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THIRD QUARTER REPORT
SEPTEMBER 30, 2000
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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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ALABAMA ALASKA ARIZONA ARKANSAS CALIFORNIA COLORADO CONNECTICUT DELAWARE
FLORIDA GEORGIA HAWAII IDAHO ILLINOIS INDIANA IOWA KANSAS KENTUCKY
LOUISIANA MAINE MARYLAND MASSACHUSETTS MICHIGAN MINNESOTA MISSISSIPPI
MISSOURI MONTANA NEBRASKA NEVADA NEW HAMPSHIRE NEW JERSEY NEW MEXICO
NEW YORK N. CAROLINA N. DAKOTA OHIO OKLAHOMA OREGON PENNSYLVANIA
RHODE ISLAND S.CAROLINA S. DAKOTA TENNESSEE TEXAS UTAH VERMONT VIRGINIA
WEST VIRGINIA WASHINGTON WISCONSIN WYOMING
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,
Declining market interest rates (bond yields), a quiescent Federal
Reserve, and reasonable second quarter earnings spawned a late summer rally,
temporarily putting the Standard & Poor's 500 and Nasdaq Composite Indices into
positive performance territory for the year. However, stocks retreated in
September as higher oil prices, the plummeting Euro, and third quarter earnings
jitters eroded investor confidence. The Dow Jones Industrial Average ("DJIA")
managed a slight gain for the third quarter, but the S&P 500 and Nasdaq
Composite Indices closed with losses.
Buoyed by deals for a handful of portfolio companies, a strong rebound in
aerospace stocks, and generally positive performance from our utility holdings,
our Equity Trust was essentially unchanged for the quarter.
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INVESTMENT PERFORMANCE
For the third quarter ended September 30, 2000, The Gabelli Equity Trust's
(the "Equity Trust") net asset value ("NAV") slipped 0.73% after adjusting for
the reinvestment of the $0.27 per share distribution paid on September 25, 2000.
The Standard & Poor's ("S&P") 500 Index and the Nasdaq Composite Index declined
0.97% and 7.35%, respectively, while the Value Line Composite and Russell 2000
Indices rose 6.40% and 1.11%, respectively, over the same period. Each index is
an unmanaged indicator of stock market performance.
The Equity Trust was up 15.94% over the trailing twelve-month period after
adjusting for the reinvestment of the $1.17 per share in distributions. The S&P
500, Nasdaq Composite, Value Line Composite and Russell 2000 Indices rose
13.27%, 33.99%, 17.59% and 23.39%, respectively, over the same twelve-month
period.
For the ten-year period ended September 30, 2000, the Equity Trust's total
return averaged 15.51% annually, including reinvestments of $14.11 per share in
distributions, versus average annual returns of 19.42%, 26.67%, 17.45% and
16.93% for the S&P 500, Nasdaq Composite, Value Line Composite and Russell 2000
Indices, respectively. Since inception on August 21, 1986 through September 30,
2000, the Equity Trust had a cumulative total return of 550.19%, including
reinvestments of $18.09 per share in distributions, which equates to an average
annual total return of 14.17%.
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<TABLE>
AVERAGE ANNUAL RETURNS - SEPTEMBER 30, 2000
-------------------------------------------
<CAPTION>
NAV Average Average Annual
Annual Return Investment Return (A)
------------- ---------------------
<S> <C> <C>
1 Year ....................................... 15.94% 12.45%
5 Year ....................................... 15.08% 16.71%
10 Year ...................................... 15.51% 16.77%
Life of Fund (SINCE AUGUST 21, 1986) ......... 14.17% 13.48%
(A) BASED ON INITIAL OFFERING PRICE OF $10.00
--------------------------------------------------------------------------------
</TABLE>
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The Equity Trust's common shares ended the third quarter at $11.50 per
share on the New York Stock Exchange, a decline of 3.45% for the third quarter.
The Equity Trust's common shares rose 12.45% over the trailing twelve-month
period after adjusting for all distributions.
RIGHTS OFFERING
Your Board of Directors has recently announced a transferable rights
offering. The Equity Trust will be offering shareholders one transferable right
for each share of common stock held as of the record date. Six rights will be
required to purchase one additional share at a discounted price to net asset
value and free of commission. Shareholders who fully exercise their primary
subscription rights may oversubscribe for any additional amount of shares they
wish. These oversubscription shares will be distributed based on a pro-rata
allocation formula. Shareholders will be mailed a notice of the rights offering
approximately ten days prior to the record date of the offering.
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[PYRAMID TEXT AS FOLLOWS:]
EPS
PMV
MANAGEMENT
CASH FLOW
RESEARCH
WHAT'S RIGHT ABOUT RIGHTS
To raise additional capital, rights offerings have historically been a
fair and efficient method. This method is widely used in England. A traditional
rights offering allows an issuer's shareholders to participate directly in the
growth of that issuer by purchasing additional common shares at a set
subscription price. We will discuss some of the basic issues of rights offerings
and how they relate to the Trust in a question and answer format below.
RIGHTS OFFERING--Q&A
Q: WHAT ARE RIGHTS?
Rights are privileges granted to existing shareholders of a corporation
(in our case the Equity Trust) to subscribe to shares of a new issue of common
stock. These rights represent short-term options granted by the corporation
which the shareholder has the option of exercising.
Q: WHAT IS THE HISTORY OF RIGHTS OFFERINGS?
Rights offerings have been used in Europe since the late 17th century
following the commencement of the London Stock Exchange. In England, rights
offerings are commonplace and represent an integral part of its capital markets
and are well-regarded by shareholders. While underwritten public offerings have
been the preferred method of raising capital in the U.S., rights offerings have
become more understood and more widely used. Today, rights offerings are even
more common in the U.S. and we expect that their frequency and effectiveness
will increase.
Q: WHAT IS A RIGHTS OFFERING AS IT RELATES TO CLOSED-END FUNDS?
A rights offering is an opportunity for shareholders to purchase
additional shares of a publicly traded company or mutual fund at a specified
price--the "subscription price"--with a nominal commission. To attract
shareholder interest, the subscription price is set at a discount to the current
market price. Although shareholders are not required to purchase additional
shares, they are given the opportunity, or "right", to purchase shares based on
the number of underlying shares they own on the record date. Rights may either
be transferable or non-transferable and the offering may or may not be
underwritten with a commitment by the underwriter to buy what is not subscribed
for.
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Q: WHAT ARE TRANSFERABLE RIGHTS VERSUS NON-TRANSFERABLE RIGHTS?
Non-transferable rights have no value other than that they may be
exercised and are not tradable on any exchange.
Transferable rights may trade on an exchange and afford the
non-subscribing shareholder the option of selling their rights on the exchange
or through the transfer agent. Selling the rights allows a non-subscribing
shareholder to recoup much of the dilution that would otherwise occur. A
non-transferable rights offering does not permit such an offset so that
non-subscribing shareholders would experience full dilution.
Q: HOW IS A RIGHTS OFFERING BENEFICIAL TO SHAREHOLDERS?
The Equity Trust shareholder benefits from the opportunity to purchase
additional shares with no commission if shares are held directly with the Trust
or, in some instances, with a nominal charge from their broker. Thus, an
investor is able to put more financial assets to work in an investment
discipline in which she or he believes and which has performed well over an
extended period of time. The additional capital that is raised by the Trust is
used to position the portfolio to more fully take advantage of new investment
opportunities. Increasing the asset size of the Trust may also result in
lowering the Trust's expenses as a percentage of average net assets.
Q: HOW IS THE EQUITY TRUST'S RIGHTS OFFERING BETTER THAN OTHER RIGHTS OFFERINGS
BY CLOSED-END FUNDS?
There are two types of rights offerings a closed-end fund may use to raise
additional capital: the direct offering method and the firm-underwritten method.
The Equity Trust is utilizing a direct offering method to realize the relative
cost advantages associated with this method as compared to a firm-underwritten
method. A direct offering avoids costly underwriting and distribution services
that lessen shareholder value.
Q: WHAT IF MY TOTAL NUMBER OF RIGHTS IS NOT EVENLY DIVISIBLE BY SIX?
The Trust will automatically round up shareholders' rights so that the
total number of rights a shareholder is granted is evenly divisible by six.
Q: ARE THE SHAREHOLDERS IN FAVOR OF RIGHTS OFFERINGS?
We have received numerous requests from the shareholders of the Trust for
rights offerings. Our shareholders have been overwhelmingly in favor of rights
offerings and look forward to future ones. This interest was evidenced by the
oversubscribed rights offerings that the Equity Trust had in 1991, 1992, 1993
and 1995, as well as the Gabelli Multimedia Trust's (which was spun-off from the
Equity Trust in 1994) oversubscribed rights offerings in 1995 and 2000. This
interest was further confirmed with the response to the Gabelli Equity Trust
shareholder vote in 1993 in which shareholders voted 90% in favor to provide
rights offerings.
Q: WHY DO MEMBERS OF THE NEWS MEDIA SAY THAT A RIGHTS OFFERING IS DILUTIVE?
Dilution is experienced by shareholders who do not fully exercise their
rights. The dilution is the result of issuing new shares below the then current
net asset value. This causes the number of shares outstanding to increase at a
percentage rate greater than the increase in the Trust's assets. To avoid
dilution, a shareholder should fully subscribe to all shares made available
based on the subscription ratio. If a shareholder does not exercise his or her
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rights, and sells the rights at their intrinsic value, the shareholder will not
experience dilution. However, a failure to sell rights or a sale below intrinsic
value will result in dilution.
Q. HOW DID THE TRUST FARE IN ITS PREVIOUS RIGHTS OFFERING?
This will be the fifth rights offering for our Trust. The following
compares the total subscriptions received with the amount sought for the
previous rights offerings:
AMOUNT SUBSCRIPTIONS
SOUGHT RECEIVED
YEAR ($ MILLIONS) ($ MILLIONS)
---- ---------- ----------
1991 $63 $136
1992 $76 $160
1993 $93 $176
1995 $119 $200
Q. WERE SHAREHOLDERS ABLE TO SELL THEIR RIGHTS IN THE PAST RIGHTS OFFERING?
Registered shareholders of the Equity Trust had the option of selling all
or a portion of their rights by designating this desire on the Subscription
Certificate which accompanied the Prospectus. The certificate must have been
returned to State Street Bank and Trust Company by the end of the offering
period at the designated address.
Those who held shares through a broker could simply have made the broker
aware of their desire to sell or exercise the rights. The broker should fulfill
the remainder of the order.
Q. WHAT WERE THE TRANSACTION COSTS ON THE SALE OF THE EQUITY TRUST RIGHTS?
Equity Trust rights were sold through State Street Bank and Trust with no
fees and only a nominal commission; however, certain brokerage firms may have
charged a transaction fee to sell rights.
COMMENTARY
THE FIVE E'S
In the third quarter of 2000, investors focused on the five E's--Energy,
the Euro, the Economy, Earnings, and the Election. We will share our perspective
on the five E's and offer an opinion on how they may impact the market going
forward.
