfoods Inc. ....................................... 1,753,125
18,000 Brau and Brunnen+ .................................... 1,794,408
19,000 Corn Products International, Inc.+ ................... 681,625
21,600 Diageo PLC, Sponsored ADR ............................ 1,048,950
200,000 Fomento Economico Mexicano SA,
ADR 144A(c) ........................................ 1,400,000
450,000 Foster's Brewing Group Ltd. .......................... 979,573
40,520 General Mills Inc. ................................... 3,079,520
9,000 Hartwall Oy AB ....................................... 1,057,984
100,000 Kellogg Co. .......................................... 4,312,500
11,000 LVHM Moet Hennessy Louis Vuitton,
Sponsored ADR ...................................... 467,500
700 Nestle SA ............................................ 1,336,852
335,000 PepsiCo Inc. ......................................... 14,300,312
240,000 Quaker Oats Co. ...................................... 13,740,000
40,000 Ralcorp Holdings Inc.+ ............................... 830,000
120,000 Seagram Co. Ltd. ..................................... 4,582,500
45,195 Tootsie Roll Industries Inc. ......................... 3,239,943
356,000 Whitman Corp. ........................................ 7,031,000
74,000 Wrigley (Wm.) Jr. Co. ................................ 6,049,500
-----------
67,948,802
-----------
Wireless Communications-- 4.8%
125,000 AirTouch Communications Inc.+ ........................ 6,117,188
133,000 Associated Group Inc., Cl. A+ ........................ 5,120,500
133,000 Associated Group Inc., Cl. B+ ........................ 4,887,750
57,000 Centennial Cellular Corp., Cl. A+ .................... 1,498,031
145,000 Century Telephone Enterprises Inc. ................... 8,863,125
100,000 COMSAT Corp., Series 1 ............................... 3,443,750
100,000 Loral Space & Communications Ltd.+. .................. 2,793,750
5,000 NEXTEL Communications Inc., Cl. A+ ................... 168,750
250,000 Securicor Group plc ORD .............................. 1,707,479
75,000 TCI Satellite Entertainment Inc., Cl. A+ ............. 534,375
1,495,000 Telecom Italia Mobile SpA ............................ 8,027,148
320,000 Telephone and Data Systems Inc. ...................... 15,200,000
100,000 360(degree)Communications Co. ........................ 3,125,000
115,812 Vodafone Group plc ORD ............................... 1,210,713
-----------
62,697,559
-----------
Cable -- 4.6%
40,125 Cable Michigan ....................................... 1,023,188
440,000 Cablevision Systems Corp., Cl. A+ .................... 28,930,000
40,000 Comcast Corp., Cl. A ................................. 1,387,500
40,000 Comcast Corp., Cl. A Special ......................... 1,412,500
50,000 Shaw Communications Inc., Cl. B, Conv. ............... 746,448
301,547 Tele-Communications Inc., Cl. A ...................... 9,376,227
55,000 Tele-Communications International Inc.,
Cl. A+ ............................................. 1,106,875
361,970 TCI Ventures Group+................................... 6,357,098
15
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
March 31, 1998 (Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Cable (Continued)
305,000 US WEST Media Group+ ................................. $ 10,598,750
------------
60,938,586
------------
Publishing -- 4.0%
30,000 Arnoldo Mondadori Editore SpA+ ....................... 345,347
90,000 Dow Jones & Co. Inc. ................................. 4,764,375
215,000 Golden Books Family Entertainment Inc.+ .............. 2,472,500
50,000 Harcourt General Inc. ................................ 2,768,750
228,000 Independent Newspapers Ltd., ORD ..................... 1,377,726
50,000 McGraw-Hill Companies Inc. ........................... 3,803,125
360,000 Media General Inc., Cl. A (d) ........................ 17,707,500
145,000 Meredith Corp. ....................................... 6,108,125
85,000 New York Times Co., Cl. A ............................ 5,950,000
5,000 News Corp. Ltd., ADR ................................. 134,688
140,000 News Corp. Ltd., ORD ................................. 923,531
60,000 Pearson plc ORD ...................................... 974,267
85,000 Publishing & Broadcasting Ltd. ....................... 441,486
100,000 Reader's Digest Association Inc., Cl. B .............. 2,687,500
65,000 Schibsted A/A ........................................ 1,149,222
1,500,000 Seat SpA+ ............................................ 873,236
200,000 South China Morning Post Holdings ORD ................ 134,216
------------
52,615,594
------------
Consumer Products -- 3.9%
500,000 Carter-Wallace Inc. .................................. 9,093,750
