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ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
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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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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
INVESTMENT OBJECTIVE:
The Gabelli Equity Trust Inc. is a closed-end,
non-diversified management investment company
whose primary objective is long-term growth of
capital, with income as a secondary objective.
THIS REPORT IS PRINTED ON RECYCLED PAPER.
<PAGE>
TO OUR SHAREHOLDERS,
The leading stock market indices rallied strongly in the fourth quarter of
1999 and finished the year at or near record highs. However, relatively few
stocks participated in this year's stock market bonanza. New lows outnumbered
new highs on the NYSE by a wide margin throughout much of the year. Growth
continued to out-perform value across the market capitalization spectrum and
large cap stocks continued to outperform small caps. Technology stocks were the
biggest winners, with the tech-heavy Nasdaq Composite outdistancing all other
major market indices.
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INVESTMENT PERFORMANCE
For the fourth quarter ended December 31, 1999, The Gabelli Equity Trust
Inc.'s ("Equity Trust") net asset value (NAV) per share increased 18.04% to
$12.75, after adjusting for the $0.36 per share distribution on December 27,
1999. The Standard & Poor's 500 Index (S&P 500), the Value Line Composite Index
and the Russell 2000 Index increased 14.87%, 6.67% and 18.44%, respectively,
over the same period. Each is an unmanaged indicator of stock market
performance.
For the twelve months concluded December 31, 1999, the Equity Trust
appreciated 29.49% after adjusting for the $1.17 per share in distributions and
the $0.75 per share spin-off of the Gabelli Utility Trust. The S&P 500, the
Value Line Composite and the Russell 2000 rose 21.03%, 10.56% and 21.26%,
respectively, over the same twelve-month period.
For the five year period ended December 31, 1999, the Equity Trust's
return averaged 19.46% annually, compared to average annual returns of 28.54%,
17.78% and 16.69% for the S&P 500, the Value Line Composite and the Russell
2000. Total return includes adjustments of $6.73 per share for the reinvestment
of dividends and distributions, rights offerings and the spin-off of the Gabelli
Utility Trust and the Gabelli Global Multimedia Trust.
For the ten years ended December 31, 1999, the Equity Trust achieved a
total return of 246.87%, including adjustments of $14.33 per share in
distributions, which equates to an average annual return of 13.24%. This
compares to 18.19%, 13.46% and 13.40% average annual returns over the same time
period for the S&P 500, the Value Line Composite and the Russell 2000.
Since its inception on August 21, 1986 through December 30, 1999, the
Equity Trust has had a total return of 561.96%, including adjustments of $17.28
per share in distributions, which equates to an average annual return of 15.18%.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS - DECEMBER 31, 1999
------------------------------------------
NAV Average Average Annual
Annual Return Investment Return (A)
------------- ---------------------
1 Year .................... 29.49% 26.57%
5 Year .................... 19.46% 18.70%
10 Year ..................... 13.24% 12.53%
Life of Fund (AUGUST 21, 1986) 15.18% 14.47%
(A) BASED ON INITIAL OFFERING PRICE OF $10.00
- --------------------------------------------------------------------------------
<PAGE>
The Equity Trust's common shares ended the quarter at $12.5625 per share
on the New York Stock Exchange, an increase of 14.86% for the quarter. For the
twelve months ended December 30, 1999, the common shares are up 26.57%, after
adjusting for all distributions.
Our long-term performance goal is to grow our net asset value by a real
rate of return of 10% per year. In addition, our goal is to have the publicly
traded market price track the net asset value.
WHAT WE DO
The success of momentum investing in recent years and investors' desire
for instant gratification have combined to make value investing appear dull. At
the risk of being dull, we will once again describe the "boring" value approach
that has seen us through both good and bad markets over the last 13 years at The
Gabelli Equity Trust and for over 23 years at Gabelli Asset Management Company.
In past reports, we have tried to articulate our investment philosophy and
methodology. The following graphic further illustrates the interplay among the
four components of our valuation approach.
[Graphic of pyramid omitted--text as follows]
EPS
PMV
MANAGEMENT
CASH FLOW
RESEARCH
[End of Pyramid text]
Our focus is on free cash flow: earnings before interest, taxes,
depreciation and amortization (EBITDA) minus the capital expenditures necessary
to grow the business. We believe free cash flow is the best barometer of a
business' value. Rising free cash flow often foreshadows net earnings
improvement. We also look at earnings per share trends. Unlike Wall Street's
ubiquitous earnings momentum players, we do not try to forecast earnings with
accounting precision and then trade stocks based on quarterly expectations and
realities. We simply try to position ourselves in front of long-term earnings
uptrends. In addition, we analyze on and off balance sheet assets and
liabilities such as plant and equipment, inventories, receivables, and legal,
environmental and health care issues. We want to know everything and anything
that will add to or detract from our private market value (PMV) estimates.
Finally, we look for a catalyst: something happening in the company's industry
or indigenous to the company itself that will surface value. In the case of the
independent telephone stocks, the catalyst is a regulatory change. In the
agricultural equipment business, it is the increasing world-wide demand for
American food and feed crops. In other instances, it may be a change in
management, sale or spin-off of a division or the development of a profitable
new business.
Once we identify stocks that qualify as fundamental and conceptual
bargains, we then become patient investors. This has been a proven long-term
method for preserving and enhancing wealth in the U.S. equities market. At the
margin, our new investments are focused on businesses that are well-managed and
will benefit from sustainable long-term economic dynamics. These include macro
trends, such as the globalization of the market in filmed entertainment and
telecommunications, and micro trends, such as an increased focus on productivity
enhancing goods and services.
COMMENTARY
1999'S HAVE AND HAVE NOT MARKET
At year-end 1999, many investors were left pondering how and why their
individual stock and/or mutual fund portfolios performed so poorly in a year in
which all the leading stock market indices posted strong gains. The answer is
simple. A relative handful of increasingly popular technology and
Internet-related stocks propelled the capitalization-weighted market indices
higher, while the majority of stocks languished. If you owned these types of
companies, you were a winner. If you owned index funds, you earned respectable
returns. If you owned most anything else, especially value stocks and most value
oriented funds; you had a "dull year".
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<PAGE>
How did our largely non-tech, value-oriented portfolio perform so well in
this extremely narrow market? First, we pick businesses with good growth
prospects that are reasonably valued compared to their "intrinsic value".
Secondly, we look for a "catalyst" that will surface that underlying value.
The seeds for this year's performance harvest were sown four and five
years ago when we were buying telecommunications, cable television, and media
stocks at what we viewed as bargain basement prices. Our intensive research in
these groups, and the identification of "catalysts" that would surface value,
rewarded us in 1997 - 1998 and again this year. Importantly, despite recent
years' excellent performance, our holdings in these industries remain quite
reasonably valued in light of still favorable business prospects.
And, of course, we benefited from financial engineering - particularly
deals, as merger and acquisition activity was at an all time high.
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FLOW OF FUNDS ($ Billions)
<TABLE>
<CAPTION>
Sources 1994 1995 1996 1997 1998 1999(E)
- ------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Deals $340 $511 $ 652 $ 919 $1,620 $1,745
Stock Buybacks 47 99 176 181 207 178
Equity Mutual Funds (Net) 119 128 222 232 157 188
Dividends 182 254 298 334 349 367
---- ---- ------ ------ ------ ------
TOTAL SOURCES: 688 992 1,348 1,666 2,333 2,478
---- ---- ------ ------ ------ ------
Uses
- ----
IPOs 29 30 50 43 37 69
U.S./International Equity Capital Flow
U.S. Purchases of Non-U.S. Equities (net) 48 50 59 41 (6) 22
International Purchases of U.S. Equities (net) 1 11 12 70 50 73
---- ---- ------ ------ ------ ------
Net Flow: 47 39 47 (29) (56) (51)
---- ---- ------ ------ ------ ------
TOTAL USES: 76 69 97 14 (19) 18
---- ---- ------ ------ ------ ------
NET FLOW OF FUNDS: $612 $923 $1,251 $1,652 $2,352 $2,460
==== ==== ====== ====== ====== ======
</TABLE>
SOURCES: SECURITIES DATA CORP, INVESTMENT COMPANY INSTITUTE, BIRINYI ASSOCIATES,
FEDERAL RESERVE BOARD (SAAR-DIV.) (C)2000 GABELLI ASSET MANAGEMENT INC.
- --------------------------------------------------------------------------------
THE ECONOMY AND THE MARKET: INFLATION, INTEREST RATES, AND CORPORATE PROFITS
Inflation, interest rates, and corporate profits represent an economic
trifecta for stocks. Through most of this historic eighteen-year bull market, we
have enjoyed low inflation, declining interest rates, and strong corporate
profit growth. Over the last two years the market has managed to advance despite
one or another of these economic horses breaking stride. In 1998, the market
shrugged off lackluster corporate earnings growth. This year, the market
delivered double-digit returns despite higher inflation and materially higher
interest rates. Looking ahead, we suspect the market will not be able to
maintain its pace if one or more of these horses pull up lame.
We believe corporate earnings will continue to run strong. The global
economic recovery improves the profit picture for many American companies. But
the Asian and European economies continue to advance and we see synchronized
global growth in the year 2000 providing corporate profits with a tailwind that
will result in earnings that may be even better than current Wall Street
estimates. The wild card is the American consumer. At present, consumer
confidence remains strong. Everyone who wants a job has one and wages are
rising. However, it now costs more to gas up the car and heat our homes.
Variable rate mortgage payments will soon be higher and the
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<PAGE>
days of raising spending money by refinancing your home at lower fixed rates are
over for the time being. Also, with the yen strong versus the dollar, all of the
Japanese cars, televisions, stereos, and video games that the American consumer
loves will be more expensive. Will all this be enough to cause the American
consumer to tighten the purse strings? Or will the "wealth effect" of a rising
stock market and a significant tax cut--the Republicans are running on the "3
Fs" (Faith, Finances, and Family)--provide a bonus for Americans to spend?