ENERGY
The price of oil hit a ten-year high in the third quarter. Gasoline prices
exceeded $2.00 per gallon in many areas of the country this summer and home
heating costs are expected to rise by 50% this winter. Rising oil prices have
already sparked demonstrations in Europe and energy has become a political issue
in the U.S. as well. Although OPEC has increased production and is publicly
targeting a $25 to $28 per barrel price, global inventories are still tight and
the price of oil remains well over $30 per barrel. The U.S. is attempting to
influence the world energy market by dipping into its strategic oil reserves.
However, this is not likely to have a meaningful near term impact on oil
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prices. Treasury Secretary Lawrence Summers recently characterized high oil
prices as "the biggest cloud in the relatively blue sky" of a fundamentally
sound global economy. We agree.
We do not anticipate a repeat of the 1973-74 oil shock, which sent the
global economy into recession and sparked the last great bear market in stocks.
After the Gulf War, we doubt Middle East oil producers, particularly the
Saudi's, would risk alienating their protectors. Only in our worst nightmares do
we consider the impact that $50 per barrel of oil would have on today's equity
markets. Our best guess is that oil prices will decline from their peaks, but
remain high enough to keep pressure on global economies.
THE EURO
EURO VS. U.S. DOLLAR
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC.]
1999 2000
------ ------
Jan 1.1874 1.0155
1.1761 1.0309
1.1637 1.0335
1.1675 1.0324
1.1556 1.0294
1.1535 1.0252
1.1555 1.0322
1.1698 1.0281
1.1687 1.0270
1.1592 1.0128
1.1603 1.0121
1.1604 1.0115
1.1574 1.0133
1.1578 1.0100
1.1583 1.0019
1.1568 1.0041
1.1575 1.0011
1.1478 0.9890
1.1393 0.9765
1.1374 0.9757
Feb 1.1303 0.9731
1.1328 0.9768
1.1338 0.9887
1.1308 0.9760
1.1283 0.9783
1.1297 0.9862
1.1303 0.9914
1.1330 0.9865
1.1303 0.9847
1.1283 0.9783
1.1247 0.9834
1.1191 0.9842
1.1231 0.9863
1.1223 0.9850
1.1072 1.0060
1.1037 1.0017
1.0994 0.9931
1.0975 0.9763
1.1069 0.9669
1.0993 0.9643
1.0891 0.9700
Mar 1.0929 0.9619
1.0887 0.9618
1.0825 0.9603
1.0843 0.9560
1.0901 0.9576
1.0873 0.9684
1.0961 0.9659
1.0917 0.9648
1.0948 0.9644
1.0930 0.9696
1.0916 0.9710
1.1017 0.9694
1.0993 0.9710
1.0925 0.9703
1.0918 0.9608
1.0919 0.9691
1.0924 0.9724
1.0872 0.9645
1.0745 0.9614
1.0718 0.9524
1.0734 0.9594
1.0809 0.9574
1.0780 0.9560
Apr 1.0707 0.9588
1.0842 0.9647
1.0785 0.9580
1.0842 0.9590
1.0785 0.9588
1.0843 0.9591
1.0780 0.9551
1.0780 0.9524
1.0718 0.9564
1.0690 0.9550
1.0610 0.9477
1.0631 0.9369
1.0614 0.9376
1.0599 0.9379
1.0633 0.9396
1.0590 0.9265
1.0649 0.9217
1.0618 0.9083
1.0597 0.9089
1.0566 0.9120
1.0570 0.9068
1.0594 0.8891
May 1.0725 0.8907
1.0779 0.8953
1.0785 0.8950
1.0790 0.9023
1.0723 0.9097
1.0667 0.9021
1.0624 0.9080
1.0652 0.9138
1.0672 0.9053
1.0672 0.8921
1.0643 0.8952
1.0632 0.8946
1.0575 0.9036
1.0589 0.9032
1.0469 0.9096
1.0439 0.9072
1.0426 0.9310
1.0436 0.9314
1.0446 0.9328
1.0360 0.9307
1.0347 0.9432
1.0330 0.9471
Jun 1.0298 0.9570
1.0442 0.9600
1.0451 0.9548
1.0479 0.9526
1.0519 0.9544
1.0418 0.9619
1.0420 0.9590
1.0303 0.9530
1.0329 0.9648
1.0368 0.9622
1.0324 0.9557
1.0322 0.9455
1.0320 0.9398
1.0371 0.9358
1.0443 0.9382
1.0372 0.9444
1.0339 0.9444
1.0300 0.9515
1.0248 0.9545
1.0224 0.9526
1.0252 0.9548
1.0221 0.9527
Jul 1.0200 0.9484
1.0187 0.9521
1.0138 0.9497
1.0179 0.9401
1.0216 0.9339
1.0221 0.9374
1.0204 0.9351
1.0204 0.9322
1.0418 0.9237
1.0526 0.9292
1.0509 0.9343
1.0501 0.9314
1.0653 0.9391
1.0628 0.9413
1.0645 0.9331
1.0716 0.9246
1.0696 0.9266
1.0680 0.9228
1.0769 0.9137
1.0794 0.9042
1.0771 0.9075
1.0712 0.9105
Aug 1.0752 0.9019
1.0664 0.8991
1.0635 0.9077
1.0570 0.9046
1.0559 0.9037
1.0524 0.9135
1.0508 0.9143
1.0644 0.9152
1.0655 0.9068
1.0553 0.9027
1.0502 0.8965
1.0468 0.8967
1.0440 0.9028
1.0464 0.9024
1.0449 0.9002
1.0581 0.8966
1.0583 0.8924
1.0691 0.8878
1.0607 0.8993
1.0582 0.8876
1.0591 0.8702
1.0541 0.8740
Sep 1.0401 0.8664
1.0401 0.8624
1.0404 0.8596
1.0388 0.8640
1.0417 0.8617
1.0401 0.8572
1.0409 0.8527
1.0462 0.8514
1.0503 0.8463
1.0416 0.8559
1.0469 0.8794
1.0432 0.8738
1.0513 0.8813
1.0616 0.8807
1.0642 0.8830
1.0717 0.8842
1.0704 0.8788
1.0692 0.8745
1.0703 0.8727
1.0722 0.8691
1.0633 0.8686
Oct 1.0737 0.8682
1.0761 0.8716
1.0803 0.8644
1.0888 0.8567
1.0864 0.8491
1.0833 0.8509
1.0764 0.8391
1.0808 0.8412
1.0679 0.8406
1.0668 0.8364
1.0578 0.8365
1.0533 0.8274
1.0519 0.8273
1.0519 0.8408
1.0495 0.8433
1.0507 0.8485
1.0487 0.8588
1.0439 0.8579
1.0402 0.8619
1.0362 0.8585
1.0402 0.8585
Nov 1.0444 0.8554
1.0315 0.8574
1.0316 0.8624
1.0319 0.8574
1.0403 0.8571
1.0306 0.8534
1.0315 0.8517
1.0329 0.8487
1.0262 0.8460
1.0177 0.8424
1.0199 0.8401
1.0138 0.8383
1.0103 0.8503
1.0077 0.8545
1.0068 0.8577
1.0026 0.8694
1.0016 0.8768
Dec 1.0253 0.8876
1.0223 0.8803
1.0262
1.0165
1.0161
1.0122
1.0068
1.0066
1.0169
1.0089
1.0068
1.0097
1.0080
1.0164
1.0132
1.0046
1.0029
1.0064
1.0070
In January 1999, the Euro was introduced with great fanfare. Originally
expected to be a strong international currency, the Euro has declined against
the Japanese yen and plummeted against the U.S. dollar.
The plunging Euro presents a threat to the U.S. economy and stock market.
Europe is by far the largest market for U.S. exports. As the dollar strengthens
against the Euro, our exports become more expensive for European and other
global consumers. Conversely, European imports become cheaper for American
consumers as well as Latin American and Asian purchasers. This is making the
already troublesome balance of trade deficit even more problematic for the U.S.
Eventually, the dollar will have to be contained. While this will help on the
balance of trade front, it may have the adverse affect of reducing foreign
investment in U.S. capital markets. This is a long-term quandary without any
easy solutions.
A secondary effect of the weak Euro--but one with a more immediate impact
on U.S. stocks--is that the earnings for U.S. multi-national companies that do a
significant amount of business in Europe are being penalized significantly as
Euro denominated revenues and profits are translated back into dollars for
reporting purposes. This results in earnings shortfalls for some of the U.S.
market's "bellwether" stocks.
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THE ECONOMY
Prior to the rapid increase in oil prices and the collapse of the Euro,
the global economic picture looked relatively bright. Asia had recovered, Europe
was gaining momentum, and after six Federal Reserve interest rate hikes, the
U.S. economy appeared headed for a soft landing. Now, this comfortable economic
scenario is threatened. Will we have a "hard landing?"
EARNINGS
The potential for slower economic growth in the U.S. has investors
questioning whether third and fourth quarter corporate 2000 earnings will meet
what may now be optimistic expectations.
Relatively high equity valuations do not leave much room for earnings
disappointments. The most richly valued sectors of the market (technology in
particular) are well above Benjamin Graham's "safety net". To wit, technology
bellwether Intel lost approximately 20% of its market value in after hours
trading following its announcement that third quarter revenues and earnings
would fall modestly short of consensus Wall Street expectations. After a sharp
decline on the opening bell the next day, stocks rebounded and ended the day
mixed. We question whether stocks will continue to be so resilient if we see
more widespread disappointments during the upcoming 2000 earnings reporting
seasons.
THE ELECTION
After this summer's relatively quiet campaigning, the political rhetoric
is heating up as we approach the November election. There are very clear
differences in the Republicans' and Democrats' positions on a number of economic
issues, in particular, what to do with the growing Federal Government budget
surplus. The Republicans favor large tax cuts. The Democrats are advocating
using the surplus to continue to reduce government debt and plug some holes in
the social safety net. The Republicans tend to view consolidation as an integral
part of global economic evolution. The Democrats are concerned that
consolidation will reduce competition, leaving consumers vulnerable. The
Republicans do not want to interfere in the energy markets. The Democrats are
calling for action. As we write, it appears the election is up for grabs,
creating even more uncertainty in an already uncertain economic and market
environment.
OUR ADVICE
Our stock selection process is based on a "bottoms up" approach. We review
relevant economic and market issues--a list of our current hopes and fears--and
offer carefully considered opinions on their short-term investment implications.
This is a courtesy to shareholders that want to know what we are thinking. It
does not influence our investment strategy. We strive to identify and invest in
undervalued companies with favorable long-term business prospects. Over the
short term, these stocks will be impacted by broad market trends. Over the long
term, they will be judged on their own individual merit. So, our advice to
shareholders is simply to be patient and have faith that selected businesses
purchased at reasonable prices to intrinsic value will produce long-term
rewards.
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INVESTMENT SCOREBOARD--THE ENVELOPE PLEASE
Each quarter, we give out Oscars to the portfolio's top performers. Often
these Oscars go to companies making their last independent films (takeovers).
This quarter, Dexter Corp., which is being purchased in part by Invitrogen;
Sybron Chemicals, which is selling out to Germany's Bayer; and old friend
Chris-Craft, which will become part of the News Corp. empire, get the awards.
Other outstanding performers in the financial services category include
Lehman Brothers, which we believe will attract a larger corporate suitor as
consolidation in the industry continues, Allstate, and Bank One. In the
aerospace and aerospace component field, the winners are Fairchild, Northrop
Grumman, and Precision Castparts. Utility holdings AGL Resources, El Paso
Electric, and Energy East Corp. enjoyed good reviews this quarter.