9,500 Christian Dior SA .................................... 1,262,479
75,000 Church & Dwight Co. Inc. ............................. 2,268,750
700 Compagnie Financiere Richemont AG,
Cl. A .............................................. 940,799
30,000 Eastman Kodak Co. .................................... 1,946,250
57,000 First Brands Corp. ................................... 1,421,437
170,000 Fortune Brands Inc. .................................. 6,778,750
240,000 Gallaher Group plc ................................... 5,190,000
120,000 General Cigar Holdings Inc.+ ......................... 1,837,500
54,000 Harley Davidson Inc. ................................. 1,782,000
33,000 National Presto Industries Inc. ...................... 1,421,063
6,500 Nintendo Co. Ltd. .................................... 565,535
145,000 Ralston Purina Group ................................. 15,370,000
1,200 SMH AG+ .............................................. 770,209
275,000 Swedish Match AB ..................................... 914,261
------------
51,562,783
------------
Diversified Industrial -- 3.4%
70,909 Antofagasta Holdings plc ............................. 384,593
100,000 Crane Co. ............................................ 5,300,000
20,000 Elsag Bailey Process Automation N.V. ................. 382,500
59,022 GATX Corp. ........................................... 4,603,716
60,000 Honeywell Inc. ....................................... 4,961,250
200,000 ITT Industries Inc. .................................. 7,612,500
390,000 Lamson & Sessions Co.+ ............................... 2,583,750
100,000 Lawter International Inc. ............................ 1,112,500
100,000 National Service Industries Inc. ..................... 5,881,250
30,715 Park-Ohio Industries Inc.+ ........................... 595,103
750 Rieter Holding AG .................................... 423,359
105,000 Tenneco Inc.+ ........................................ 4,482,188
78,000 Thomas Industries Inc. ............................... 1,735,500
50,000 Trinity Industries Inc. .............................. 2,743,750
26,000 Tyco International Ltd. .............................. 1,420,250
100,000 Tyler Corp.+ ......................................... 775,000
------------
44,997,209
------------
Automotive: Parts And Accessories -- 3.0%
110,000 Echlin Inc. .......................................... 5,768,125
140,000 GenCorp Inc. ......................................... 4,305,000
55,000 Genuine Parts Co. .................................... 2,096,875
95,000 Handy & Harman ....................................... 3,342,813
125,000 Johnson Controls Inc. ................................ 7,585,938
10,000 LucasVarity plc ...................................... 413,125
290,000 Modine Manufacturing Co. ............................. 10,077,500
47,500 Pheonix AG ........................................... 962,448
6,500 SPX Corp. ............................................ 496,031
130,000 Standard Motor Products Inc. ......................... 2,494,375
5,000 Superior Industries International, Inc. .............. 165,937
110,000 TransPro Inc. ........................................ 866,250
54,000 Wynn's International Inc. ............................ 1,228,500
------------
39,802,917
------------
Energy -- 2.2%
34,000 Apache Corp. ......................................... 1,249,500
70,000 Atlantic Richfield Co. ............................... 5,503,750
150,000 British Petroleum Co. plc, ADR ....................... 8,611,417
65,000 Burlington Resources Inc. ............................ 3,115,937
10,000 Chevron Corp. ........................................ 803,125
30,000 Eastern Enterprises .................................. 1,290,000
50,000 Halliburton Co. ...................................... 2,509,375
80,000 Pennzoil Co. ......................................... 5,170,000
11,000 Veba AG .............................................. 779,792
------------
29,032,896
------------
Hotels/Gaming -- 1.5%
80,000 Aztar Corp.+ ......................................... 690,000
5,000 GTECH Holdings Corp.+ ................................ 194,375
350,000 Hilton Hotels Corp. .................................. 11,156,250
1,016,949 Ladbroke Group plc ................................... 5,690,176
100,000 Mirage Resorts Inc.+ ................................. 2,431,250
240 Moevenpick Holding AG ................................ 119,583
------------
20,281,634
------------
16
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
March 31, 1998 (Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Aviation: Parts And Services -- 1.4%
85,000 Boeing Co. ........................................... $ 4,430,625