Inflation, as measured by the Consumer Price Index ("CPI"), is currently
running around 2.7%--about a percentage point higher than last year, but still
in the comfort zone. Can we expect inflation to stabilize at present levels or
will it trend materially higher, eventually disrupting the economy and stock
market? This depends on two things: (1) whether the Federal Reserve will succeed
in cooling the economy and (2) whether improving productivity will continue to
offset rising wages in today's tight labor market. Nobody (and that includes us)
seems to have a good handle on these two issues and, consequently, the short
term outlook for inflation remains cloudy. Longer term, we see the Internet as a
disinflationary force. E-commerce is taking the middleman out of the picture and
in the process eliminating an entire level of cost in the economic system. It is
also heightening price competition. If E-commerce approaches its growth
potential, we believe inflation will remain in check.
Without a clear reading on the inflation front, making near term interest
rate forecasts is an even greater folly than usual. We note that although stocks
advanced while bonds declined from January through April, they eventually
stalled as bonds continued to drift lower. When bonds rallied briefly in late
October, stocks took off shortly thereafter. At year-end, bonds were once again
sinking, but stocks moved steadily higher. If bonds continue to decline and
market interest rates continue to rise, it will eventually take the wind out of
the stock market's sail.
GREENSPEAK
The following is excerpted from Federal Reserve Board Chairman Alan
Greenspan's speech, given before the Economic Club of New York on January 13,
2000. Greenspan ponders the impending arrival of the U.S. economy at its longest
peacetime expansion of this half-century, reflecting on the "New Economy" and
where we will go from here:
"WE ARE WITHIN WEEKS OF ESTABLISHING A RECORD FOR THE LONGEST ECONOMIC
EXPANSION IN THIS NATION'S HISTORY. THE 106-MONTH EXPANSION OF THE 1960S, WHICH
WAS ELONGATED BY THE VIETNAM WAR, WILL BE SURPASSED IN FEBRUARY. NONETHELESS,
THERE REMAIN FEW EVIDENT SIGNS OF GERIATRIC STRAIN THAT TYPICALLY PRESAGE AN
IMMINENT ECONOMIC DOWNTURN...
WHAT SHOULD BE INDISPUTABLE IS THAT A NUMBER OF NEW TECHNOLOGIES THAT
EVOLVED LARGELY FROM THE CUMULATIVE INNOVATIONS OF THE PAST HALF-CENTURY HAVE
NOW BEGUN TO BRING ABOUT AWESOME CHANGES IN THE WAY GOODS AND SERVICES ARE
PRODUCED AND, ESPECIALLY, IN THE WAY THEY ARE DISTRIBUTED TO FINAL USERS...
CAPITAL MARKETS, NOT COMFORTABLE WITH DISCONTINUOUS SHIFTS IN ECONOMIC
STRUCTURE, ARE GROPING FOR SENSIBLE EVALUATIONS OF [INNOVATIVE INTERNET STARTUP
FIRMS]... ONE RESULT OF THE MORE-RAPID PACE OF IT INNOVATION HAS BEEN A VISIBLE
ACCELERATION OF THE PROCESS OF "CREATIVE DESTRUCTION," A SHIFTING OF CAPITAL
FROM FAILING TECHNOLOGIES INTO THOSE TECHNOLOGIES AT THE CUTTING EDGE...
INDEED, THESE DEVELOPMENTS EMPHASIZE THE ESSENCE OF INFORMATION
TECHNOLOGY--THE EXPANSION OF KNOWLEDGE AND ITS OBVERSE, THE REDUCTION IN
UNCERTAINTY. AS A CONSEQUENCE, RISK PREMIUMS THAT WERE ASSOCIATED WITH ALL FORMS
OF BUSINESS ACTIVITIES HAVE DECLINED... THE RELATIONSHIP BETWEEN BUSINESSES AND
CONSUMERS ALREADY IS BEING CHANGED BY THE EXPANDING OPPORTUNITIES FOR
E-COMMERCE. THE FORCES UNLEASHED BY THE INTERNET ARE ALMOST SURELY TO BE EVEN
MORE POTENT WITHIN AND AMONG BUSINESSES, WHERE UNCERTAINTIES ARE BEING REDUCED
BY IMPROVING THE
4
<PAGE>
QUANTITY, THE RELIABILITY, AND THE TIMELINESS OF INFORMATION. THIS IS THE CASE
IN MANY RECENT INITIATIVES, ESPECIALLY AMONG OUR MORE SEASONED COMPANIES, TO
CONSOLIDATE AND RATIONALIZE THEIR SUPPLY CHAINS USING THE INTERNET...
AN ABILITY TO REORGANIZE PRODUCTION AND DISTRIBUTION PROCESSES IS
ESSENTIAL TO TAKE ADVANTAGE OF NEWER TECHNOLOGIES. INDEED, THE COMBINATION OF A
MARKED SURGE IN MERGERS AND ACQUISITIONS, AND ESPECIALLY THE VAST INCREASE IN
STRATEGIC ALLIANCES, INCLUDING ACROSS BORDERS, IS DRAMATICALLY ALTERING BUSINESS
STRUCTURES TO CONFORM TO THE IMPERATIVES OF THE NEWER TECHNOLOGIES.
TO BE SURE, INCREASES IN WAGES IN EXCESS OF PRODUCTIVITY GROWTH MAY NOT BE
INFLATIONARY, AND DESTRUCTIVE OF ECONOMIC GROWTH, IF OFFSET BY DECREASES IN
OTHER COSTS OR DECLINING PROFIT MARGINS. A PROTRACTED DECLINE IN MARGINS,
HOWEVER, IS A RECIPE FOR RECESSION. THUS, IF OUR OBJECTIVE OF MAXIMUM
SUSTAINABLE ECONOMIC GROWTH IS TO BE ACHIEVED, THE POOL OF AVAILABLE WORKERS
CANNOT SHRINK INDEFINITELY...IF A TREND CANNOT CONTINUE, IT WILL STOP. WHAT WILL
STOP THE WEALTH-INDUCED EXCESS OF DEMAND OVER PRODUCTIVITY-EXPANDED SUPPLY IS
LARGELY DEVELOPMENTS IN FINANCIAL MARKETS...
WE ARE IN A PERIOD OF DRAMATIC GAINS IN INNOVATION AND TECHNICAL CHANGE
THAT CHALLENGE ALL OF US, AS OWNERS OF CAPITAL, AS SUPPLIERS OF LABOR, AS VOTERS
AND POLICYMAKERS. HOW WELL POLICY CAN BE FASHIONED TO ALLOW THE PRIVATE SECTOR
TO MAXIMIZE THE BENEFITS OF INNOVATIONS THAT WE CURRENTLY ENJOY, AND TO CONTAIN
THE IMBALANCES THEY CREATE, WILL SHAPE THE ECONOMIC CONFIGURATION OF THE FIRST
PART OF THE NEW CENTURY."
SUPPLY/DEMAND AND VALUATIONS
Although 1999 was a big year for Initial Public Offerings ("IPOs"), it was
an even bigger year for deals. The end result was that the supply of stock in
the market continued to shrink. We believe that what we have termed "The Third
Great Wave of Takeovers" is far from cresting. In fact, we think it will
continue to swell as companies throughout the world attempt to lower costs and
improve their competitive positions via acquisitions. The elimination of
"pooling of interest" accounting in stock swap mergers--scheduled to take effect
at the beginning of January 2001--will likelY accelerate deal activity this
year.
Fueled by IRA, 401K, and Keogh Plan investing, demand for equities remains
strong. The market's sharp September/October correction didn't seem to
discourage investors, who in recent years have become accustomed to buying
stocks on dips. Barring a severe recession and/or a full scale bear market, we
believe the demand for stocks will continue to grow.
Where, then, will demand be channeled? Will demand go to the same handful
of stocks every one wants to own today, or to what has become a vast wasteland
of high quality companies in other industries that have been largely ignored in
recent years? We believe valuations will ultimately come into play. Great
technology companies have terrific growth prospects. They also have current
valuations that defy economic gravity. Sooner or later, investors will realize
that you can pay too much for good technology companies, particularly when there
are so many equally good companies in other good businesses trading at bargain
basement prices. Ironically, this may eventually result in a mirror image
market, with the leading market indices being dragged down by flagging
technology stocks and the majority of stocks doing better on an absolute and
relative basis.
A component of our investment methodology is to identify industry and
sector trends and themes ahead of the curve and position ourselves to take
advantage of these developments. Industry consolidation is one such trend. As we
have discussed in previous letters, the continued high level of activity in
mergers and acquisitions contributes significantly to the solid performance of
the Equity Trust. The accompanying table illustrates how deal activity surfaced
value in a small sample of the portfolio holdings.
5
<PAGE>
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1999 COMPLETED DEALS
<TABLE>
<CAPTION>
NUMBER AVERAGE COST CLOSING
FUND HOLDING OF SHARES (a) PER SHARE (b) PRICE (c) CLOSING DATE %RETURN (d)
------------ ------------ ------------ --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
COMSAT Corp. 150,000 $22.78 $45.50 09/18/99 99.78%
Coltec Industries Inc. 150,000 14.87 24.81 07/13/99 66.89%
AirTouch Communications Inc. 65,000 23.42 107.13 06/30/99 357.37%
Lawter International Inc. 200,000 11.50 12.25 06/01/99 6.54%
Whitman Corp. 356,000 13.46 17.94 05/20/99 33.25%
BAMerchant Services Inc. 435,000 20.25 20.44 04/27/99 0.91%
AMP Inc. 515,000 46.42 53.75 04/02/99 15.78%
Tele-Communications Inc. 265,000 10.01 67.88 03/10/99 578.12%
TCI/ Liberty Media Group 36,000 32.68 54.44 03/10/99 66.59%
TCI Ventures Group 361,970 5.99 28.00 03/10/99 367.45%
BC Telecom 87,000 17.94 26.48 02/01/99 47.60%
Petersen Companies Inc. 105,400 33.62 34.00 01/14/99 1.12%
British Petroleum Co. 85,000 23.21 90.75 01/04/99 291.00%
--------------------- ------ ----- ----- -------- -------
</TABLE>
(a) Number of shares held by the Fund on the final day of trading for the
issuer.