We also recognize each quarter's biggest box office busts.
Telecommunications companies such as Sprint and Sprint PCS Group, which were
hobbled by antitrust issues, and Nextel failed at the box office. All were
previous portfolio stars, which we believe will be applauded again in the year
ahead. Food companies H.J. Heinz and Kellogg also proved unappetizing to
investors this quarter.
TMT
Technology, media, and telecommunications ("TMT") stocks produced
exceptional returns in 1997-99. This year, media and telecommunications stocks
languished. This is partially the result of good old-fashioned profit taking in
stocks that had delivered spectacular returns and momentum investors were
dumping.
However, there are other factors that have temporarily soured investors on
media and telecommunication stocks. Consolidation has slowed as regulators here
and abroad are redefining "competitive" standards. European regulators rejected
Time Warner's proposed acquisition of European recorded music powerhouse EMI.
The WorldCom/Sprint merger was derailed by U.S. regulators. U.S. antitrust
authorities are taking a hard look at the Time Warner/AOL deal. These actions
have put potential international telecommunications acquirers such as Deutsche
Telekom temporarily on hold. Smaller deals without antitrust implications are
being completed. However, these smaller deals do not generate the kind of
headlines that captivate investors. Is this the start of a global regulatory
backlash? We do not think so. Consolidation in these industries makes economic
sense in a truly global marketplace.
The constricted capital markets are also causing disruption. As a result
of the "dot.com" stock massacre, the new issue market appears to be closed for
the season and venture capital firms have pulled in their horns. Internet
start-ups are not the only companies being hurt. Promising young media and
telecommunications companies are just not going to be able to survive without
being able to tap the equity or venture capital markets for cash infusions.
These cash-burn casualties will be absorbed by larger entities at rock-bottom
prices, indiscriminately depressing asset values for more worthy competitors.
For example, Time Warner Telecom scooped up bankrupt competitive local exchange
carrier ("CLEC") GST Telecommunications at a fire sale price. Shortly
thereafter, virtually every CLEC stock got shelled.
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Media and telecommunications companies do face serious challenges in the
years ahead. Not all will be up to the task. The Internet is the competitive
tool of the future, but not all media companies will make a successful
transition into the online world. This will be a particularly tough hurdle for
print media companies without a well-planned Internet strategy. The long
distance telephony market is besieged by cutthroat competition and pricing. This
will likely continue for the foreseeable future as margins and earnings are
sacrificed on the altar of market share. Technology will bring new entrants and
established companies will have to fight vigorously to preserve their
franchises.
All things considered, how do we feel about the media and
telecommunications stocks that have rewarded us so generously over the past
several years, but performed so poorly in 2000? Just fine thank you. There are
going to be winners and losers in these rapidly changing industries. Risk and
reward always go hand in hand. Going forward, stock selection remains the key to
making money in these dynamic industries. The silver lining in the cloud
overhanging the media and telecommunications groups is that we now have more
value oriented opportunities to choose from. We believe if we do our analysis,
we can identify many of the companies that will prosper while avoiding most of
those that will fail. A solid stock picking batting average in these groups
should produce attractive long-term returns.
A MEDIA BASTILLE DAY?
In recent years, regulatory barricades in the media industry have been
coming down. Television and radio station cross-ownership barriers have fallen
and broadcast companies have been allowed to substantially expand their national
footprints. But, there are still walls preventing media companies from realizing
their full potential. Media companies are not permitted to own television
stations and newspapers in the same market. Broadcasters and cable television
companies still have onerous and unnecessary restrictions on the number of
customers they can service. We believe as the Internet Age unfolds--making
information and entertainment instantly available to an increasing percentage of
the American public--media companies will be liberated from largely unnecessary
restrictions. Federal Communications Commission ("FCC") Chairman William Kennard
is retiring after the election. The new FCC boss, whether a Democrat or a
Republican, may promote more market oriented regulation. Eventually, common
sense and economic realities will rise above politics, and media companies will
be unshackled. Our portfolio is well positioned to celebrate a Bastille Day for
the media industry. Content will again be King--just as Cash is again King.
SPECTRUM
America is well behind the rest of the developed world in building
state-of-the-art wireless communications systems. One of the reasons is that the
FCC has kept tight control over the transmission spectrum needed to fully
develop wireless networks. Broadcasters have been allocated large chunks of
spectrum to be used to deliver high definition television ("HDTV"). It now
appears that the demand for HDTV will fall well short of previous expectations.
Currently, there is a debate over whether the FCC should retake control of this
spectrum or allow broadcasters to sell it on the open market. We think the
latter option makes more sense. This is a win/win situation. Broadcasters could
make a bundle by auctioning off spectrum and wireless communications companies
would be able to acquire the spectrum they need to further develop their
systems.
8
<PAGE>
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Trust.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time.
BESTFOODS INC. (BFO - $72.75 - NYSE) agreed to a sweetened buyout offer from
Unilever (UN - $48.25 - NYSE) of $73 per share in cash, or $24.3 billion
including assumed debt. The merger will create the world's largest food company.
The transaction is conditioned on the approvals of BFO and UN shareholders and
regulatory approvals, including the European Union and United States antitrust
clearance. The deal is not contingent upon financing. It is expected to close in
the fourth quarter of 2000. The acquisition adds such well-known brands to UN's
portfolio as Entenmann's baked goods and Hellmann's mayonnaise. It will be
accretive to UN's cash earnings per share in the first full year of operation,
resulting in cost savings of about $750 million annually. The
hostile-turned-friendly deal is Unilever's third notable food acquisition in
past months, as it recently acquired SlimFast diet foods and Ben & Jerry's ice
cream for $2.6 billion.
CABLEVISION SYSTEMS CORP. (CVC - $66.3125 - NYSE) is one of the nation's leading
communications and entertainment companies, with a portfolio of operations that
spans state-of-the-art, high-speed multimedia delivery, subscription cable
television services, championship professional sports teams and national cable
television networks. Headquartered in Bethpage, N.Y., Cablevision serves nearly
3 million cable customers in the most important cable TV market--New York.
Cablevision is a leader in delivering cutting-edge technological innovation,
such as high speed cable, to the home. Through its Rainbow Media Holdings
subsidiary, Cablevision manages recognized content offerings such as American
Movie Classics, Bravo and The Independent Film Channel. Cablevision owns and
operates New York City's famed Madison Square Garden, which includes the arena
complex, the N.Y. Knicks, the N.Y. Rangers and the MSG network. Cablevision also
operates Radio City Entertainment and holds a long term lease for Radio City
Music Hall, home of the world-famous Rockettes.
CARTER-WALLACE INC. (CAR - $24.4375 - NYSE), founded in 1880 as the Carter
Medicine Company marketing a single product called Carter Little Liver Pills,
now manufactures and sells a diversified line of consumer health care products
including toiletries, pharmaceuticals, diagnostic specialties, proprietary drugs
and pet supplies. Such brands as Arrid deodorant, Nair hair remover and Pearl
Drops toothpaste are Carter-Wallace products. The company also sells certain
products exclusively in international markets.
CHRIS-CRAFT INDUSTRIES INC. (CCN - $82.375 - NYSE), through its 80% ownership of
BHC Communications (BHC - $157.375 - AMEX), is primarily a television
broadcaster. BHC owns and operates UPN affiliated stations in New York (WWOR),
Los Angeles (KCOP) and Portland, Oregon (KPTV). BHC also owns 58% of United
Television (UTVI - $147.00 - Nasdaq), which operates an NBC affiliate, an ABC
affiliate and five UPN affiliates. Chris-Craft's television stations constitute
one of the nation's largest television station groups, reaching approximately
22% of U.S. households. Chris-Craft is a major beneficiary of the recent FCC
ruling allowing television duopoly, or ownership of two stations in a single
market. The Chris-Craft complex is debt free, with roughly $1.5 billion in cash
and marketable securities. On August 14, News Corp. (NWS - $56.0625 - NYSE)
announced that it would purchase Chris-Craft (along with BHC and United
Television) in a deal worth $5.35 billion. According to the terms of the deal,
CCN shareholders will receive a package of cash and securities having an
"initial" stated value of $85 per share.
9
<PAGE>
DEUTSCHE BANK AG (DBKG.F - $82.95 - FRANKFURT STOCK EXCHANGE) is the leading
publicly quoted bank in Germany. The bank is organized into five self-contained
Group Divisions providing services and products to over seven million
customers--retail and private banking, corporate and real estate, Global
Corporates and Institutions, Asset Management and Global Technology and
Services. Deutsche Bank has a strong market position in Germany, and is
expanding throughout Europe--it is now the biggest foreign bank in Italy and
Spain. Deutsche Bank's presence in the U.S. has been expanded by the acquisition
of Bankers Trust.
DONALDSON, LUFKIN & JENRETTE INC. (DLJ - $89.4375 - NYSE) was acquired by Credit
Suisse Group for $13.4 billion in cash and stock on November 2. DLJ shareholders
received $90 per share. Credit Suisse paid DLJ's parent, French insurer Axa SA,
$8.14 billion in cash and stock. All other shareholders got cash. Credit Suisse
has spent about $12 billion the past three years to expand in insurance, money
management, and securities. The purchase of DLJ, which generates four-fifths of
its profit in the U.S., will strengthen the Credit Suisse First Boston
investment bank's telecommunications and junk-bond businesses.
LIBERTY CORP. (LC - $34.625 - NYSE), headquartered in Greenville, S.C., is a
holding company with operations in broadcasting and insurance. Liberty's Cosmos
Broadcasting owns and operates eleven network affiliated television stations in
the Southeast and Midwest. Six stations are affiliated with NBC, three with ABC
and two with CBS. These stations serve more than four million households.
Liberty Life is a regional insurer, with North Carolina, South Carolina and
Louisiana accounting for more than 50% of its premium volume. The insurance
segment specializes in providing agency (home service) and mortgage protection,
life and health insurance. In February 1999, Liberty hired an investment banker
and began a strategic review. In June, Liberty announced it would sell its
insurance operations to Royal Bank of Canada for $650 million, refocusing the
company on its broadcasting operations. The company's Cosmos Broadcasting unit
is also buying Civic Communications for $204 million, bringing the number of
television stations to fifteen.
LIBERTY MEDIA GROUP (LMG'A - $18.00 - NYSE), run by savvy media investor John
Malone, is engaged in businesses that provide programming services (including
production, acquisition and distribution through all media formats) as well as
businesses engaged in electronic retailing, direct marketing and other services.
LMG holds interests in globally branded entertainment networks such as Discovery
Channel, USA Network, QVC, Encore and STARZ! Liberty's investment portfolio also
includes interests in international video distribution businesses, international
telephony and domestic wireless companies, plant and equipment manufacturers,
and other businesses related to broadband services. Liberty Media Group Class A
and Class B common stock are tracking stocks of AT&T.