360,000 Coltec Industries Inc.+ .............................. 9,000,000
100,000 Curtiss-Wright Corp. ................................. 3,875,000
145,000 Hi-Shear Industries Inc. ............................. 407,813
23,000 Precision Castparts Corp. ............................ 1,361,313
------------
19,074,751
------------
Paper And Forest Products -- 1.4%
252,000 Greif Bros. Corp., Cl. A ............................. 9,765,000
3,400 Greif Bros. Corp., Cl. B(a) .......................... 140,888
255,000 St. Joe Corp. ........................................ 8,574,375
------------
18,480,263
------------
Consumer Services -- 1.4%
25,000 Cendant Corporation .................................. 990,625
20,000 Department 56 Inc.+ .................................. 760,000
100,000 Loewen Group Inc. .................................... 2,525,000
30,000 Midas, Inc.+ ......................................... 618,757
10,000 N2K Inc.+ ............................................ 298,750
15,000 Republic Industries, Inc.+ ........................... 387,188
12,000 Response USA, Inc.+ .................................. 69,750
447,000 Rollins Inc. ......................................... 9,331,125
100,000 Ticketmaster Group Inc.+ ............................. 3,012,500
------------
17,993,695
------------
Retail -- 1.4%
5,000 Coldwater Creek Inc.+. ............................... 121,250
30,000 Crown Books Corp.+ ................................... 204,375
80,000 Earl Scheib Inc.+ .................................... 690,000
2,000 Fred Meyer Inc.+ ..................................... 92,375
100,000 Lillian Vernon Corp. ................................. 1,743,750
332,000 Neiman Marcus Group Inc.+ ............................ 13,632,750
100,000 Simint SpA ........................................... 1,055,228
10,425 Syratech Corp.+ ...................................... 370,088
------------
17,909,816
------------
Automotive -- 1.2%
210,000 General Motors Corp.(d) .............................. 14,161,875
28,000 Renault SA ........................................... 1,246,351
20,000 Toyota Motor Corp. ................................... 532,533
------------
15,940,759
------------
Health Care -- 1.2%
15,000 Amgen Inc.+ .......................................... 913,125
49,666 Astra AB, Cl. A ...................................... 1,024,233
13,000 Biogen Inc.+ ......................................... 626,438
49,000 Glaxo Wellcome plc ORD ............................... 1,427,052
1,150 Novartis AG, Registered+. ............................ 2,034,157
54,000 Novartis AG, ADR+ .................................... 4,789,125
25,000 Pfizer Inc. .......................................... 2,492,187
120 Roche Holding AG ..................................... 1,298,105
25,000 Zeneca Group plc+ .................................... 1,077,218
------------
15,681,640
------------
Business Services -- 1.0%
8,625 Alliance et Gestion .................................. 712,201
2,000 CheckFree Corp. ...................................... 44,250
170,000 Computer Sciences Corporation+ ....................... 9,350,000
105,000 Landauer Inc. ........................................ 2,835,000
500 Seagate Technology, Inc.+ ............................ 12,625
------------
12,954,076
------------
Transportation -- 0.8%
58,000 AMR Corp.+ ........................................... 8,304,875
873 Illinois Central Corporation ......................... 34,320
12,000 Kansas City Southern Industries, Inc. ................ 528,000
30,600 MIF Ltd.+. ........................................... 480,905
60,000 SAS Norge ASA ........................................ 939,022
------------
10,287,122
------------
Specialty Chemical -- 0.7%
5,400 Ciba Specialty Chemicals, ADR 144A(c)+ ............... 347,371
700 Clariant AG .......................................... 754,933
20,000 E.I. du Pont de Nemours and Co. ...................... 1,360,000
240,000 Ferro Corp. .......................................... 7,050,000
5,000 Monsanto Company ..................................... 260,000
------------
9,772,304
------------
Retail Food And Drug-- 0.7%
120,000 Bruno's Inc. ......................................... 202,500
227,000 Giant Food Inc., Cl. A ............................... 8,767,875
------------
8,970,375
------------
Electronics -- 0.6%
60,000 AMP Inc. ............................................. 2,628,750
10,000 Contextvision AB ..................................... 176,803
2,000 Hitachi Ltd., ADR .................................... 147,000
36,500 Matsushita Electric Industrial Co. Ltd., ADR ......... 801,691