(b) Average purchase price of issuer's shares held by the Fund on the final day
of trading for the issuer.
(c) Closing price on the final day of trading for the issuer or the tender price
on the closing date of the tender offer.
(d) Represents average estimated return based on average cost per share and
closing price per share.
NOTE: SEE THE PORTFOLIO OF INVESTMENTS FOR A COMPLETE LISTING OF HOLDINGS.
- --------------------------------------------------------------------------------
THIS YEAR'S SCORECARD
Wireless telecommunications stocks, including Omnipoint, Nextel, Sprint
PCS, and Vodafone AirTouch, and a host of international wireless operators, were
at the top of 1999's performance list. Cable television stocks such as Comcast,
MediaOne, and Cablevision Systems also performed extremely well, as did cable
network companies AT&T / Liberty Media Group and USA Networks. Small group
broadcasters Chris-Craft, and Paxson Communications contributed to returns.
Multimedia giants Viacom, News Corp, and Tribune were also stellar performers.
American Express, our largest financial services holding, was also a big winner.
Our telecommunications investments were mixed, with BCE and Telephone & Data
Systems more than doubling, while SBC Communications declined.
After a good start, our industrial cyclical investments disappointed.
Auto-parts suppliers Federal Mogul, GenCorp, Modine and Dana were all positioned
at the rear of our portfolio return rankings and Genuine Parts, the world's
largest auto-parts retailer, fell sharply. Aerospace component manufacturers SPS
Technologies, Precision Castparts, and Crane stalled on the performance runway.
There was nothing sweet about the declines in confectioners Tootsie Roll and
Nestle.
BACK DOOR INTERNET
The Fund didn't own a single pure "dot com" company, but still managed to
benefit from the explosive growth in the worldwide web. Our substantial
investments in cable television and telecommunications companies that link
businesses and consumers to the Internet have paid off handsomely. Publishers
and group broadcasters have been good performers, in part because all those "dot
com" companies are advertising heavily to establish their franchises. We've even
been rewarded by investing in a truck manufacturer (Navistar), whose mid-sized
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<PAGE>
trucks will be the preferred vehicle for delivering your e-tail purchases, and
an old line publisher (Readers Digest) whose extensive subscriber list looks
like a natural for developing its own e-commerce business. Looking ahead, we
believe our "click and mortar" investments (traditional retailers like Genuine
Parts developing their own e-tail presence) will also reward shareholders.
INTERNATIONAL SEGMENT
A portion of the Equity Trust's portfolio continues to be managed by
Caesar Bryan. Caesar also manages the Gabelli International Growth Fund and is a
co-manager of the recently launched Gabelli Global Opportunity Fund. Below are
Caesar's thoughts on international markets and global economies:
Certainly the last quarter of 1999, and the year as a whole, is going to
be a hard act to repeat but we do retain a positive outlook towards
international markets in 2000.
Economic growth is gathering steam in Europe with improvements in various
indicators of both business and consumer confidence. Most pleasing is the
apparent improvement in Germany, the largest European economy and a recent
laggard. The German market was given a shot in the arm at the end of the year
when the Government announced plans to remove the capital gains tax of 50% on
corporate equity holdings. This plan, if it goes into effect, will have a major
impact on the German economy. Following World War II, German banks and insurance
companies financed, and took major stakes in, many large companies. However,
these stakes became static and prevented a reorganization of corporate Germany.
We believe this proposal is a major step forward and will result in an
improvement of the competitive position of the German economy.
The Euro has now been in existence for one year. Its first year of life
has largely been successful despite its fall from about 1.18 to the dollar to
just over 1.00 during the year. This fall has helped improve Euroland's
competitive position and we expect some recovery this year. But, more
importantly, the introduction of the Euro is a necessary step to the creation of
a single market. Companies in Europe are now busily consolidating various
sectors. Merger and acquisition activity in Europe was at record levels in 1999,
and we expect more of the same in 2000. Merger and acquisition activity will
provide a solid support for equity markets.
For example, the telecommunications sector is likely to consolidate
further. At year-end, Vodafone's hostile bid for Mannesmann was just warming up.
This combination, should it occur, would create the world's largest mobile phone
company. As a result, we expect many of the smaller players in Europe will be
purchased by a handful of larger companies seeking scale. We also expect further
merger activity in many other industry sectors, particularly pharmaceuticals,
media and broadcasting, and financial services.
Japan is the only major industrialized country that is not experiencing
rising interest rates. This is because their economy remains precariously
positioned despite quite healthy growth earlier in the year. The Bank of Japan
remains concerned that the economy can not withstand higher interest rates and
has therefore committed itself to a zero percent interest rate policy.
The Tokyo equity market was a profitable place for investors in 1999, but
strong performance was generated by a fairly narrow group of mostly technology
and telecommunications companies. Valuations in these sectors are stretched, and
for the Japanese market to continue to do well we would expect to see some
broadening in the market.
Across the board, equity valuations are extended relative to their history
and to bond yields. Markets have little room for disappointment. Although
interest rates have risen, equity markets appear prepared to believe this
reflects more a return to normalcy following the Asian meltdown rather than a
reaction to higher inflation. Inflation
7
<PAGE>
must continue to behave or central banks will have to tighten further. Free
trade, global competition and advances in technology have kept consumer prices
in check and labor shortages have appeared. Pricing in many industries is still
very tight - just ask a product manager at a consumer products company.
Looking ahead, we will continue to emphasize companies that have some
pricing power, a differential product or franchise and growth potential. With
markets probably experiencing greater volatility, we believe valuations will
become increasingly important. We will continue to pay close attention to levels
of valuation and remain extremely skeptical of valuations based on multiples of
sales closer in number to my age than my child's. Also, in a more challenging
environment, we will remain very diversified by stock sector and country.
WINNERS AND LOSERS
During the fourth quarter of 1999, the Equity Trust's telecommunications
and technology stocks performed best on the international side. The big winners
were Jafco (a Japanese financial services company) and NRJ (a French radio
broadcaster), which rose 371% and 324%, respectively. Other tremendous gainers
included Nokia (+113%), Asatsu (+106%), Sony (+98%) and STMicroelectronics
(+96%). Some stocks continue to post negative returns, including pharmaceutical
company Novartis (-1.5%) and consumer non-durable companies like Nestle (-2.4%).
Overall, however, the Equity Trust finished the quarter and year with winners
far outweighing losers.
LET'S TALK STOCKS
The following are stock specifics on selected holdings of the Equity
Trust. Favorable EBITDA prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time.
BCE INC. (BCE - $90.1875 - NYSE) is Canada's global communications company. BCE
recently completed a major transaction with Ameritech (AIT - $67.1875 - NYSE).
Under the agreement, BCE sold 20% of Bell Canada, its wholly-owned Canadian
telecommunications subsidiary, to Ameritech. BCE also owns strategic stakes in
Nortel Networks (NT - $101.00 - NYSE), Teleglobe (TGO - $22.6875 - NYSE), BCE
Emergis and CGI Group. One share of BCE provides ownership of 0.42 shares of
Nortel Networks. The company's positions in satellites, network operations,
information technology, media and e-commerce are expected to provide growth for
the company.
CABLEVISION SYSTEMS CORP. (CVC - $75.50 - AMEX) is one of the nation's leading
communications and entertainment companies, with a portfolio of operations that
span 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 more
than 3.4 million cable customers primarily in three core markets: New York,
Boston and Cleveland. Cablevision is a leader in delivering cutting-edge
technological innovation, such as Optimum TV, to the home. Through its Rainbow
Media Holdings subsidiary, Cablevision manages and develops internationally
recognized content offerings such as the popular national television networks
American Movie Classics, Bravo and The Independent Film Channel. Cablevision has
a controlling interest in 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 operates Radio City Entertainment and holds a long term
lease for Radio City Music Hall, home of the world famous Rockettes.
CHRIS-CRAFT INDUSTRIES INC. (CCN - $72.125 - NYSE), through its 80% ownership of
BHC Communications (BHC - $160.00 - 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 - $139.875 - Nasdaq), which operates an NBC affiliate, an ABC
affiliate and five UPN affiliates. United
8
<PAGE>
Television recently completed the purchase of WHSW in Baltimore for $80 million.
The station's call letters were changed to WUTB and the station became a UPN
affiliate. UTVI also acquired WRBW, a UPN affiliate in Orlando, for $60 million
in July 1999. 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 market. The Chris-Craft
complex is debt free and strongly positioned to expand its operations, with
roughly $1.5 billion in cash and marketable securities.
FERRO CORP. (FOE - $22.00 - NYSE), based in Cleveland, is a global specialty
chemical manufacturer. The company is a leading producer of frits, powder
coatings, polymer additives and plastic compounds. New CEO Hector Ortino is
positioning Ferro to be a premier specialty chemical provider by focusing on
profitable growth and shareholder value. The company's new strategy of using
mature, cash generating businesses in the portfolio to finance investments in
"springboard" businesses should help to accelerate earnings per share growth.
GREIF BROS. CORP. (GBCOA - $29.75 - NASDAQ; GBCOB - $30.625 - NASDAQ), founded
in 1877, is a proven leader in industrial packagings, manufacturing fiber,
steel, plastic drums, IBC's, multiwall bags, corrugated boxes and specialty
products. The company is fully integrated, from its 305,000 acres of timberlands
to corrugated sheet and box operations, including both virgin and recycled paper
mills. Management is striving to become a packaging solutions supplier for major
companies. In 1999, Greif obtained a 49% interest in a French fiber drum
business. Greif also continues its stock repurchase plans for 2000.
LIBERTY MEDIA GROUP (LMG'A - $56.75 - NYSE) is engaged in businesses which
provide programming services, including production, acquisition and distribution
through all available 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 assets also include interests in international
video distribution businesses, international telephony and domestic wireless,
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 Corp. (T - $43.50 - NYSE) and are now traded on the New York
Stock Exchange.