NAVISTAR INTERNATIONAL CORP. (NAV - $29.9375 - NYSE), with world headquarters in
Chicago, is a leading North American manufacturer and marketer of medium and
heavy trucks and school buses, and a worldwide leader in the manufacture of
mid-range diesel engines, produced in a range of 160 to 300 horsepower for the
International[REGISTRATION MARK] brand. The company is also a private label
designer and manufacturer of diesel engines for the full-size pickup truck and
van markets. The company's products, parts and services are sold through a
network of 1,000 International[REGISTRATION MARK] brand dealer outlets in the
United States, Canada, Brazil and Mexico, and through more than 90 separate
dealers in 75 countries. Navistar provides financing for its customers and
distributors principally through its wholly-owned subsidiary, Navistar Financial
Corporation.
10
<PAGE>
NIAGARA MOHAWK HOLDINGS INC. (NMK - $15.75 - NYSE) is the holding company of
Niagara Mohawk Power Corporation, which is primarily a regulated electric and
gas utility, and Opinac North America, which is mainly involved in unregulated
activities in the energy business. Niagara Mohawk provides electric service, and
sells, distributes, and transports natural gas to approximately 1.6 million
electric and 540,000 gas customers in areas of central, northern and western New
York State. On September 5, National Grid Group plc (NGG - $43.125 - NYSE)
signed a merger agreement to acquire Niagara Mohawk in exchange for a
combination of American Depositary Shares (ADSs) and cash. Niagara Mohawk is
National Grid's third U.S. acquisition, after New England Electric System and
Eastern Utilities Association. The combination will create the ninth largest
electric utility in the U.S. with an electric customer base of approximately 3.3
million, and National Grid will own and operate the most extensive transmission
network (by miles) and be the second largest distribution business (by power
delivered) in the New England/New York market.
SEAGRAM CO. (VO - $57.4375 - NYSE) operates two global businesses: beverages and
entertainment. The beverage group's major brands include Chivas Regal, Martell,
Mumm, Crown Royal and Seagram's Gin. With its $10.4 billion December acquisition
of Polygram, Seagram has created the world's leading music company, the
Universal Music Group. Seagram's entertainment business includes the Universal
Motion Pictures Group, the Universal Studios Recreation Group and a 46% interest
in USA Networks (USAI - $21.9375 - Nasdaq). On June 20th, Seagram agreed to
merge with French companies Vivendi and Canal Plus, creating a fully integrated
global media and communications company for the wired and wireless world.
TELECOM ITALIA SPA (TIT.MI - $10.62 - MILAN STOCK EXCHANGE; TI - $105.00 - NYSE)
is the principal provider of domestic and international telecommunications
services in Italy. Telecom Italia is also the seventh largest fixed
telecommunications operator in Europe, as well as the largest mobile operator in
Europe, through its 53% held subsidiary, Telecom Italia Mobile. In addition,
Telecom Italia also provides leased lines, data communications services,
satellite communications services and the development and manufacture of
telecommunications equipment and networks.
TELEPHONE & DATA SYSTEMS INC. (TDS - $110.70 - AMEX) is a diversified
telecommunications service company with cellular telephone, local telephone and
personal communications services ("PCS") operations. TDS serves 3.7 million
customers in 35 states. TDS conducts the vast majority of its cellular
operations through its 81% owned United States Cellular Corp. (USM - $70.00 -
AMEX) and conducts its telephone operations through its wholly-owned TDS
Telecommunications Corp. ("TDS Telecom") subsidiary, a full-service local
exchange carrier. Having completed a merger of its 82%-owned PCS subsidiary
Aerial Communications with VoiceStream Wireless (VSTR - $116.0625 - Nasdaq), TDS
now owns 35.6 million shares of VSTR valued at over $4.0 billion. VSTR is in the
process of being acquired by Deutsche Telekom (DT - $34.25 - NYSE), a former
German phone monopoly, for 3.2 DT shares plus $30 in cash per VSTR share.
11
<PAGE>
TIME WARNER INC. (TWX - $78.25 - NYSE) is 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. Time Warner controls
a host of powerful brands, such as Warner Brothers, CNN, HBO, Cinemax, and Time
magazine. Under the terms of a definitive agreement approved by the boards of
both companies, Time Warner and America Online (AOL - $53.75 - NYSE) have agreed
to merge in an all-stock combination, creating a global new- media powerhouse
for the 21st century.
UNITED TELEVISION INC. (UTVI - $147.00 - NASDAQ), headquartered in Beverly
Hills, California, is a television broadcasting group which owns and operates
seven of the stations (one ABC, one NBC and five UPN affiliates) that comprise
Chris-Craft's (CCN - $82.375 - NYSE) television division. UTVI stations cover
approximately nine percent of the U.S. population. UTVI is 58%-owned by BHC
Communications (BHC - $157.375 - AMEX). United Television is a beneficiary of
the recent FCC ruling allowing television duopoly, or ownership of two stations
in a single market. On August 14, News Corp. (NWS - $56.0625 - NYSE) announced
it would purchase United Television (along with Chris-Craft and BHC) in a deal
worth $5.35 billion.
USA NETWORKS INC. (USAI - $21.9375 - NASDAQ), through its subsidiaries, engages
in diversified media and electronic commerce businesses that include electronic
retailing, ticketing operations and television broadcasting. Chairman and CEO
Barry Diller has brought together under one umbrella the USA Network, the Sci-Fi
Channel, USA Networks Studios, USA Broadcasting, The Home Shopping Network and
the Ticketmaster Group. The plan is to integrate these assets, leveraging
programming, production capabilities and electronic commerce across this strong
distribution platform.
WHITMAN CORP. (WH - $11.5625 - NYSE), through its principal operating company,
Pepsi-Cola General Bottlers Inc., manufactures, packages, sells and distributes
carbonated and non-carbonated Pepsi-Cola beverages as well as a variety of other
non-alcoholic beverages in the United States and Central Europe. Pepsi General
serves a significant portion of a ten state region, primarily in the Midwest,
with a population of approximately 35 million people. In addition, Pepsi General
serves territories in Poland, Hungary, the Czech Republic and the Republic of
Slovakia. Pepsi General's three largest brands in terms of volume are
Pepsi-Cola, Diet Pepsi and Mountain Dew.
COMMON STOCK 10% DISTRIBUTION POLICY
The Equity Trust continues to adhere to its 10% Distribution Policy
whereby the Equity Trust pays out to common stock shareholders 10% of its
average net assets each year. Pursuant to this policy, the Equity Trust
distributed $0.27 per share on September 25, 2000. The next distribution is
scheduled for December 2000.
7.25% TAX ADVANTAGED CUMULATIVE PREFERRED STOCK--DIVIDENDS
The Equity Trust's 7.25% Tax Advantaged Cumulative Preferred Stock paid a
cash distribution on September 26, 2000 of $0.453125 per share. For the
twelve-months ended September 30, 2000, Preferred Stock shareholders received
distributions totaling $1.8125, the annual dividend rate per share of Preferred
Stock. The next distribution is scheduled for December 2000.
12
<PAGE>
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at http://www.gabelli.com
contains information about Gabelli Asset Management 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 market has behaved like a swimmer in distress in the third quarter of
2000. Every time stocks struggled to the surface, they were pulled back under
the waves. As we write, stocks are sinking under the weight of higher oil
prices, the weak Euro, and earnings uncertainties. Moderation in oil prices, a
firmer Euro, and solid third quarter earnings would provide a lifeline for
stocks. We will not speculate on the near term prospects for the market. We will
simply continue to practice our time tested investment strategy of buying
quality companies at discount prices. Over the long term, we remain confident
this will produce attractive returns.
Sincerely,
/S/ SIGNATURE
MARIO J. GABELLI, CFA
President and Chief Investment Officer
November 14, 2000
-----------------------------------------------------------------------
TOP TEN HOLDINGS
SEPTEMBER 30, 2000
------------------
Chris-Craft Industries Inc. Liberty Media Group
Viacom Inc. Donaldson, Lufkin &Jenrette Inc.
Telephone & Data Systems Inc. Time Warner Inc.
United Television Inc. Bestfoods Inc.
Cablevision Systems Corp. Telecom Italia SpA
-----------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio managers
only through the end of the period stated in this report. 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, 2000
(UNAUDITED)
OWNERSHIP AT
SEPTEMBER 30,
SHARES 2000
-------- -------------
NET PURCHASES
COMMON STOCKS
Albertson's Inc. ............................... 5,000 200,000
ANC Rental Corp. (a) ........................... 60,000 60,000
Archer-Daniels-Midland Co. (b) ................. 129,500 829,500
AT&T Wireless Group ............................ 40,000 50,000
AutoNation Inc. (a) ............................ 40,000 400,000
Aventis SA ..................................... 10,000 10,000
Bank of Ireland, London ........................ 15,000 15,000
Bestfoods Inc. ................................. 90,000 300,000
Borg Warner Automotive Inc. .................... 500 25,802
BAE Systems plc ................................ 100,000 100,000
Cablevision Systems Corp., Cl. A ............... 5,000 520,000
Capcom Co. Ltd. ................................ 10,000 10,000
Cheung Kong (Holdings) Ltd. .................... 25,000 75,000
Christian Dior SA (c) .......................... 32,250 43,000
Computer Associates International Inc. ......... 30,000 40,000
Conoco Inc., Cl. A ............................. 50,000 150,000
Cooper Industries Inc. ......................... 28,000 50,000
Corn Products International Inc ................ 7,750 85,000
Crane Co. ...................................... 15,000 150,000
Credit Suisse Group ............................ 1,000 6,000
Diageo plc, ADR ................................ 15,000 120,000
Donaldson, Lufkin & Jenrette Inc. .............. 300,000 300,000
EnergyNorth Inc. ............................... 2,100 12,100
Flowserve Corp. ................................ 25,000 130,000