46,500 NEC Corp., Sponsored ADR ............................. 528,403
12,000 Philips Electronics N.V., New York ................... 881,250
29,000 Sony Corp., ADR ...................................... 2,464,048
------------
7,627,945
------------
Real Estate -- 0.6%
300,000 Catellus Development Corp.+ .......................... 5,568,750
11,000 Florida East Coast Industries Inc. ................... 1,222,375
50,000 Griffin Land & Nurseries Inc.+ ....................... 750,000
------------
7,541,125
------------
17
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
March 31, 1998 (Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Agriculture -- 0.5%
325,000 Archer-Daniels-Midland Co. ........................ $ 7,129,688
------------
Country/Closed-End Funds -- 0.4%
59,000 Central European Equity Fund Inc. ................. 1,161,563
70,000 Emerging Germany Fund Inc.+ ....................... 923,125
25,000 France Growth Fund Inc. ........................... 332,813
40,250 Italy Fund Inc. ................................... 618,844
70,000 New Germany Fund .................................. 1,172,500
45,942 Royce Value Trust Inc. ............................ 783,885
------------
4,992,730
------------
Communications Equipment -- 0.4%
100,000 Allen Telecom Inc.+ ............................... 1,575,000
15,000 Dynatech Corporation .............................. 722,813
18,000 Lucent Technologies Inc. .......................... 2,301,750
20,000 Scientific-Atlanta Inc. ........................... 391,250
------------
4,990,813
------------
Housing Related -- 0.3%
130,000 Nortek Inc.+ ...................................... 4,160,000
5,000 Nortek Inc., Special Common+ ...................... 160,000
------------
4,320,000
------------
Aerospace / Defense -- 0.2%
100,000 Fairchild Corporation, Cl. A ...................... 2,156,250
------------
Conglomerates -- 0.1%
74,000 Cheung Kong (Holdings) Ltd. ....................... 525,249
7,750 Oerlikon-Buhrle Holding AG ........................ 1,364,240
------------
1,889,489
------------
Building and Construction -- 0.1%
70,000 CRH plc ORD ....................................... 1,053,667
15,000 Martin Marietta Materials Inc. .................... 647,813
------------
1,701,480
------------
Metals And Mining -- 0.1%
20,000 Newmont Gold Co. .................................. 626,250
749,000 Pegasus Gold Inc.+ ................................ 313,059
20,000 Placer Dome Inc. .................................. 263,750
40,000 Randgold and Exploration Co. Ltd.+ ................ 57,500
------------
1,260,559
------------
Computer Software -- 0.0%
10,500 Merkantildata ..................................... 521,177
------------
TOTAL COMMON STOCKS ............................................ 1,177,998,100
-------------
PREFERRED STOCKS -- 0.6%
Telecommunications -- 0.2%
40,000 Sprint Corp., 8.250%, Conv. Pfd. .................. 2,565,000
2,223,575 Telecomunicacoes de Sao Paulo SA
(Telesp), Pfd., Registered ...................... 721,635
------------
3,286,635
------------
Diversified Industrial -- 0.1%
4,000 KSB AG, Pfd. ...................................... 1,063,353
------------
Publishing -- 0.1%
43,500 News Corp. Ltd, Sponsored ADR, Pfd. ............... 1,000,500
------------
Automotive -- 0.1%
1,500 Volkswagen AG, Pfd. ............................... 851,006
------------
Cable -- 0.1%
8,000 Tele-Communications Inc., Cl. B,
6.000%, Ex. Jr. Pfd. ............................ 704,000
------------
Broadcasting -- 0.0%
9,750 ProSieben Media AG ................................ 508,375
------------
Entertainment -- 0.0%
183,856 Village Roadshow Ltd., PFD. ....................... 379,543
------------
TOTAL PREFERRED STOCKS ......................................... 7,793,412
------------
COMMON STOCK WARRANTS AND RIGHTS -- 0.0%
62,463 Advantica Restaurant Group, Inc.,
Warrants, expires 01/07/2005+ ................... 171,773
29,900 Oriental Press Group, Warrants,
expires 10/02/1998+ ............................. 54
1,500 Volkswagon AG, Rights ............................. 27,232
------------
199,059
------------
Principal
Amount
------
CORPORATE BONDS -- 0.6%
Entertainment -- 0.5%
$2,400,000 Time Warner Inc., Deb.,
8.110% due 08/15/2006 ........................... 2,622,000
2,400,000 Time Warner Inc., Deb.,
8.180% due 08/15/2007 ........................... 2,652,000
1,200,000 Time Warner Inc., Note, 7.975%
due 08/15/2004 .................................. 1,290,000
------------
6,564,000
------------
18
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
March 31, 1998 (Unaudited)
Principal Market
Amount Value
------ -----
CORPORATE BONDS (Continued)
Publishing -- 0.1%
$ 200,000 News American Holdings Inc., Gtd. Ex.