SPRINT CORP. (FON - $67.3125 - NYSE) is the third largest long distance carrier
and the second largest independent local telephone company in the U.S. Sprint
has positioned itself globally through a joint venture called GlobalOne. Its
joint venture partners, France Telecom and Deutsche Telekom, also have a direct
20% stake in Sprint. FON faces risks from prospective new entrants in its long
distance business which may be offset by the "ION" high bandwith network that
the company is developing, and by other new services. On October 5, 1999, MCI
WorldCom announced plans to acquire Sprint for $125 billion in stock and cash.
The transaction is expected to close in about 12 months upon regulatory
approval. Sprint PCS Group (PCS - $102.50 - NYSE) is the leading all digital
personal communications services ("PCS") carrier in the U.S. with over four
million customers and licenses covering over 230 million people. Sprint PCS will
be acquired as part of MCI WorldCom's (WCOM - $53.0625 - Nasdaq) acquisition of
Sprint Corp.
TELECOM ITALIA MOBILE SPA (TIM.MI - $11.17 - MILAN STOCK EXCHANGE), formerly a
subsidiary of Telecom Italia (the provider of wired local and long distance
telephone service in Italy), was spun-off in July 1998 and began trading on the
Milan Stock Exchange as an independent company. Telecom Italia Mobile is the
leading cellular provider in Italy. The company is the largest cellular provider
in Europe with close to 15 million GSM subscribers. The competitive environment
in which Telecom Italia Mobile operates remains favorable, with only two
competitors, Omnitel and Wind.
9
<PAGE>
TELEPHONE & DATA SYSTEMS INC. (TDS - $126.00 - AMEX) is a diversified
telecommunications company with established cellular and local telephone
operations and a developing personal communications services ("PCS") business.
TDS provides high quality telecommunications services to three million customers
in 35 states. TDS owns 81.1% of United States Cellular Corp. (USM - $100.9375 -
AMEX), the nation's seventh largest cellular telephone company. It also owns
82.4% of Aerial Communications Inc. (AERL - $60.875 - Nasdaq), TDS's PCS
subsidiary which owns the licenses to provide PCS service in six major trading
areas ("MTAs") encompassing approximately 27.6 million population equivalents.
On September 20, 1999, VoiceStream Wireless (VSTR - $142.3125 - Nasdaq)
announced the acquisition of Aerial in a $3.3 billion transaction. Pro-forma for
this acquisition, TDS will own over 36 million shares of VoiceStream.
TIME WARNER INC. (TWX - $72.4375 - NYSE), with its 1996 acquisition of Turner
Broadcasting System, became the global leader in media and entertainment, with
interests in filmed entertainment, television production and broadcasting,
recorded music, cable television programming, magazine and book publishing,
direct marketing and cable television systems. The combined companies have
almost $27 billion in revenues and $4.5 billion in EBITDA. Time Warner controls
a host of powerful brands, such as Warner Brothers, CNN, HBO, Cinemax, Time and
People magazines. Under the terms of a definitive agreement approved by the
boards of both companies, Time Warner and America Online Inc. have agreed to
merge in an all-stock combination valued at $350 billion.
UNITED TELEVISION INC. (UTVI - $137.6875 - 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 - $72.125 - NYSE) television division. The $60 million
purchase of WRBW, a UPN affiliate in Orlando (the country's 22nd largest and the
fastest growing television market over the past decade), closed on July 7, 1999.
UTVI stations cover approximately nine percent of the U.S. population. UTVI is
58%-owned by BHC Communications (BHC - $160.00 - AMEX). United Television is a
beneficiary of the recent FCC ruling allowing television duopoly, or ownership
of two stations in a market.
VIACOM INC. (VIA'A - $60.4375 - NYSE; VIA'B - $60.4375 - NYSE), long a major
provider of entertainment "content", has evolved into one of the world's
dominant media companies. The additions of Paramount Communications, Blockbuster
Entertainment (acquired in 1994), and publisher Simon & Schuster make Viacom one
of the largest entertainment and publishing companies. Non-core assets are being
divested and debt has been reduced to approximately $8 billion. Viacom is
focusing on global expansion of its media franchises. Viacom is particularly
well-positioned in music (notably MTV) and cable networks (such as Nickelodeon).
Viacom recently announced its intentions to merge with CBS (CBS - $63.9375 -
NYSE).
WATTS INDUSTRIES INC. (WTS - $14.75 - NYSE) was founded in 1874 to make steam
pressure regulators for the New England textile industry. Based in North
Andover, Massachusetts, Watts is now one of the world's largest independent
valve companies, designing, manufacturing and selling an extensive line of
valves for the plumbing and heating, water quality, industrial and oil and gas
markets. In December 1998, the company announced plans to spin off its CIRCOR
International industrial oil and gas unit to shareholders. The spin-off was
completed on October 6, 1999. Watts shareholders received one CIRCOR share
valued at $10.625 per share for every two Watts shares. Watts will now focus on
its remaining plumbing and heating and water quality businesses.
DAILY NAVS NOW DISTRIBUTED BY NASDAQ
Since our inception, we have made the net asset value available on nightly
recordings through1-800-GABELLI. Now, Nasdaq is also disseminating the daily per
share net asset values (NAVs) for the Equity Trust, which is traded on the New
York Stock Exchange. The NAV ticker symbol via Nasdaq is "XGABX".
10
<PAGE>
The NAVs are available through any stock quote lookup service and on
broker Nasdaq level one terminals. The dissemination of daily NAVs allows
investors and brokers to better track the long-term performance of the Fund's
underlying portfolios. We applaud Nasdaq's efforts in making closed-end funds'
NAVs available on a daily basis.
COMMON STOCK 10% DISTRIBUTION POLICY
The Equity Trust continues to maintain 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 $0.36
per share on December 27, 1999. The next distribution is scheduled for March
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 December 27, 1999 of $0.453125 per share. The next
distribution is scheduled for March 2000.
IN CONCLUSION
Without technology superstars or surging Internet stocks, the Equity Trust
outperformed all the major stock market indices. We finished well ahead of most
of our value fund peers. As always, we have some reservations about the
market--at least the market as represented by capitalization weighted indices
dominated by small handfuls of those stocks that everyone wants to own. However,
we see exceptional value in the vast wasteland of quality companies that have
been virtually ignored in recent years.
We look forward to the challenges in the first year of the new millennium
and believe that our old-fashioned value discipline will continue to reward
shareholders.
Sincerely,
/s/ signature
MARIO J. GABELLI, CFA
Portfolio Manager and
Chief Investment Officer
January 31, 2000
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
DECEMBER 31, 1999
-----------------
Chris-Craft Industries Inc. United Television Inc.
Telephone & Data Systems Inc. Time Warner Inc.
Viacom Inc. Telecom Italia Mobile Spa
Cablevision Systems Corp. Liberty Media Group
BCE Inc. Sprint Corp.
- --------------------------------------------------------------------------------
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.
11
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
QUARTER ENDED DECEMBER 31, 1999
(UNAUDITED)
OWNERSHIP AT
DECEMBER 31,
SHARES 1999
-------- ------------
NET PURCHASES
COMMON STOCKS
AGL Resources Inc. ................ 3,400 73,400
Albertson's Inc. .................. 205,000 205,000
Alcatel SA, Sponsored ADR ......... 10,000 10,000
Allianz AG . ...................... 3,100 3,100
Allstate Corp. .................... 58,000 100,000
Amgen Inc. (a) .................... 30,000 60,000
Arvin Industries Inc. ............. 8,000 60,000
AT&T Canada Inc. .................. 2,000 4,000
AutoNation Inc. ................... 20,000 360,000
Bank One Corp. .................... 20,000 65,000
BCT.Telus Communications Inc., ADR 10,000 27,500
Benesse Corp. ..................... 4,000 4,000
Bestfoods Inc. .................... 3,000 35,000
Borg Warner Automotive Inc. ....... 4,000 20,302
BP Amoco plc (a) .................. 60,000 120,000
BP Amoco plc, ADR (a) ............. 65,000 134,000
Cable & Wireless plc, ADR. ........ 65,000 150,000
Canada Life Financial Corp. 144a .. 50,000 50,000
Capcom Co. Ltd. ................... 14,000 14,000
Carter-Wallace Inc. ............... 3,000 533,000
Catellus Development Corp. ........ 20,000 450,000
CenturyTel Inc. ................... 7,600 60,000
CIRCOR International Inc. (b) ..... 85,000 85,000
Columbia Energy Group ............. 60,000 60,000
COMSAT Corp. ...................... 32,335 100,000
Corn Products International Inc. .. 3,000 56,250
Cresco Ltd. ....................... 7,000 9,000
Dana Corp. ........................ 10,000 300,000
DDI Corp. ......................... 25 25
Delhaize America Inc., Cl. A. ..... 10,000 60,000
Diageo plc, ADR ................... 2,000 42,000
Disney (Walt) Co. ................. 25,000 150,000
Dun & Bradstreet Corp. ............ 30,000 30,000
Eastern Enterprises ............... 102,000 150,000
El Paso Electric Co. .............. 50,000 400,000
Federal-Mogul Corp. ............... 12,000 15,000
Ferro Corp. ....................... 10,000 310,000
First Union Corp. . ............... 5,000 30,000
Foremost Corp. of America ......... 25,000 25,000
Fortune Brands Inc. . ............. 5,000 115,000
Fujitsu Ltd. ...................... 13,000 43,000
Gaylord Entertainment Co., Cl. A .. 7,500 187,500