Fuji Soft ABC Inc. ............................. 4,500 4,500
Gaylord Entertainment Co., Cl. A ............... 60,000 250,000
Gemstar-TV Guide International Inc. (d) ........ 16,432 16,432
GenCorp Inc. ................................... 5,000 260,000
General Chemical Group Inc. .................... 5,100 110,100
General Motors Corp., Cl. H (e) ................ 110,882 166,323
Gillette Co. ................................... 10,000 75,000
Granada Compass plc (f) ........................ 150,940 150,940
Heinz (H.J.) Co. ............................... 5,000 15,000
Hewlett-Packard Co. ............................ 40,000 40,000
Honeywell International Inc. ................... 25,000 125,000
Ingersoll-Rand Co. ............................. 47,000 47,000
Irish Life & Permanent plc, Dublin ............. 10,000 100,000
ITT Industries Inc. ............................ 22,500 142,500
Keebler Foods Co. .............................. 16,000 20,000
Lilly Industries Inc., Cl. A ................... 20,000 20,000
LVMH Moet Hennessy Louis
Vuitton, ADR (g) ............................. 48,400 60,500
Midas Inc. ..................................... 15,000 64,167
Molex Inc., Cl. A .............................. 1,000 4,000
Nabisco Group Holdings Corp. ................... 20,000 20,000
Nabisco Holdings Corp., Cl. A .................. 20,000 20,000
National Service Industries Inc ................ 5,000 125,000
Newmont Mining Corp. ........................... 12,000 50,000
Nextlink Communications Inc., Cl. A ............ 3,000 3,000
Niagara Mohawk Holdings Inc .................... 206,500 206,500
NTL Inc. ....................................... 2,000 14,625
Pacific Century CyberWorks Ltd., ADR ........... 34,445 34,445
OWNERSHIP AT
SEPTEMBER 30,
SHARES 2000
-------- -------------
Pactiv Corp. ................................... 50,000 700,000
Park-Ohio Holdings Corp. ....................... 5,000 78,715
Paxson Communications Corp., Cl. A ............. 700 120,700
Pearson plc .................................... 17,727 82,727
PepsiAmericas Inc. ............................. 4,900 150,000
Philips Electronics NV (h) ..................... 4,640 16,640
Placer Dome Inc. ............................... 5,000 25,000
Precision Castparts Corp. (i) .................. 14,000 44,000
Republic Services Inc. ......................... 10,000 60,000
Rohm & Haas Co. ................................ 89,000 204,000
Ryder System Inc. .............................. 10,000 35,000
Shaw Industries Inc. ........................... 325,000 325,000
Six Flags Inc. ................................. 10,000 10,000
SJW Corp. ...................................... 2,000 2,000
Stanley Electric Co. Ltd. ...................... 20,000 20,000
Stilwell Financial Inc. (j) .................... 30,000 30,000
Swire Pacific Ltd., Cl. A ...................... 82,000 82,000
SYNAVANT Inc. (k) .............................. 3,500 3,500
Telefonica SA, ADR (l)(m)(n) ................... 100,950 244,950
Telefonica SA, BDR ............................. 15,626 15,626
Telesp Celular Participacoes SA, Rights (o) 1,076,054 1,076,054
Telesp Celular Participacoes SA, ADR, Rights 6,680 6,680
Thomas & Betts Corp. ........................... 10,000 50,000
Totalfina Elf, Cl. B ........................... 2,000 4,907
Tribune Co. .................................... 130,000 160,000
UnitedGlobalCom Inc., Cl. A .................... 8,000 35,000
Verizon Communications (p) ..................... 300,000 330,000
Waste Management Inc. .......................... 110,000 360,000
Westvaco Corp. ................................. 50,000 50,000
Whitman Corp. .................................. 39,000 450,000
Wrigley (Wm.) Jr. Co. .......................... 5,000 75,000
Xerox Corp. .................................... 25,000 40,000
WARRANTS
Aegon NV, expire 02/04/01 ...................... 26,000 26,000
NET SALES
COMMON STOCKS
Advantica Restaurant Group Inc. ................ (30,000) 10,108
American Express Co. ........................... (10,000) 185,000
Amphenol Corp., Cl. A .......................... (30,500) 129,500
Anglogold Ltd. ................................. (3,500) --
Anglogold Ltd., ADR ............................ (10,000) --
Antofagasta Holdings plc ....................... (110,909) --
Arnoldo Mondadori Editore SpA (i) .............. (39,700) --
ArvinMeritor Inc. .............................. (5,000) 55,000
AT&T Corp. ..................................... (18,506) 319,994
Atlantic Richfield Co. ......................... (20) --
Bristol-Myers Squibb Co. ....................... (10,000) --
Cable & Wireless HKT Ltd., ADR ................. (50,000) --
Central Newspapers Inc., Cl. A ................. (6,000) --
CheckFree Corp. ................................ (500) 1,000
Coldwater Creek Inc. ........................... (3,000) 16,000
14
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES (CONTINUED)
QUARTER ENDED SEPTEMBER 30, 2000
(UNAUDITED)
OWNERSHIP AT
SEPTEMBER 30,
SHARES 2000
-------- -------------
NET SALES (CONTINUED)
COMMON STOCKS (CONTINUED)
Delhaize America Inc., Cl. A .................. (20,000) 50,000
Department 56 Inc. ............................ (5,000) 35,000
Dexter Corp. .................................. (10,000) 40,000
Dow Jones & Co. Inc. .......................... (2,000) 11,000
Dynatech Corp. ................................ (15,340) --
Fairchild Corp., Cl. A ........................ (5,000) 110,000
Ford Motor Co. ................................ (2,000) 10,000
Fujitsu Ltd. .................................. (5,000) 38,000
Furukawa Electric Co. Ltd. .................... (17,000) --
Gerald Stevens Inc. ........................... (20,000) --
Givaudan ...................................... (140) --
Granada Group plc (f) ......................... (200,000) --
Grupo Televisa SA, GDR ........................ (12,000) 138,000
GTE Corp. (p) ................................. (260,000) --
Hain Celestial Group Inc. ..................... (44,003) 30,000
Hannaford Bros. Co. ........................... (20,000) --
Harcourt General Inc. ......................... (10,000) 80,000
Jafco Co. Ltd. ................................ (4,000) --
John Hancock Financial Services Inc. .......... (20,000) --
Kansas City Southern Industries Inc. (j) ...... (7,500) 7,500
KPN NV (q) .................................... (23,923) 77
Lamson & Sessions Co. ......................... (26,300) 390,000
Lehman Brothers Holdings Inc. ................. (4,000) 21,000
Liberty Livewire Corp. Cl. A .................. (2,000) 24,000
Loral Space & Communications Ltd .............. (5,000) 145,000
Mark IV Industries Inc. ....................... (300,000) --
Mattel Inc. ................................... (20,000) 50,000
Morgan (J.P.) & Co. Inc. ...................... (2,000) 12,000
News Corp. Ltd., Pfd., ADR .................... (1,500) 42,000
Northrop Grumman Corp. ........................ (2,000) 80,000
Pennzoil-Quaker State Co. ..................... (2,000) 78,000
Pepsi Bottling Group Inc. ..................... (80,000) 20,000
PepsiCo Inc. .................................. (25,000) 330,000
Philips Electronics NV, ADR (h) ............... (1,200) 38,800
Primark Corp. ................................. (50,000) --
ReliaStar Financial Corp. ..................... (25,000) --
Rogers Communications Inc.,
Cl. B, ADR .................................. (10,000) 110,345
Rohm Co. Ltd. ................................. (1,000) 1,400
SBC Communications Inc. ....................... (20,000) 120,000
Seat-Pagine Gialle SpA ........................ (1,500,000) --
Shared Medical Systems Corp. .................. (140,000) --
Skandia Forsakrings AB ........................ (38,000) 80,000
SPX Corp. ..................................... (1,000) --
T. Rowe Price Associates Inc. ................. (2,000) 38,000
Tele Sudeste Celular Participacoes
SA, ADR (l) ................................. (33,400) --
Telecomunicacoes de Sao Paulo
SA (Telesp), ADR (m) ....................... (167,000) --
OWNERSHIP AT
SEPTEMBER 30,
SHARES 2000
-------- -------------
Telefonica de Argentina SA,
Cl. B, ADR (n) ............................. (8,000) --
Telefonica SA ................................. (26,914) --
TeleWest Communications plc ................... (118,999) --
Tenneco Automotive Inc. ....................... (30,000) 130,000
THK Co. Ltd. .................................. (13,000) 29,000
Thomas Nelson Inc. ............................ (5,000) 75,000
TransPro Inc. ................................. (5,000) 105,000
TV Guide Inc., Cl. A (d) ...................... (25,000) --
Tyco International Ltd. ....................... (142,000) 45,000
Tyler Technologies Inc. ....................... (18,000) 70,000
Vastar Resources Inc. ......................... (5,000) --
Viacom Inc., Cl. A ............................ (5,000) 920,000
Visteon Corp. ................................. (1,571) --
Vodafone Group plc ............................ (100,000) 623,888
Waddell & Reed Financial Inc., Cl. A ......... (15,000) 30,000
Wynn's International Inc. ..................... (60,000) 40,000
PREFERRED STOCKS
News Corp. Ltd., Pfd., ADR .................... (1,500) 42,000
Telesp Participacoes de Sao
Paulo SA, Pfd. ............................. (12,045,773) --
------------------------------------
(a) Spinoff - 0.125 shares of ANC Rental Corp. for every 1 share of AutoNation
Inc.
(b) 5% stock dividend
(c) 4 for 1 stock split
(d) Merger - 0.6573 shares of Gemstar-TV Guide International Inc. for every 1
share of TV Guide Inc., Cl. A
(e) 3 for 1 stock split
(f) Merger - 0.7547 shares of Granada Compass plc for every 1 share of Granda
Group plc
(g) 5 for 1 stock split
(h) 0.97 for 1 stock split
(i) 2 for 1 stock split
(j) Spinoff - 1 share of new Kansas City Southern Industries Inc. for every 2
shares of Stilwell Financial Inc.
(k) Spinoff - 1 share of SYNAVANT Inc. for every 2 shares of IMS Health Inc.
(l) Merger - 0.72727 shares of Telefonica SA, ADR for every 1 share of Tele
Sudeste Celular Participacoes SA, ADR
(m) Merger - 0.43243 shares of Telefonica SA, ADR for every 1 share of
Telecomunicacoes de Sao Paulo SA (Telesp), ADR
(n) Merger - 0.55555 shares of Telefonica SA, ADR for every 1 share of
Telefonica de Argentina SA, Cl. B, ADR
(o) Spinoff - 10 shares of Telesp Cellular Participacoes SA for every 1 share
of Telesp Celular Participacoes SA, Pfd.
(p) Merger - 1.22 shares of Verizon Communications for every 1 share of GTE
Corp.