Sub. Note, Zero Coupon
due 03/31/2002 .................................. $ 247,000
1,000,000 Thomas Nelson Inc., Conv. Sub.
Note, 5.750% due
11/30/1999 144A(c) .............................. 1,001,250
------------
............................................................... 1,248,250
------------
TOTAL CORPORATE BONDS .......................................... 7,812,250
------------
U.S. TREASURY BILLS -- 9.1%
120,000,000 4.972%++ due 04/02/1998(d) ........................ 119,983,427
------------
REPURCHASE AGREEMENT -- 0.5%
6,539,000 Agreement with Salomon Smith Barney, Inc.,
5.90% dated 03/31/1998, to be
repurchased at $6,540,072
on 04/01/1998, collateralized
by $4,787,000 U.S. Treasury Bond,
9.125% due 05/15/18
(value $6,839,054) .............................. 6,539,000
------------
TOTAL INVESTMENTS
(Cost $694,612,204)(b) ............................. 100.1% 1,320,325,248
----- --------------
OTHER ASSETS AND
LIABILITIES (Net) .................................. (0.1) (1,128,031)
----- --------------
NET ASSETS ........................................... 100.0% $1,319,197,217
===== ==============
NET ASSET VALUE ($1,319,197,217 /
104,676,584 shares outstanding) .............................. $12.60
======
FUTURES CONTRACTS -- SHORT POSITION
Number of Unrealized
Contracts Depreciation
--------- ------------
550 S&P 500 Index Futures, June 1998 ................ $(6,359,375)
===========
SCHEDULE OF FORWARD
FOREIGN EXCHANGE CONTRACTS
Unrealized
Expiration Appreciation/
Date (Depreciation)
---- ------------
Forward Foreign Exchange Contracts to Deliver
14,863,709 Greek Drakma in exchange
for USD 46,653 ..................... 04/01/98 146
510,464 French Francs in exchange
for USD 83,382 ..................... 04/02/98 1,055
493,094 Swiss Francs in exchange
for USD 324,340 .................... 04/03/98 1,046
14,195,004 Japanese Yen in exchange
for USD 106,577 .................... 04/06/98 75
18,800,000 Hong Kong Dollars
in exchange for
USD 2,391,553 ...................... 08/26/98 (19,145)
---------
Total Net Unrealized Depreciation
on Forward Foreign Exchange Contracts ........... $ (16,823)
=========
- ----------
(a) Security fair valued under procedures established by the Board of
Directors.
(b) For Federal tax purposes:
Aggregate cost $695,057,842
============
Gross unrealized appreciation $632,607,900
Gross unrealized depreciation (7,340,494)
------------
Net unrealized appreciation $625,267,406
============
(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 March 31, 1998 was $3,526,414 representing
0.27% of total net assets.
(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, GDR - Global
Depositary Receipt, ORD - Ordinary Share
19
<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 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.
20
<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
Executive Vice President,
FMG Group
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 Adviser
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 104,676,584
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 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
[GRAPHIC OMITTED]
First Quarter Report
March 31, 1998
GAB 03/98