GenCorp Inc. ...................... 42,500 252,500
General Mills Inc. (a). ........... 90,000 160,000
General Motors Corp. .............. 5,000 200,000
Genuine Parts Co. ................. 160,000 260,000
Gillette Co. ...................... 40,000 40,000
Greif Bros. Corp., Cl. A .......... 8,000 260,000
Hannaford Bros. Co. ............... 3,000 20,000
Harcourt General Inc. (c) ......... 35,000 90,000
Helsingin Puhelin Oyj ............. 10,000 10,000
Homefed Corp. ..................... 4,753 4,753
Huttig Building Products Inc. (d) . 32,222 32,222
Invik and Co. AB, Cl. B ........... 693 20,000
ITT Industries Inc. ............... 50,000 60,000
KDD Corp. ......................... 2,500 2,500
KPN NV ............................ 12,000 12,000
Ladbroke Group plc. ............... 28,051 1,045,000
Leucadia National Corp. ........... 1,000 65,500
OWNERSHIP AT
DECEMBER 31,
SHARES 1999
-------- ------------
NET PURCHASES (CONTINUED)
COMMON STOCKS (CONTINUED)
Liberty Corp. ..................... 60,000 200,000
Life Technologies Inc. ............ 1,633 35,294
Mark IV Industries Inc. ........... 45,000 245,000
Mattel Inc. ....................... 20,000 60,000
Maytag Corp. ...................... 6,000 6,000
MCN Energy Group Inc. ............. 50,000 50,000
Midas Inc. ........................ 5,000 35,000
National Service Industries Inc. .. 5,000 110,000
Neiman Marcus Group Inc. (c) ...... 22,598 350,000
Nikko Securities Co. Ltd. ......... 66,000 113,000
Nippon Broadcasting System Inc. ... 2,000 2,000
Nokia Corp., Cl. A, ADR. .......... 5,500 5,500
Northeast Utilities ............... 30,000 30,000
Northrop Grumman Corp. ............ 30,000 90,000
NTL Inc. (e) ...................... 2,500 12,500
NTT Mobile Communication Network Inc. 7 32
Omnova Solutions Inc. (f) ......... 210,000 210,000
Pactiv Corp. (g) .................. 650,000 650,000
Park-Ohio Holdings Corp. .......... 10,000 68,715
Pepsi Bottling Group Inc. ......... 10,000 60,000
Precision Castparts Corp. ......... 5,000 25,000
PRIMEDIA Inc. ..................... 30,000 30,000
Publishing & Broadcasting Ltd. .... 20,000 145,000
Rogers Cantel Mobile
Communications Inc., Cl. B. .... 25,000 25,000
Rogers Communications Inc., Cl. B, ADR 30,345 180,345
Sony Corp. ........................ 1,000 8,000
South China Morning
Post Holdings, ORD. ............ 200,000 400,000
SPS Technologies Inc. ............. 2,000 170,000
STMicroelectronics NV. ............ 5,000 5,000
Sumisho Computer Systems Corp. .... 4,000 10,000
Takeda Chemical Industries Co., Ltd. 14,000 14,000
Telecom Italia Mobile SpA ......... 30,000 1,390,000
Telefonica de Espana SA, ADR (i) .. 180 144,000
Telefonica SA (h) ................. 1,159 59,119
TeleWest Communications plc (j) ... 18,181 218,181
TNP Enterprises Inc. .............. 2,000 5,000
Total Fina SA, Cl. B .............. 2,907 2,907
Tyco International Ltd. (a) ....... 45,000 200,000
UnitedGlobalCom Inc., Cl. A (a) ... 8,000 12,000
Vivendi (k) ....................... 5,250 30,900
Vodafone AirTouch plc, ADR (l) .... 130,000 140,000
Vodafone Group plc, ORD (m) ....... 463,252 579,065
Waddell & Reed Financial Inc., Cl. A 10,100 40,000
Waste Management Inc. ............. 90,000 170,000
Watts Industries Inc., Cl. A (b) .. 150,000 250,000
Xerox Corp. ....................... 15,000 15,000
PREFERRED STOCKS
ProSieben Media AG, Pfd. .......... 10,000 10,000
Telesp Participacoes de Sao Paulo SA,
Preference Shares (n) .......... 9,822,198 12,045,773
CORPORATE BONDS
Kaman Corp. Sub. Deb. Cv.
6.000%, 03/15/12 ............... 1,000,000 1,000,000
Pillowtex Corp. Sub. Deb. Cv.
6.000%, 03/15/12 ............... 1,000,000 1,000,000
12
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES (CONTINUED)
QUARTER ENDED DECEMBER 31, 1999
(UNAUDITED)
OWNERSHIP AT
DECEMBER 31,
SHARES 1999
-------- ------------
NET SALES
COMMON STOCKS
3Com Corp. ........................ (30,000) --
Aerial Communications Inc. ........ (16,000) 5,000
Alltel Corp. ...................... (8,140) 60,000
American Express Co. .............. (63,000) 100,000
American General Corp. ............ (8,000) --
Amphenol Corp., Cl. A ............. (6,000) 137,000
AMR Corp. ......................... (6,000) 73,000
Asatsu(DK Inc. .................... (5,000) 20,000
AT&T Corp. ........................ (105,000) 105,000
BCE Inc. .......................... (65,000) 445,000
Bell Atlantic Corp. ............... (5,000) 22,000
Block (H&R) Inc. .................. (3,000) 105,000
Cablevision Systems Corp., Cl. A .. (34,000) 535,000
Case Corp. ........................ (3,000) --
CDNow Inc. ........................ (5,000) --
Cendant Corp. ..................... (2,984) 100,000
Centros Comerciales Continente SA . (20,000) --
Chase Manhattan Corp Ltd. ......... (10,000) --
CheckFree Holdings Corp. .......... (5,000) 2,000
Chris(Craft Industries Inc. ....... (30,673) 326,400
Church & Dwight Co. Inc. .......... (13,000) 45,000
Cilcorp Inc. ...................... (50,000) --
Coldwater Creek Inc. .............. (1,500) 19,000
Colonial Limited Inc. ............. (209,979) --
Comcast Corp., Cl. A Special.. .... (3,400) 95,000
Compaq Computer Corp. ............. (55,000) --
Convergys Corp. ................... (5,000) --
Daiicho Kosho Co. Ltd. ............ (12,000) --
Delphi Automotive Systems Corp. ... (5,001) 75,000
Devon Energy Corp. ................ (70,000) 15,000
Dexter Corp. ...................... (5,000) 45,000
Dow Jones & Co. Inc. .............. (8,000) 30,000
du Pont de Nemours (E.I.) & Co. ... (3,000) 12,000
Eastman Kodak Co. ................. (9,000) --
EchoStar Communications Corp., Cl. A (14,000) --
ELF Aquitaine SA .................. (2,000) --
EMI Group plc ..................... (165,000) 23,288
ENI SpA ........................... (112,000) --
Fort James Corp. .................. (25,000) --
Foster's Brewing Group ............ (450,000) --
Gallaher Group plc, ADR. .......... (2,300) 250,000
General Motors Corp., Cl. H ....... (10,000) 10,000
Gerald Stevens Inc. ............... (15,000) 20,000
Grupo Danone SA ................... (2,500) --
Grupo Televisa SA, GDR ............ (40,000) 180,000
GTE Corp. ......................... (5,000) 260,000
Ito Yokado Co. Ltd. ............... (12,000) --
Jafco Co. Ltd. .................... (4,000) 8,000
Japan Lifeline Co. Ltd. ........... (10,0000) --
Japan Telecom Co. Ltd. ............ (6) 32
Johnson Controls Inc. ............. (1,000) 117,000
KAO Corp. ......................... (35,000) --
Kellogg Co. ....................... (2,000) 128,000
Kinder Morgan Inc. ................ (40,000) --
King World Productions Inc. (o) ... (3,000) --
Kmart Corp. ....................... (50,000) --
Lehman Brothers Holdings Inc. ..... (36,000) 27,000
Liberty Media Group, Cl. A ........ (3,448) 440,000
Lockheed Martin Corp. ............. (10,000) --
Lucent Technologies Inc. .......... (15,000) 50,000
Lyondell Chemical Co. ............. (50,000) --
McKesson HBOC Inc. ................ (15,000) --
MediaOne Group Inc. ............... (15,000) 225,000
Meredith Corp. .................... (2,000) 128,000
Merrill Lynch & Co. ............... (7,000) 50,000
Morgan (J.P.) & Co. Inc. .......... (6,000) 14,000
OWNERSHIP AT
DECEMBER 31,
SHARES 1999
-------- ------------
NET SALES (CONTINUED)
COMMON STOCKS (CONTINUED)
Morgan Stanley Dean Witter & Co. .. (10,000) --
Motorola Inc. ..................... (2,000) 8,000
Nalco Chemical Co. ................ (210,000) --
Neiman Marcus Group Inc. . ........ (350,000) --
New York Times Co., Cl. A. ........ (45,000) 120,000
Nielsen Media Research Inc. ....... (40,000) --
Nippon Telegraph & Telephone Corp. (75) 75
Nissin Co. Ltd. ................... (4,000) --
Nucor Corp. ....................... (8,000) --
Obic Co. Ltd. ..................... (2,700) 3,300
Omnipoint Corp. ................... (8,000) 2,000
Park Place Entertainment Corp. .... (30,000) 430,000
Parker Hannifin Corp. ............. (20,000) --
Pennzoil(Quaker State Co. ......... (15,000) 85,000
Pittway Corp. ..................... (8,000) 400,000
Pittway Corp., Cl. A .............. (70,000) --
Providian Financial Corp. ......... (10,000) --
Quaker Oats Co. ................... (35,000) 75,000
RCN Corp. ......................... (9,000) 228,000
Republic New York Corp. ........... (5,000) --
Reynolds Metals Co. ............... (10,000) --
Ryder System Inc. ................. (23,000) 27,000
Safra Republic Holdings SA, ORD ... (14,000) --
Seagate Technology Inc. ........... (30,000) --
Shohkoh Fund & Co. Ltd. ........... (10) 440
Skandia Forsakrings AB. ........... (15,000) 69,000
Sprint Corp. ...................... (13,000) 342,000
SPX Corp. ......................... (5,500) 1,000
SRL Inc. .......................... (20,000) --
T. Rowe Price Associates Inc. ..... (15,000) 40,000
Telecom Italia SpA, ADR ........... (9,500) 142,000
Telephone & Data Systems Inc. ..... (50,000) 450,000
Telstra Corp. ..................... (90,000) --
Tenneco Automotive Inc. (g)(p) .... (370,000) 160,000
Thermo Power Corp. ................ (5,500) --
THK Co. Ltd. ...................... (3,000) 42,000
Time Warner Inc. .................. (15,000) 440,000
Tokyo Broadcasting System Inc. .... (6,000) 64,000
Travelers Property Casualty Corp.,
Cl. A ........................... (42,000) --
Unilever plc ...................... (70,714) --
Union Planters Corp. .............. (10,000) --
United Television Inc. ............ (2,200) 248,109
UnumProvident Corp. ............... (15,000) --
U.S. West Inc. .................... (27,000) --
Viacom Inc., Cl. A ................ (20,000) 930,000
Vodafone AirTouch plc, ADR ........ (22,500) 140,000
Vulcan Materials Co. .............. (17,000) --
(a) 2 for 1 stock split
(b) Spinoff - 0.3 shares of CIRCOR International Inc. for every 1 share of Watts
Industries Inc., Cl. A
(c) Spinoff - 0.3013 shares of Neiman Marcus Group Inc. for every 1 share of
Harcourt General Inc.