(q) 0.699% stock dividend
15
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS -- 97.5%
ENTERTAINMENT -- 10.5%
160,000 Canal Plus, ADR+ ........................... $ 4,791,918
145,000 Disney (Walt) Co. (c) ...................... 5,546,250
100,000 EMI Group plc, ADR ......................... 1,601,221
25,000 Fox Entertainment Group Inc. ............... 662,500
75,000 GC Companies Inc.+ ......................... 225,000
16,432 Gemstar-TV Guide International Inc.+ ....... 1,432,665
150,940 Granada Compass plc+ ....................... 1,412,633
24,000 Liberty Livewire Corp., Cl. A+ ............. 738,000
1,550,000 Liberty Media Group, Cl. A+ (d) ............ 27,900,000
145,000 Publishing & Broadcasting Ltd. ............. 1,052,251
195,000 Seagram Co. ................................ 11,200,312
10,000 Six Flags Inc. ............................. 155,000
285,000 Time Warner Inc. ........................... 22,301,250
600,000 USA Networks Inc.+ ......................... 13,162,500
920,000 Viacom Inc., Cl. A+ ........................ 53,820,000
------------
146,001,500
------------
BROADCASTING -- 9.7%
50,000 Ackerley Group Inc. ........................ 500,000
17,700 Audiofina .................................. 1,918,005
336,192 Chris-Craft Industries Inc.+ ............... 27,693,816
592,897 Chris-Craft Industries Inc., Cl. B+ (a) .... 48,839,890
16,666 Corus Entertainment Inc., Cl. B+ ........... 473,519
37,500 Gray Communications Systems Inc. ........... 424,219
138,000 Grupo Televisa SA, GDR+ .................... 7,960,875
200,000 Liberty Corp. .............................. 6,925,000
4,000 Nippon Broadcasting System Inc. ............ 222,839
50,375 NRJ Groupe+ ................................ 1,982,568
120,700 Paxson Communications Corp., Cl. A+ ........ 1,388,050
100,000 Television Broadcasting Ltd. ............... 600,239
245,009 United Television Inc. ..................... 36,016,323
------------
134,945,343
------------
FINANCIAL SERVICES -- 9.3%
26,000 Aegon NV ................................... 980,816
4,100 Allianz AG ................................. 1,354,920
110,000 Allstate Corp. ............................. 3,822,500
185,000 American Express Co. (c) ................... 11,238,750
30,000 Argonaut Group Inc. ........................ 525,000
90,000 Banco Santander Central Hispano
SA, ADR .................................. 984,375
84,000 Bank of Ireland, Dublin .................... 671,561
15,000 Bank of Ireland, London .................... 120,120
56,000 Bank of Scotland ........................... 492,636
110,000 Bank One Corp. ............................. 4,248,750
300,000 Bankgesellschaft Berlin AG ................. 4,182,697
260 Berkshire Hathaway Inc., Cl. A+ ............ 16,744,000
100,000 Block (H&R) Inc. ........................... 3,706,250
MARKET
SHARES VALUE
------ ------
50,000 Commerzbank AG, ADR ........................ $ 1,482,476
6,000 Credit Suisse Group ........................ 1,121,242
150,000 Deutsche Bank AG, ADR ...................... 12,442,200
300,000 Donaldson, Lufkin & Jenrette Inc. .......... 26,831,250
30,000 Dun & Bradstreet Corp. ..................... 1,033,125
110,000 First Union Corp. .......................... 3,540,625
25,000 Hibernia Corp., Cl. A ...................... 306,250
20,000 Invik & Co. AB, Cl. B ...................... 1,856,118
100,000 Irish Life & Permanent plc, Dublin ......... 989,199
21,000 Lehman Brothers Holdings Inc. .............. 3,102,750
65,500 Leucadia National Corp. .................... 1,752,125
60,000 Mellon Financial Corp. ..................... 2,782,500
110,000 Midland Co. ................................ 2,915,000
12,000 Morgan (J.P.) & Co. Inc. ................... 1,960,500
100,000 Nikko Securities Co. Ltd. .................. 888,395
50,000 Prudential Corp. plc ....................... 682,328
100,000 RAS SpA .................................... 1,314,814
60,000 Riggs National Corp. ....................... 735,000
80,000 Skandia Forsakrings AB ..................... 1,586,212
15,000 Societe Generale, Cl. A .................... 838,525
40,000 State Street Corp. ......................... 5,200,000
30,000 Stilwell Financial Inc.+ ................... 1,305,000
20,000 SunTrust Banks Inc. ........................ 996,250
510 Swiss Re ................................... 973,710
38,000 T. Rowe Price Associates Inc. .............. 1,783,625
50,000 Unitrin Inc. ............................... 1,584,375
30,000 Waddell & Reed Financial Inc., Cl. A ....... 930,000
------------
130,005,969
------------
TELECOMMUNICATIONS -- 9.1%
8,132 Aliant Inc. ................................ 195,648
7,500 Allegiance Telecom Inc.+ ................... 279,375
60,000 ALLTEL Corp. ............................... 3,131,250
4,000 AT&T Canada Inc., Cl. B+ ................... 122,000
319,994 AT&T Corp. ................................. 9,399,824
240,000 BCE Inc. ................................... 5,610,000
33,400 Brasil Telecom
Participacoes SA, ADR .................... 1,945,550
22,000 BroadWing Inc.+ ............................ 562,375
2,893,090 Cable & Wireless Jamaica Ltd. .............. 189,428
95,000 Cable & Wireless plc ....................... 1,355,415
145,000 Cable & Wireless plc, ADR .................. 6,171,563
60,000 CenturyTel Inc. ............................ 1,635,000
25,000 Citizens Communications Co. ................ 335,938
255,466 Commonwealth Telephone
Enterprises Inc.+ ........................ 9,420,309
20,000 Commonwealth Telephone
Enterprises Inc., Cl. B+ ................. 805,000
35,000 Compania de Telecomunicaciones de
Chile SA, ADR ............................ 608,125
16
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2000 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
30 DDI Corp. .................................. $ 197,113
167,000 Embratel Participacoes SA, ADR+ ............ 3,089,500
21,600 HPY Holding - HTF Holding
Oyj Abp, Cl. A ........................... 771,755
32 Japan Telecom Co. Ltd. ..................... 923,931
5,500 KDD Corp. .................................. 392,371
77 KPN NV ..................................... 1,675
3,000 Nextlink Communications Inc.+ .............. 105,563
34,445 Pacific Century CyberWorks
Ltd., ADR+ ............................... 378,895
160,000 RCN Corp.+ ................................. 3,320,000
9,655 Rogers Communications Inc., Cl. B+ ......... 228,761
110,345 Rogers Communications Inc.,
Cl. B, ADR+ .............................. 2,613,797
120,000 SBC Communications Inc. .................... 6,000,000
330,000 Sprint Corp.+ .............................. 9,673,125
186,554 Tele Norte Leste Participacoes SA, ADR ..... 4,267,423
8,000 Telecom Argentina Stet France Telecom
SA, ADR .................................. 173,000
400,040 Telecom Italia SpA ......................... 4,250,187
124,000 Telecom Italia SpA, ADR .................... 13,020,000
244,950 Telefonica SA, ADR ......................... 14,559,216
15,626 Telefonica SA, BDR+ ........................ 309,136
36,000 Telefonos de Mexico SA, Cl. L, ADR ......... 1,914,750
12,750 TELUS Corp. ................................ 343,191
52,500 TELUS Corp., ADR ........................... 1,413,138
4,250 TELUS Corp., Non-Voting .................... 110,442
27,500 TELUS Corp., Non-Voting, ADR ............... 714,628
330,000 Verizon Communications (e) ................. 15,984,375
------------
126,522,772
------------
FOOD AND BEVERAGE -- 6.0%
10,108 Advantica Restaurant Group Inc.+ ........... 6,002
300,000 Bestfoods Inc. ............................. 21,825,000
18,000 Brau und Brunnen AG+ ....................... 470,156
15,000 Coca-Cola Co. .............................. 826,875
85,000 Corn Products International Inc. ........... 1,933,750
120,000 Diageo plc, ADR ............................ 4,237,500
160,000 General Mills Inc. ......................... 5,680,000
30,000 Hain Celestial Group Inc.+ ................. 1,053,750
15,000 Heinz (H.J.) Co. ........................... 555,938
20,000 Keebler Foods Co.+ ......................... 840,000
130,000 Kellogg Co. ................................ 3,144,375
60,500 LVMH Moet Hennessy Louis
Vuitton, ADR ............................. 899,938
20,000 Nabisco Group Holdings Corp. ............... 570,000
20,000 Nabisco Holdings Corp., Cl. A .............. 1,075,000
650,000 Parmalat Finanziaria SpA ................... 949,269
20,000 Pepsi Bottling Group Inc. .................. 601,250
MARKET
SHARES VALUE
------ ------
150,000 PepsiAmericas Inc.+ ........................ $ 525,000
330,000 PepsiCo Inc. ............................... 15,180,000
95,000 Quaker Oats Co. ............................ 7,516,875
60,000 Ralcorp Holdings Inc.+ ..................... 847,500
95,894 Tootsie Roll Industries Inc. ............... 3,763,840
15,000 Unilever NV, New York ...................... 723,750
450,000 Whitman Corp. .............................. 5,203,125
75,000 Wrigley (Wm.) Jr. Co. ...................... 5,615,625
------------
84,044,518
------------
WIRELESS COMMUNICATIONS -- 5.8%
50,000 AT&T Wireless Group+ ....................... 1,043,750
18,000 Nextel Communications Inc., Cl. A+ ......... 841,500
25,000 Rogers Wireless Communications
Inc., Cl. B+ ............................. 759,375
220,000 Sprint Corp. (PCS Group)+ .................. 7,713,750
16,700 Tele Celular Sul Participacoes SA, ADR ..... 501,000
55,666 Tele Centro Oeste Celular Participacoes
SA, ADR .................................. 591,451
3,340 Tele Leste Celular Participacoes
SA, ADR .................................. 134,644
8,350 Tele Nordeste Celular Participacoes
SA, ADR .................................. 392,450
3,340 Tele Norte Celular Participacoes
SA, ADR .................................. 133,600
1,200,000 Telecom Italia Mobile SpA .................. 9,699,622
8,350 Telemig Celular Participacoes
SA, ADR .................................. 442,028
450,000 Telephone & Data Systems Inc. .............. 49,815,000
66,800 Telesp Celular Participacoes
SA, ADR .................................... 2,200,225
623,888 Vodafone Group plc ......................... 2,329,106
100,000 Vodafone Group plc, ADR .................... 3,700,000
455 VoiceStream Wireless Corp.,
ADR+ ....................................... 52,808
------------
80,350,309
------------
EQUIPMENT AND SUPPLIES -- 5.8%
100,000 AMETEK Inc. ................................ 2,118,750
129,500 Amphenol Corp., Cl. A+ ..................... 7,373,406
10,000 Caterpillar Inc. ........................... 337,500
95,000 CIRCOR International Inc.+ ................. 979,687
107,000 CLARCOR Inc. ............................... 2,086,500
320,000 Deere & Co. (c) ............................ 10,640,000
255,000 Donaldson Co. Inc. ......................... 5,610,000
130,000 Flowserve Corp. ............................ 2,136,875
6,500 Franklin Electric Co. ...................... 448,500
105,000 Gerber Scientific Inc. ..................... 905,625
298,000 IDEX Corp. ................................. 8,325,375
47,000 Ingersoll-Rand Co. ......................... 1,592,125
52,500 Lufkin Industries Inc. ..................... 1,069,688
1,000 Manitowoc Co. Inc. ......................... 19,250
450,000 Navistar International Corp.+ .............. 13,471,875
17
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2000 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
EQUIPMENT AND SUPPLIES (CONTINUED)
20,000 PACCAR Inc. ................................ $ 741,250
84,500 Sequa Corp., Cl. A+ ........................ 3,591,250
75,000 Sequa Corp., Cl. B+ ........................ 4,462,500
170,000 SPS Technologies Inc.+ ..................... 8,245,000
29,000 THK Co. Ltd. ............................... 1,127,152
150,000 UCAR International Inc.+ ................... 1,903,125
250,000 Watts Industries Inc., Cl. A ............... 2,500,000
100,000 Weir Group plc ............................. 294,961
-----------
79,980,394
-----------
CONSUMER PRODUCTS -- 5.2%
70,000 Altadis SA ................................. 1,009,936
540,000 Carter-Wallace Inc. ........................ 13,196,250
43,000 Christian Dior SA .......................... 2,316,500
45,000 Church & Dwight Co. Inc. ................... 826,875
1,100 Compagnie Financiere
Richemont AG, Cl. A ...................... 3,306,160
35,000 Department 56 Inc.+ ........................ 461,562
250,001 Energizer Holdings Inc.+ ................... 6,125,024
125,000 Fortune Brands Inc. (f) .................... 3,312,500
250,000 Gallaher Group plc, ADR .................... 5,812,500
75,000 Gillette Co. ............................... 2,315,625
100,000 Harley Davidson Inc. ....................... 4,787,500
1,500 Matsushita Electric Industrial Co.