(d) Spinoff - 2 shares of Huttig Building Products Inc. for every 9 shares of
Crane Co.
(e) 5 for 4 stock split
(f) Spinoff - 1 share of Omnova Solutions Inc. for every 1 share of Gencorp Inc.
(g) Spinoff - 1 share of Pactiv Corp. for every 1 share of Tenneco Inc.
(h) Spinoff - 1 share of Telefonica SA Bonus Rights for every 1 share of
Telefonica SA
(i) 2% stock dividend
(j) Spinoff - 1 share of TeleWest Communications plc Rights for every 11 shares
of TeleWest Communications plc
(k) Merger - 1.5 shares of Vivendi for every 1 share of Pathe SA
(l) 5 for 1 stock split
(m) 400% stock dividend
(n) Merger - 5.4173 shares of Telesp Participacoes de Sao Paulo SA, Preference
Shares for every 1 share of Telecommunicacoes de Sao Paulo (Telesp), Pfd.,
Registered
(o) Merger - 0.81 shares of CBS Corp. for every 1 share of King World
Productions Inc.
(p) Merger - 0.2 shares of Tenneco Automotive Inc. for every 1 share of Tenneco
Inc.
13
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 96.8%
TELECOMMUNICATIONS -- 13.4%
16,670 Aliant Inc.+ ................... $ 162,919 $ 288,708
5,000 Allegiance Telecom Inc.+ ....... 74,063 461,250
60,000 Alltel Corp. ................... 934,096 4,961,250
105,000 AT&T Corp. ..................... 2,565,849 5,328,750
4,000 AT&T Canada Inc., Cl. B+ ....... 126,625 161,000
445,000 BCE Inc. ....................... 8,375,338 40,133,438
12,750 BCT.Telus Communications
Inc. .......................... 222,542 310,469
27,500 BCT.Telus Communications
Inc., ADR ..................... 557,547 663,925
4,250 BCT.Telus Communications
Inc., Cl. A ................... 74,181 102,607
52,500 BCT.Telus Communications
Inc., Cl. A, ADR .............. 950,397 1,278,403
22,000 Bell Atlantic Corp. ............ 1,325,288 1,354,375
10,000 BroadWing Inc.+ ................ 94,651 368,750
2,448,000 Cable & Wireless Jamaica Ltd. .. 101,642 71,110
55,000 Cable & Wireless HKT Ltd.,
ADR ........................... 977,277 1,601,875
95,000 Cable & Wireless plc ........... 1,170,181 1,609,727
150,000 Cable & Wireless plc, ADR ...... 4,182,563 7,940,625
255,466 Commonwealth Telephone
Enterprises Inc.+ ............. 4,424,217 13,507,765
20,000 Commonwealth Telephone
Enterprises Inc., Cl. B+ ...... 128,902 1,265,000
35,000 Compania de
Telecomunicaciones de
Chile SA, ADR ................. 592,324 638,750
25 DDI Corp. ...................... 350,310 342,566
167,000 Embratel Participacoes SA+ ..... 3,517,106 4,550,750
260,000 GTE Corp. (d) .................. 11,000,861 18,346,250
10,000 Helsingin Puhelin Oyj .......... 683,625 832,996
32 Japan Telecom Co. Ltd. ......... 498,306 1,284,134
2,500 KDD Corp. ...................... 341,393 346,481
12,000 KPN NV ......................... 636,745 1,171,231
75 Nippon Telegraph &
Telephone Corp. ............... 585,656 1,284,624
228,000 RCN Corp.+ ..................... 1,594,860 11,058,000
29,655 Rogers Communications Inc.,
Cl. B+ ........................ 498,886 725,197
180,345 Rogers Communications Inc.,
Cl. B, ADR+ ................... 2,563,223 4,463,539
5,000 SBC Communications Inc. ........ 179,793 243,750
342,000 Sprint Corp. ................... 8,472,053 23,020,875
33,400 Tele Centro Sul
Participacoes SA, ADR ......... 1,940,826 3,031,050
167,000 Tele Norte Leste
Participacoes SA, ADR ......... 2,554,394 4,258,500
8,000 Telecom Argentina Stet
France Telecom SA, ADR ........ 164,771 274,000
400,040 Telecom Italia SpA ............. 851,138 5,641,165
142,000 Telecom Italia SpA, ADR ........ 2,868,138 19,880,000
167,000 Telecomunicacoes Brasileriras
SA (Telebras), ADR ............ 12,836 2,609
8,000 Telefonica de Argentina SA,
ADR, Cl. B .................... 202,420 247,000
59,119 Telefonica SA .................. 880,878 1,476,786
144,000 Telefonica SA, ADR ............. 1,658,394 11,349,000
18,000 Telefonos de Mexico SA,
Cl. L, ADR .................... 639,025 2,025,000
167,000 Telesp Participacoes SA,
ADR ........................... 6,264,042 4,081,063
------------ -------------
76,000,281 201,984,343
------------ -------------
MARKET
SHARES COST VALUE
------ ---- ------
ENTERTAINMENT -- 10.2%
105,768 Ascent Entertainment
Group Inc.+ ................... $ 959,442 $ 1,341,931
2,250 Avex Inc. ...................... 347,285 561,564
160,000 CANAL+, ADR+ ................... 1,355,000 4,596,421
150,000 Disney (Walt) Co. .............. 2,980,757 4,387,500
23,288 EMI Group plc .................. 89,739 228,524
118,000 EMI Group plc, ADR ............. 1,396,019 2,256,750
25,000 Fox Entertainment Group Inc. ... 556,125 623,437
75,000 GC Companies Inc.+ ............. 1,902,049 1,940,625
440,000 Liberty Media Group,
Cl. A+(d) ..................... 4,429,868 24,970,000
120,000 Seagram Co. .................... 3,575,413 5,392,500
440,000 Time Warner Inc. ............... 11,860,647 31,872,500
65,000 Todd-AO Corp., Cl. A ........... 177,273 1,982,500
300,000 USA Networks Inc.+ ............. 5,774,817 16,575,000
930,000 Viacom Inc., Cl. A+ ............ 10,827,795 56,206,875
------------ -------------
46,232,229 152,936,127
------------ -------------
WIRELESS COMMUNICATIONS-- 9.1%
5,000 Aerial Communications Inc.+ .... 39,375 304,375
133,000 Associated Group Inc., Cl. A+ .. 354,616 12,136,250
133,000 Associated Group Inc., Cl. B+ .. 354,616 12,236,000
60,000 CenturyTel Inc. ................ 430,644 2,842,500
10,000 NEXTEL Communications
Inc., Cl. A+ .................. 268,638 1,031,250
32 NTT Mobile Communication
Network Inc. .................. 632,241 1,230,890
2,000 Omnipoint Corp.+ ............... 28,844 241,250
25,000 Rogers Cantel Mobile
Communications Inc., Cl. B+ ... 614,375 909,375
250,000 Securicor Group plc, ORD ....... 0 642,082
110,000 Sprint Corp. (PCS Group)+ ...... 287,077 11,275,000
340,000 TCI Satellite Entertainment
Inc., Cl. A+ .................. 900,012 5,440,000
16,700 Tele Celular Sul
Participacoes SA, ADR ......... 266,992 530,225
55,666 Tele Centro Oeste Celular
Participacoes SA, ADR ......... 166,868 361,829
3,340 Tele Leste Celular
Participacoes SA, ADR ......... 89,340 141,950
8,350 Tele Nordeste Celular
Participacoes SA, ADR ......... 123,227 421,675
3,340 Tele Norte Celular
Participacoes SA, ADR ......... 51,601 143,411
33,400 Tele Sudeste Celular
Participacoes SA, ADR ......... 1,057,699 1,296,338
1,390,000 Telecom Italia
Mobile SpA .................... 1,854,677 15,526,862
8,350 Telemig Celular
Participacoes SA, ADR ......... 241,320 385,666
450,000 Telephone &
Data Systems Inc. ............. 11,087,191 56,700,000
66,800 Telesp Celular
Participacoes SA, ADR ......... 2,135,936 2,830,650
140,000 Vodafone AirTouch plc,
Sponsored ADR ................. 1,297,710 6,930,000
579,065 Vodafone Group plc, ORD ........ 546,042 2,869,228
------------ -------------
22,829,041 136,426,806
------------ -------------
BROADCASTING -- 8.9%
50,000 Ackerley Group Inc. ............ 544,975 906,250
22,700 Audiofina ...................... 980,102 1,714,843
326,400 Chris-Craft Industries Inc.+ ... 4,285,059 23,541,600
575,629 Chris-Craft Industries Inc.,
Cl. B+ (a) .................... 8,836,249 41,517,242
See accompanying notes to financial statements.
14
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
BROADCASTING (CONTINUED)
16,666 Corus Entertainment Inc.,
Cl. B+ ........................ $ 62,036 $ 340,594
200,000 Granada Group plc .............. 1,567,534 2,027,202
37,500 Gray Communications
Systems Inc. .................. 493,649 663,281
180,000 Grupo Televisa SA, GDR+ ........ 3,868,452 12,285,000
200,000 Liberty Corp. .................. 8,528,905 8,437,500
2,000 Nippon Broadcasting
System Inc. ................... 161,709 174,219
3,750 NRJ SA ......................... 560,129 2,581,708
120,000 Paxson Communications
Corp., Cl. A+ ................. 1,206,801 1,432,500
145,000 Publishing &
Broadcasting Ltd. ............. 802,475 1,107,089
100,000 Television Broadcasting
Ltd., ORD ..................... 396,239 681,804
64,000 Tokyo Broadcasting
System Inc. ................... 726,406 2,167,368
248,109 United Television Inc. ......... 24,595,223 34,161,508
------------ -------------
57,615,943 133,739,708
------------ -------------
EQUIPMENT AND SUPPLIES-- 7.9%
90,000 AMETEK Inc. .................... 1,219,214 1,715,625
137,000 Amphenol Corp., Cl. A+ ......... 3,555,350 9,119,063
10,000 Caterpillar Inc. ............... 136,559 470,625
85,000 CIRCOR International Inc.+ ..... 863,252 876,563
107,000 CLARCOR Inc. ................... 1,347,206 1,926,000
320,000 Deere & Co.(d) ................. 3,134,721 13,880,000
252,000 Donaldson Co. Inc. ............. 1,607,629 6,063,750
100,000 Flowserve Corp. ................ 1,618,325 1,700,000
6,500 Franklin Electric Co. .......... 210,022 456,219
105,000 Gerber Scientific Inc. ......... 1,157,606 2,303,438
250,000 Hussmann International Inc. .... 3,040,400 3,765,625
299,500 IDEX Corp. ..................... 1,945,632 9,097,313
50,000 Lufkin Industries Inc. ......... 908,348 750,000
1,000 Manitowoc Co. Inc. ............. 25,450 34,000
245,000 Mark IV Industries Inc. ........ 3,371,470 4,333,438
445,000 Navistar International Corp.+ .. 6,895,709 21,081,875
20,000 PACCAR Inc. .................... 450,000 886,250
400,000 Pittway Corp. .................. 12,845,764 18,025,000
84,500 Sequa Corp., Cl. A+ ............ 3,371,578 4,557,719
75,000 Sequa Corp., Cl. B+ ............ 3,888,160 4,500,000
170,000 SPS Technologies Inc.+ ......... 2,963,443 5,429,375
42,000 THK Co. Ltd. ................... 1,044,531 1,697,759
100,000 UCAR International Inc.+ ....... 2,055,976 1,781,250
250,000 Watts Industries Inc., Cl. A ... 3,331,739 3,687,500
------------ -------------
60,988,084 118,138,387
------------ -------------
FINANCIAL SERVICES -- 6.8%
3,100 Allianz AG ..................... 1,051,052 1,041,346
100,000 Allstate Corp. ................. 2,997,964 2,400,000
100,000 American Express Co. (d) ....... 11,132,649 16,625,000
30,000 Argonaut Group Inc. ............ 855,370 596,250
90,000 Banco Santander
Central Hispano SA,
Sponsored ADR ................. 322,130 1,051,875
84,000 Bank of Ireland ................ 427,242 668,411
56,000 Bank of Scotland ............... 350,184 650,384
65,000 Bank One Corp. ................. 2,746,788 2,084,063
300,000 Bankgesellschaft Berlin AG ..... 6,004,015 4,985,888
260 Berkshire Hathaway Inc.,
Cl. A+ ........................ 824,299 14,586,000
MARKET
SHARES COST VALUE
------ ---- ------
105,000 Block (H&R) Inc. ............... $ 3,739,395 $ 4,593,750
50,000 Canada Life Financial
Corp.+ (c) .................... 594,268 774,160
50,000 Commerzbank AG, ADR ............ 1,189,067 1,825,000
150,000 Deutsche Bank AG, ADR .......... 6,224,445 12,675,000
30,000 Dun & Bradstreet Corp. ......... 877,625 885,000
30,000 First Union Corp. .............. 1,203,095 984,375
25,000 Foremost Corp. of America ...... 697,125 709,375
25,000 Hibernia Corp. ................. 198,750 265,625
20,000 Invik and Co. AB, Cl. B ........ 936,800 2,374,236
8,000 Jafco Co. Ltd. ................. 509,226 2,857,982
27,000 Lehman Brothers
Holdings Inc. ................. 1,446,603 2,286,563
65,500 Leucadia National Corp. ........ 2,100,438 1,514,688
60,000 Mellon Financial Corp. ......... 1,898,845 2,043,750
50,000 Merrill Lynch & Co Inc.. ....... 2,718,459 4,175,000
110,000 Midland Co. .................... 1,199,131 2,282,500
14,000 Morgan (J.P.) & Co. Inc. ....... 1,229,575 1,772,750
113,000 Nikko Securities Co. Ltd. ...... 1,182,080 1,430,058
50,000 Prudential Corp. plc ........... 754,035 985,333
60,000 Riggs National Corp. ........... 552,538 791,250
40,000 Schroders plc .................. 903,175 805,066
440 Shohkoh Fund & Co. Ltd. ........ 332,560 174,200
69,000 Skandia Forsakrings AB ......... 418,395 2,084,274
40,000 State Street Corp. ............. 1,417,370 2,922,500
20,000 SunTrust Banks Inc. ............ 419,333 1,376,250
40,000 T. Rowe Price
Associates Inc. ............... 1,341,250 1,477,500
50,000 Unitrin Inc. ................... 817,863 1,881,250
40,000 Waddell & Reed Financial
Inc., Cl. A ................... 817,693 1,085,000
------------ -------------
62,430,832 101,721,652
------------ -------------
PUBLISHING -- 5.1%
70,000 Arnoldo Mondadori
Editore SpA ................... 816,206 2,220,987
3,000 Central Newspapers Inc.,
Cl. A ......................... 105,638 118,125
30,000 Dow Jones & Co. Inc. ........... 1,351,248 2,040,000
90,000 Harcourt General Inc. .......... 3,486,351 3,622,500
323,000 Independent Newspapers
Ltd., ORD ..................... 1,428,821 2,117,975
98,000 McGraw-Hill
Companies Inc. ................ 2,206,300 6,039,250
400,000 Media General Inc., Cl. A ...... 9,832,031 20,800,000
128,000 Meredith Corp. ................. 2,123,657 5,336,000
120,000 New York Times Co., Cl. A ...... 824,468 5,895,000
170,000 News Corp. Ltd. ................ 927,727 1,650,638
5,000 News Corp. Ltd., ADR ........... 54,120 191,250
70,000 Pearson plc, ORD ............... 926,104 2,265,943
400,000 Penton Media Inc. .............. 4,849,118 9,600,000
30,000 PRIMEDIA Inc.+ ................. 374,206 495,000
25,000 Pulitzer Inc. .................. 1,110,875 1,007,813
160,000 Reader's Digest Association
Inc., Cl. B ................... 4,110,972 4,240,000
70,000 Schibsted ASA .................. 1,331,230 1,301,229
1,500,000 Seat-Pagine Gialle SpA ......... 321,923 4,925,453
400,000 South China Morning
Post Holdings, ORD ............ 273,726 344,761
70,000 Thomas Nelson Inc. ............. 903,187 647,500
34,000 Tribune Co. .................... 1,054,162 1,872,125
------------ -------------
38,412,070 76,731,549
------------ -------------
See accompanying notes to financial statements.