Ltd., ADR ................................ 393,937
50,000 Mattel Inc. ................................ 559,375
25,000 Maytag Corp. ............................... 776,562
40,000 National Presto Industries Inc. ............ 1,197,500
10,500 Nintendo Co. Ltd. .......................... 1,917,130
20,000 Philip Morris Companies Inc. ............... 588,750
625,000 Ralston Purina Group ....................... 14,804,687
325,000 Shaw Industries Inc. ....................... 6,012,500
1,500 Swatch Group AG ............................ 2,169,586
10,425 Syratech Corp.+ ............................ 82,097
-----------
71,972,556
-----------
PUBLISHING -- 5.1%
11,000 Dow Jones & Co. Inc. ....................... 665,500
80,000 Harcourt General Inc. ...................... 4,720,000
646,000 Independent News & Media plc,
Dublin ................................... 2,365,695
98,000 McGraw-Hill Companies Inc. ................. 6,229,125
400,000 Media General Inc., Cl. A .................. 17,200,000
128,000 Meredith Corp. ............................. 3,776,000
115,000 New York Times Co., Cl. A .................. 4,520,938
145,000 News Corp. Ltd. ............................ 2,041,681
5,000 News Corp. Ltd., ADR ....................... 280,313
82,727 Pearson plc ................................ 2,298,240
400,000 Penton Media Inc. .......................... 11,000,000
MARKET
SHARES VALUE
------ ------
30,000 PRIMEDIA Inc.+ ............................. $ 491,250
27,000 Pulitzer Inc. .............................. 1,159,650
160,000 Reader's Digest Association Inc., Cl. B .... 5,050,000
60,000 Schibsted ASA .............................. 1,054,152
400,000 South China Morning Post Holdings .......... 305,250
75,000 Thomas Nelson Inc. ......................... 614,062
160,000 Tribune Co. ................................ 6,980,000
-----------
70,751,856
-----------
ENERGY AND UTILITIES -- 4.6%
73,400 AGL Resources Inc. ......................... 1,472,587
34,000 Apache Corp. ............................... 2,010,250
120,000 BP Amoco plc ............................... 1,068,068
248,800 BP Amoco plc, ADR .......................... 13,186,400
110,000 Burlington Resources Inc. .................. 4,049,375
100,000 Columbia Energy Group ...................... 7,100,000
150,000 Conoco Inc., Cl. A ......................... 3,918,750
150,000 Eastern Enterprises ........................ 9,571,875
400,000 El Paso Electric Co.+ ...................... 5,508,000
20,000 Energy East Corp. .......................... 452,500
12,100 EnergyNorth Inc. ........................... 734,319
100,000 Florida Progress Corp. ..................... 5,293,750
55,000 Halliburton Co. ............................ 2,691,562
60,000 MCN Energy Group Inc. ...................... 1,537,500
206,500 Niagara Mohawk Holdings Inc. ............... 3,252,375
30,000 Northeast Utilities ........................ 650,625
78,000 Pennzoil-Quaker State Co.+ ................. 819,000
2,000 SJW Corp. .................................. 237,500
15,000 St. Joseph Light & Power Co. ............... 289,687
4,907 Totalfina Elf .............................. 717,924
-----------
64,562,047
-----------
CABLE -- 3.2%
520,000 Cablevision Systems Corp.,
Cl. A+ ..................................... 34,482,500
40,000 Comcast Corp., Cl. A ....................... 1,627,500
90,000 Comcast Corp., Cl. A, Special .............. 3,684,375
14,625 NTL Inc.+ .................................. 677,320
20,000 Shaw Communications Inc., Cl. B ............ 458,584
80,000 Shaw Communications Inc., Cl. B,
Non-Voting+ .............................. 1,815,000
35,000 UnitedGlobalCom Inc., Cl. A+ ............... 1,050,000
-----------
43,795,279
-----------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.7%
55,000 ArvinMeritor Inc. .......................... 807,812
25,802 Borg-Warner Automotive Inc. ................ 854,691
295,000 Dana Corp. ................................. 6,342,500
75,000 Delphi Automotive Systems Corp.+ (c) ....... 1,134,375
40,000 Federal-Mogul Corp. ........................ 217,500
260,000 GenCorp Inc. ............................... 2,112,500
270,000 Genuine Parts Co. .......................... 5,146,875
18
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2000 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
AUTOMOTIVE: PARTS AND ACCESSORIES (CONTINUED)
117,000 Johnson Controls Inc. ...................... $ 6,222,937
64,167 Midas Inc. ................................. 898,338
330,000 Modine Manufacturing Co. ................... 9,296,719
80,000 Scheib (Earl) Inc.+ ........................ 260,000
163,000 Standard Motor Products Inc. ............... 1,304,000
70,000 Superior Industries International Inc. ..... 2,100,000
130,000 Tenneco Automotive Inc. .................... 674,375
105,000 TransPro Inc. .............................. 367,500
-----------
37,740,122
-----------
DIVERSIFIED INDUSTRIAL -- 2.6%
195,000 Ampco-Pittsburgh Corp. ..................... 1,998,750
50,000 Cooper Industries Inc. ..................... 1,762,500
150,000 Crane Co. .................................. 3,431,250
102,000 GATX Corp. ................................. 4,271,250
150,000 GenTek Inc. ................................ 2,287,500
125,000 Honeywell Inc. ............................. 4,453,125
142,500 ITT Industries Inc.+ ....................... 4,622,344
390,000 Lamson & Sessions Co.+ ..................... 4,631,250
125,000 National Service Industries Inc. ........... 2,445,312
78,715 Park-Ohio Holdings Corp.+ .................. 619,881
82,000 Swire Pacific Ltd., Cl. A .................. 511,127
75,000 Thomas Industries Inc. ..................... 1,518,750
27,000 TI Group plc ............................... 143,710
50,000 Trinity Industries Inc. .................... 1,168,750
45,000 Tyco International Ltd. .................... 2,334,375
-----------
36,199,874
-----------
HEALTH CARE -- 2.2%
40,000 American Home Products Corp. ............... 2,262,500
60,000 Amgen Inc.+ ................................ 4,189,688
10,000 AstraZeneca plc, London .................... 523,980
35,146 AstraZeneca plc, Stockholm ................. 1,842,491
10,000 Aventis SA ................................. 750,062
26,000 Biogen Inc.+ ............................... 1,586,000
50,000 Glaxo Wellcome plc ......................... 1,513,984
4,000 Glaxo Wellcome plc, ADR .................... 241,750
40,294 Life Technologies Inc. ..................... 2,740,395
1,150 Novartis AG ................................ 1,763,151
108,000 Novartis AG, Registered .................... 4,178,250
45,000 Pfizer Inc. ................................ 2,022,188
140 Roche Holding AG ........................... 1,231,168
20,000 Sanofi Synthelabo SA ....................... 1,074,794
55,000 SmithKline Beecham plc ..................... 753,407
14,000 Takeda Chemical Industries Ltd. ............ 925,042
70,000 Wesley Jessen VisionCare Inc.+ ............. 2,690,625
-----------
30,289,475
-----------
MARKET
SHARES VALUE
------ ------
HOTELS AND GAMING -- 1.9%
120,000 Aztar Corp.+ ............................... $ 1,845,000
90,000 Boca Resorts Inc., Cl. A+ .................. 984,375
250,000 Gaylord Entertainment Co. .................. 5,968,750
5,000 GTECH Holdings Corp.+ ...................... 82,813
1,045,000 Hilton Group plc ........................... 2,997,363
700,000 Hilton Hotels Corp. ........................ 8,093,750
5,000 MGM Grand Inc. ............................. 190,938
430,000 Park Place Entertainment Corp.+ ............ 6,503,750
-----------
26,666,739
-----------
PAPER AND FOREST PRODUCTS -- 1.8%
260,000 Greif Bros. Corp., Cl. A ................... 8,645,000
3,400 Greif Bros. Corp., Cl. B ................... 104,550
700,000 Pactiv Corp.+ .............................. 7,831,250
253,000 St. Joe Co. ................................ 7,020,750
50,000 Westvaco Corp. ............................. 1,334,375
-----------
24,935,925
-----------
SPECIALTY CHEMICALS -- 1.5%
5,400 Ciba Specialty Chemicals, ADR+ (b) ......... 159,560
40,000 Dexter Corp. ............................... 2,833,752
10,000 du Pont de Nemours (E.I.) & Co. ............ 414,375
315,000 Ferro Corp. ................................ 6,004,688
10,000 Fuller (H.B.) Co. .......................... 287,500
110,100 General Chemical Group Inc. ................ 103,219
20,000 Lilly Industries Inc., Cl. A ............... 590,000
210,000 Omnova Solutions Inc. ...................... 1,168,125
204,000 Rohm & Haas Co. ............................ 5,928,750
105,000 Sybron Chemicals Inc.+ ..................... 3,642,188
-----------
21,132,157
-----------
RETAIL -- 1.4%
200,000 Albertson's Inc. ........................... 4,200,000
400,000 AutoNation Inc.+ ........................... 2,400,000
16,000 Coldwater Creek Inc.+ ...................... 432,000
50,000 Delhaize America Inc., Cl. A ............... 871,875
100,000 Lillian Vernon Corp. ....................... 975,000
350,000 Neiman Marcus Group Inc., Cl. B+ ........... 10,018,750
-----------
18,897,625
-----------
COMMUNICATIONS EQUIPMENT -- 0.9%
68,000 Acterna Corp.+ ............................. 2,065,500
290,000 Allen Telecom Inc.+ ........................ 4,911,875
40,000 Lucent Technologies Inc. ................... 1,222,500
24,000 Motorola Inc. .............................. 678,000
22,000 Nokia Corp., Cl. A, ADR .................... 875,875
44,000 Scientific-Atlanta Inc. .................... 2,799,500
-----------
12,553,250
-----------
19
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2000 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
REAL ESTATE -- 0.8%
450,000 Catellus Development Corp.+ ................ $ 7,875,000
75,000 Cheung Kong (Holdings) Ltd. ................ 906,611
44,000 Florida East Coast Industries Inc. ......... 1,804,000
55,000 Griffin Land & Nurseries Inc.+ ............. 694,375
4,753 HomeFed Corp.+ ............................. 2,852
-----------
11,282,838
-----------
AEROSPACE -- 0.8%
100,000 BAE Systems plc ............................ 539,652
100,000 Lockheed Martin Corp. ...................... 3,296,000
80,000 Northrop Grumman Corp. ..................... 7,270,000
-----------
11,105,652
-----------
SATELLITE -- 0.8%
166,323 General Motors Corp., Cl. H+ ............... 6,183,889
340,000 Liberty Satellite &
Technology Inc., Cl. A+ .................. 3,612,500
145,000 Loral Space & Communications Ltd.+ ......... 888,125
-----------
10,684,514
-----------
AUTOMOTIVE -- 0.8%
10,000 Ford Motor Co. ............................. 253,125
157,942 General Motors Corp. ....................... 10,266,230
-----------
10,519,355
-----------
BUSINESS SERVICES -- 0.8%
60,000 ANC Rental Corp.+ .......................... 345,000
100,000 Cendant Corp.+ ............................. 1,087,500
1,000 CheckFree Corp.+ ........................... 41,891
70,000 IMS Health Inc. ............................ 1,452,500
100,000 Landauer Inc. .............................. 1,885,000
58,500 Nashua Corp.+ .............................. 493,594
10,833 Reuters Holdings plc, ADR .................. 1,217,358
13,000 Secom Co. Ltd. ............................. 1,045,438
250,000 Securicor Group plc ........................ 514,703
3,500 SYNAVANT Inc.+ ............................. 23,406
30,900 Vivendi .................................... 2,295,877
-----------
10,402,267
-----------
ELECTRONICS -- 0.7%
38,000 Fujitsu Ltd. ............................... 882,658
3,000 Hitachi Ltd., ADR .......................... 342,750
4,000 Molex Inc., Cl. A .......................... 165,750
1,500 NEC Corp., ADR ............................. 167,062
16,640 Philips Electronics NV ..................... 716,117
38,800 Philips Electronics NV, ADR ................ 1,649,000
1,400 Rohm Co. Ltd. .............................. 383,620
16,000 Sony Corp. ................................. 1,622,802
32,000 Sony Corp., ADR ............................ 3,230,000
20,000 Stanley Electric Co. Ltd. .................. 242,088
MARKET
SHARES VALUE
------ ------
50,000 Thomas & Betts Corp. ....................... $ 871,875
-----------
10,273,722
-----------
CONSUMER SERVICES -- 0.5%
40,000 Loewen Group Inc. .......................... 11,200
510,000 Rollins Inc. ............................... 7,554,375
-----------
7,565,575
-----------
AVIATION: PARTS AND SERVICES -- 0.5%
100,000 Curtiss-Wright Corp. ....................... 4,718,750
110,000 Fairchild Corp., Cl. A+ .................... 701,250
145,000 Hi-Shear Industries Inc. ................... 253,750
44,000 Precision Castparts Corp. .................. 1,688,500
-----------
7,362,250
-----------
AGRICULTURE -- 0.5%
829,500 Archer-Daniels-Midland Co. (g) ............. 7,154,437
5,000 Delta & Pine Land Co. ...................... 128,437
-----------
7,282,874
-----------
ENVIRONMENTAL SERVICES -- 0.5%
60,000 Republic Services Inc.+ .................... 787,500
360,000 Waste Management Inc. ...................... 6,277,500
-----------
7,065,000
-----------
BUILDING AND CONSTRUCTION -- 0.4%
90,000 CRH plc .................................... 1,432,706
32,222 Huttig Building Products Inc.+ ............. 144,999
15,000 Martin Marietta Materials Inc. ............. 574,200
150,000 Nortek Inc.+ ............................... 2,625,000
5,000 Nortek Inc., Special Common+ (a) ........... 87,500
-----------
4,864,405
-----------
COMPUTER HARDWARE-- 0.3%
40,000 Hewlett-Packard Co. ........................ 3,880,000
40,000 Xerox Corp. ................................ 602,500
-----------
4,482,500
-----------
CLOSED END FUNDS -- 0.3%
59,000 Central European Equity
Fund Inc. .................................. 752,250
70,000 Dresdner RCM Europe Fund Inc. .............. 1,073,100
25,000 France Growth Fund Inc. .................... 315,625
40,250 Italy Fund Inc. ............................ 696,828
68,000 New Germany Fund Inc. ...................... 833,000
45,942 Royce Value Trust Inc. ..................... 663,288
-----------
4,334,091
-----------
TRANSPORTATION -- 0.2%
73,000 AMR Corp.+ ................................. 2,386,188
7,500 Kansas City Southern
Industries Inc. ............................ 65,156
31,273 MIF Ltd.+ .................................. 318,642
35,000 Ryder System Inc. .......................... 645,313
-----------
3,415,299
-----------
20
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2000 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE AND SERVICES -- 0.2%
10,000 Capcom Co. Ltd. ............................ $ 387,748
40,000 Computer Associates International Inc. ..... 1,007,500
4,500 FujiSoft ABC Inc. .......................... 308,579
25,000 Genuity Inc.+ .............................. 163,281
3,300 Obic Co. Ltd. .............................. 1,175,736
70,000 Tyler Technologies Inc. .................... 140,000
--------------
3,182,844
--------------
METALS AND MINING -- 0.1%
72,500 Harmony Gold Mining Co. Ltd. ............... 368,472
12,500 Harmony Gold Mining Co. Ltd., ADR .......... 64,063
50,000 Newmont Mining Corp. ....................... 850,000
25,000 Placer Dome Inc. ........................... 235,938
--------------
1,518,473
--------------
EDUCATIONAL SERVICES -- 0.0%
10,000 Benesse Corp. .............................. 601,518
--------------
TOTAL COMMON STOCKS ........................ 1,357,290,887
--------------
PREFERRED STOCKS -- 0.3%
PUBLISHING -- 0.1%
42,000 News Corp. Ltd., Pfd., ADR ................. 1,968,750
--------------
BROADCASTING -- 0.1%
10,000 ProSieben Media AG, Pfd. ................... 1,145,388
--------------
TELECOMMUNICATIONS -- 0.1%
15,000 Citizens Communications Co.,
5.00% Cv. Pfd. ........................... 813,750
--------------
WIRELESS COMMUNICATIONS -- 0.0%
10,760,547 Telesp Celular Participacoes SA, Pfd.+ ..... 141,143
--------------
TOTAL PREFERRED STOCKS ..................... 4,069,031
--------------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS -- 0.2%
AVIATION: PARTS AND SERVICES -- 0.1%
$ 941,000 Kaman Corp.,
Sub. Deb. Cv.
6.00%, 03/15/12 .......................... 821,023
--------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1%
1,500,000 Standard Motor Products Inc.,
Sub. Deb. Cv.
6.75%, 07/15/09 .......................... 772,500
--------------
PRINCIPAL MARKET
AMOUNT VALUE
----------- ------
PUBLISHING -- 0.0%
$ 200,000 News America Holdings Inc.,
Sub. Deb. Cv.
Zero Coupon, 03/31/02 .................... $ 481,250
--------------
HOTELS AND GAMING -- 0.0%
200,000 Hilton Hotels Corp.,
Sub. Deb. Cv.
5.00%, 05/15/06 .......................... 168,750
--------------
CONSUMER PRODUCTS -- 0.0%
1,000,000 Pillowtex Corp., Sub. Deb. Cv.
6.00%, 03/15/12 .......................... 90,000
--------------
TOTAL CORPORATE BONDS ...................... 2,333,523
--------------
SHARES
-------
RIGHTS -- 0.0%
TELECOMMUNICATIONS -- 0.0%
1,076,054 Telesp Celular Participacoes SA ............ 6
6,680 Telesp Celular Participacoes SA, ADR ....... 0
--------------
6
--------------
TOTAL RIGHTS ............................... 6
--------------
WARRANTS -- 0.0%
FINANCIAL SERVICES -- 0.0%
26,000 Aegon NV, expire 02/04/01+ ................. 5,850
--------------
FOOD AND BEVERAGE -- 0.0%
62,463 Advantica Restaurant Group Inc.,
expire 01/07/05+ ......................... 5,856
--------------
TOTAL WARRANTS ............................. 11,706
--------------
PRINCIPAL
AMOUNT
---------
U.S. GOVERNMENT OBLIGATIONS-- 0.4%
$ 6,500,000 U.S. Treasury Bill,
6.13%++, due 10/12/00 (c) ................ 6,487,076
--------------
REPURCHASE AGREEMENTS -- 2.0%
27,784,000 State Street Bank & Trust Co.,
6.46%, dated 09/29/00,
due 10/02/00, proceeds at
maturity $27,798,957 (h) ................. 27,784,000
--------------
21
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2000 (UNAUDITED)
MARKET
VALUE
------
TOTAL INVESTMENTS -- 100.4%
(Cost $863,784,089) ...................................... $1,397,976,229
OTHER ASSETS, LIABILITIES AND
LIQUIDATION VALUE OF CUMULATIVE
PREFERRED STOCK -- (10.1)% ............................... (140,229,605)
NET ASSETS -- COMMON STOCK -- 90.3%
(107,376,617 common shares outstanding) .................. 1,257,746,624
--------------
NET ASSETS -- PREFERRED STOCK -- 9.7%
(5,374,900 preferred shares outstanding) ................. 134,372,500
--------------
TOTAL NET ASSETS -- 100.0% ................................. $1,392,119,124
==============
NET ASSET VALUE PER COMMON SHARE
($1,257,746,624 [DIVIDE] 107,376,617 shares outstanding) $11.71
======
PRINCIPAL SETTLEMENT UNREALIZED
AMOUNT DATE APPRECIATION
--------- ---------- ------------
FORWARD FOREIGN EXCHANGE CONTRACTS
6,627,720 (i) Deliver Hong Kong Dollars
in exchange for
USD 851,213 ............ 08/03/01 $2,786
======
NUMBER OF
CONTRACTS
----------
FUTURES CONTRACTS -- SHORT POSITION
310 S&P 500 Index Futures
12/15/00 ................................. $3,805,250
==========
--------------------
For Federal tax purposes:
Aggregate cost ..................................... $863,784,089
==============
Gross unrealized appreciation ...................... $598,136,715
Gross unrealized depreciation ...................... (63,944,575)
--------------
Net unrealized appreciation ........................ $534,192,140
==============
--------------------
(a) Security fair valued under procedures established by the Board of
Directors.
(b) 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. At
September 30, 2000, the market value of Rule 144A securities amounted to
$168,535 or 0.0% of total net assets.
(c) Security was pledged as collateral for futures contracts.
(d) At September 30, 2000, 1,520,000 shares were pledged as collateral for
futures contracts.
(e) At September 30, 2000, 317,200 shares were pledged as collateral for
futures contracts.
(f) At September 30, 2000, 115,000 shares were pledged as collateral for
futures contracts.
(g) At September 30, 2000, 735,000 shares were pledged as collateral for
futures contracts.
(h) Collateralized by U.S. Treasury Bond, 8.50%, due 02/15/20, market value
$28,350,631.
(i) Principal amount denoted in Hong Kong Dollars.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depositary Receipt
BDR - Brazilian Depositary Receipt
USD - United States Dollars
GDR - Global Depositary Receipt
% of
Market Market
Value Value
------ ------
GEOGRAPHIC DIVERSIFICATION
United States ................ 82.1% $1,147,404,698
Europe ....................... 11.8 165,219,303
Asia/Pacific Rim ............. 2.1 29,345,525
Latin America ................ 1.9 27,019,572
Canada ....................... 1.9 26,305,534
South Africa ................. 0.2 2,681,597
-------- --------------
Total Investments ............ 100.0% $1,397,976,229
-------- ==============
22
<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
23
<PAGE>
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.
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 ASSET MANAGEMENT INC.
Dr. Thomas E. Bratter
PRESIDENT, JOHN DEWEY ACADEMY
Felix J. Christiana
FORMER SENIOR VICE PRESIDENT,
DOLLAR DRY DOCK SAVINGS BANK
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
James P. Conn
FORMER 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
Carter W. Austin
VICE PRESIDENT
James E. McKee
SECRETARY
INVESTMENT ADVISOR
Gabelli Funds, LLC
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: 107,376,617 5,374,900
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 common 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. The Equity Trust may also, from time to time, purchase shares of its
Cumulative Preferred Stock in the open market when the shares are trading at a
discount to the Liquidation Value of $25.00.
--------------------------------------------------------------------------------
<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, 2000
GBFCM 09/00