15
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
CABLE -- 4.6%
535,000 Cablevision Systems Corp.,
Cl. A+ ........................ $ 6,092,950 $ 40,392,500
40,000 Comcast Corp., Cl. A ........... 341,837 1,915,000
95,000 Comcast Corp.,
Cl. A Special ................. 817,897 4,803,437
225,000 MediaOne Group Inc.+ ........... 5,107,752 17,282,812
12,500 NTL Inc.+ ...................... 841,666 1,559,375
10,000 Shaw Communications Inc.,
Cl. B ......................... 52,983 330,100
40,000 Shaw Communications Inc.,
Cl. B, Non-Voting+ ............ 329,198 1,325,000
218,181 TeleWest
Communications plc+ ........... 802,458 1,163,893
12,000 UnitedGlobalCom Inc.,
Cl. A+ ........................ 457,602 847,500
------------ -------------
14,844,343 69,619,617
------------ -------------
CONSUMER PRODUCTS -- 3.6%
533,000 Carter-Wallace Inc. ............ 7,746,168 9,560,687
10,750 Christian Dior SA .............. 1,514,055 2,663,673
45,000 Church & Dwight Co. Inc. ....... 460,073 1,200,937
1,400 Compagnie Financiere
Richemont AG, Cl. A ........... 1,967,069 3,341,079
10,000 Department 56 Inc.+ ............ 205,417 226,250
115,000 Fortune Brands Inc. (e) ........ 3,185,979 3,802,187
250,000 Gallaher Group plc, ADR ........ 4,342,521 3,843,750
180,000 General Cigar Holdings Inc.+ ... 1,968,118 1,496,250
105,000 General Cigar Holdings Inc.,
Cl. B+ (a) .................... 653,399 872,812
40,000 Gillette Co. ................... 1,459,124 1,647,500
50,000 Harley Davidson Inc. ........... 251,225 3,203,125
100,000 Imasco Ltd. .................... 2,647,522 2,767,579
1,500 Matsushita Electric Industrial
Co. Ltd., ADR ................. 178,325 418,500
60,000 Mattel Inc. .................... 1,134,312 787,500
6,000 Maytag Corp. ................... 231,456 288,000
35,000 National Presto
Industries Inc. ............... 1,316,099 1,242,500
10,500 Nintendo Co. Ltd. .............. 849,921 1,745,033
210,000 Omnova Solutions Inc. .......... 1,767,940 1,627,500
14,000 Philip Morris Companies Inc. ... 457,385 324,625
422,000 Ralston Purina Group ........... 5,413,897 11,763,250
1,500 Swatch Group AG ................ 892,765 1,727,690
10,425 Syratech Corp.+ ................ 333,704 83,400
------------ -------------
38,976,474 54,633,827
------------ -------------
FOOD AND BEVERAGE -- 3.6%
30,108 Advantica Restaurant
Group Inc.+ ................... 269,796 52,689
35,000 Bestfoods Inc. ................. 1,759,125 1,839,688
18,000 Brau und Brunnen AG+ ........... 2,282,408 852,134
58,500 Celestial Seasonings Inc.+ ..... 1,009,118 1,088,648
56,250 Corn Products
International Inc. ............ 1,788,250 1,842,188
42,000 Diageo plc, ADR ................ 1,514,897 1,344,000
160,000 General Mills Inc. ............. 4,844,439 5,720,000
4,000 Keebler Foods Co.+ ............. 107,725 112,500
128,000 Kellogg Co. .................... 3,798,581 3,944,000
12,100 LVMH Moet Hennesey
Louis Vuitton, ADR ............ 416,625 1,101,100
800 Nestle SA ...................... 1,014,437 1,465,553
MARKET
SHARES COST VALUE
------ ---- ------
60,000 Pepsi Bottling Group Inc. ...... $ 1,165,052 $ 993,750
379,000 PepsiCo Inc. ................... 10,828,118 13,359,750
75,000 Quaker Oats Co. ................ 2,761,927 4,921,875
60,000 Ralcorp Holdings Inc.+ ......... 940,903 1,196,250
93,101 Tootsie Roll Industries Inc. ... 1,501,006 3,066,514
356,000 Whitman Corp. .................. 4,792,266 4,783,750
70,000 Wrigley (Wm.) Jr. Co. .......... 3,173,614 5,805,625
------------ -------------
43,968,287 53,490,014
------------ -------------
ENERGY AND UTILITIES-- 3.4%
73,400 AGL Resources Inc. ............. 1,322,958 1,247,800
34,000 Apache Corp. ................... 844,013 1,255,875
70,000 Atlantic Richfield Co. ......... 3,751,112 6,055,000
120,000 BP Amoco plc ................... 725,215 1,206,629
134,000 BP Amoco plc, ADR .............. 1,562,872 7,947,875
110,000 Burlington Resources Inc. ...... 4,698,198 3,636,875
60,000 Columbia Energy Group .......... 3,863,212 3,795,000
40,000 Conoco Inc., Cl. A ............. 1,052,625 990,000
15,000 Devon Energy Corp. ............. 414,105 493,125
150,000 Eastern Enterprises ............ 7,662,833 8,615,625
400,000 El Paso Electric Co.+ .......... 3,236,625 3,925,000
20,000 Energy East Corp. .............. 429,788 416,250
100,000 Florida Progress Corp. ......... 4,698,010 4,231,250
55,000 Halliburton Co. ................ 1,201,188 2,213,750
50,000 MCN Energy Group Inc. .......... 1,210,180 1,187,500
25,000 New England Electric
System ........................ 1,206,926 1,293,750
30,000 Northeast Utilities ............ 648,375 616,875
85,000 Pennzoil-Quaker State Co.+ ..... 1,668,045 865,937
6,000 Public Service Co. of
North Carolina ................ 173,925 193,875
15,000 St. Joseph Light & Power Co. ... 310,677 307,500
5,000 TNP Enterprises Inc. ........... 191,375 206,250
2,907 TotalFina SA, Cl. B ............ 355,660 387,970
------------ -------------
41,227,917 51,089,711
------------ -------------
AUTOMOTIVE: PARTS AND ACCESSORIES-- 3.0%
60,000 Arvin Industries Inc. .......... 2,242,888 1,702,500
20,302 Borg Warner Automotive Inc. .... 959,996 822,231
300,000 Dana Corp. ..................... 11,266,401 8,981,250
75,000 Delphi Automotive
Systems Corp.+ (d) ............ 835,469 1,181,250
15,000 Federal-Mogul Corp. ............ 333,875 301,875
252,500 GenCorp Inc. ................... 2,412,298 2,493,437
260,000 Genuine Parts Co. .............. 6,969,200 6,451,250
117,000 Johnson Controls Inc. .......... 2,017,008 6,654,375
35,000 Midas Inc. ..................... 435,131 765,632
330,000 Modine Manufacturing Co. ....... 4,284,009 8,250,000
80,000 Scheib (Earl) Inc.+ ............ 749,281 235,000
1,000 SPX Corp. ...................... 13,487 80,812
163,000 Standard Motor Products Inc. ... 1,748,388 2,628,375
70,000 Superior Industries
International Inc. ............ 1,819,682 1,876,875
160,000 Tenneco Automotive Inc. ........ 2,273,638 1,490,000
110,000 TransPro Inc. .................. 988,933 708,125
60,000 Wynn's International Inc. ...... 674,354 847,500
------------ -------------
40,024,038 45,470,487
------------ -------------
DIVERSIFIED INDUSTRIAL -- 1.9%
195,000 Ampco-Pittsburgh Corp. ......... 2,627,873 1,974,375
10,000 Cooper Industries Inc. ......... 472,562 404,375
145,000 Crane Co. ...................... 1,646,765 2,881,875
102,000 GATX Corp. ..................... 1,533,375 3,442,500
105,000 GenTek Inc. .................... 1,039,852 1,095,937
See accompanying notes to financial statements.
16
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
DIVERSIFIED INDUSTRIAL (CONTINUED)
60,000 ITT Industries Inc.+ ........... $ 1,949,571 $ 2,006,250
416,300 Lamson & Sessions Co.+ ......... 2,598,540 2,029,462
110,000 National Service Industries Inc. 2,529,373 3,245,000
68,715 Park-Ohio Holdings Corp.+ ...... 900,987 678,561
75,000 Thomas Industries Inc. ......... 769,882 1,532,812
27,000 TI Group plc ................... 223,040 200,620
50,000 Trinity Industries Inc. ........ 945,000 1,421,875
200,000 Tyco International Ltd. ........ 6,380,335 7,775,000
100,000 Weir Group plc ................. 420,789 355,366
------------ -------------
24,037,944 29,044,008
------------ -------------
HOTELS AND GAMING -- 1.6%
110,000 Aztar Corp.+ ................... 738,332 1,196,250
90,000 Boca Resorts Inc., Cl. A+ ...... 787,000 877,500
187,500 Gaylord Entertainment Co.,
Cl. A ......................... 4,934,145 5,613,281
5,000 GTECH Holdings Corp.+ .......... 86,269 110,000
650,000 Hilton Hotels Corp. ............ 8,081,362 6,256,250
1,045,000 Ladbroke Group plc ............. 3,273,996 3,346,437
100,000 Mirage Resorts Inc.+ ........... 532,231 1,531,250
430,000 Park Place Entertainment
Corp.+ ........................ 2,424,893 5,375,000
------------ -------------
20,858,228 24,305,968
------------ -------------
HEALTH CARE -- 1.6%
47,000 American Home
Products Corp. ................ 2,316,881 1,853,563
60,000 Amgen Inc.+ .................... 256,894 3,603,750
35,146 AstraZeneca plc, (Stockholm) ... 1,283,381 1,487,137
26,000 Biogen Inc.+ ................... 181,025 2,197,000
4,000 Glaxo Wellcome plc, ADR ........ 216,096 223,500
50,000 Glaxo Wellcome plc, ORD ........ 1,009,390 1,413,388
35,294 Life Technologies Inc. ......... 1,309,763 1,504,407
1,150 Novartis AG .................... 1,431,247 1,688,564
54,000 Novartis AG, Registered ........ 970,641 3,969,000
45,000 Pfizer Inc. .................... 240,750 1,459,688
140 Roche Holding AG ............... 1,374,084 1,661,747
20,000 Sanofi-Synthelabo SA ........... 967,750 832,794
55,000 SmithKline Beecham plc ......... 807,987 701,848
14,000 Takeda Chemical Industries
Co., Ltd. ..................... 809,212 691,984
10,000 Zeneca Group, (London) ......... 394,772 414,809
------------ -------------
13,569,873 23,703,179
------------ -------------
RETAIL -- 1.6%
205,000 Albertson's Inc. ............... 6,472,165 6,611,250
360,000 AutoNation Inc.+ ............... 5,358,190 3,330,000
19,000 Coldwater Creek Inc.+ .......... 369,251 389,500
60,000 Delhaize America Inc., Cl. A ... 1,809,145 1,218,750
20,000 Gerald Stevens Inc.+ ........... 240,000 167,500
20,000 Hannaford Bros. Co. ............ 1,433,896 1,386,250
100,000 Lillian Vernon Corp. ........... 1,362,258 1,112,500
350,000 Neiman Marcus Group Inc.+ ...... 8,521,973 9,428,125
------------ -------------
25,566,878 23,643,875
------------ -------------
PAPER AND FOREST PRODUCTS -- 1.4%
260,000 Greif Bros. Corp., Cl. A ....... 4,845,131 7,735,000
3,400 Greif Bros. Corp., Cl. B ....... 69,825 104,125
650,000 Pactiv Corp.+ .................. 16,386,954 6,906,250
253,000 St. Joe Co. .................... 2,838,193 6,151,063
------------ -------------
24,140,103 20,896,438
------------ -------------
MARKET
SHARES COST VALUE
------ ---- ------
AUTOMOTIVE -- 1.0%
12,000 Ford Motor Co. ................. $ 637,600 $ 641,250
200,000 General Motors Corp. (f) ....... 5,516,355 14,537,500
------------ -------------
6,153,955 15,178,750
------------ -------------
BUSINESS SERVICES -- 0.9%
20,000 Asatsu-DK Inc. ................. 567,298 1,350,690
4,000 Benesse Corp. .................. 868,012 963,101
100,000 Cendant Corp.+ ................. 1,994,908 2,656,250
2,000 CheckFree Holdings Corp.+ ...... 18,080 209,000
100,000 Landauer Inc. .................. 647,252 2,187,500
58,500 Nashua Corp.+ .................. 548,437 438,750
10,833 Reuters Group plc, ADR ......... 815,788 875,442
12,000 Secom Co. Ltd. ................. 733,557 1,321,327
30,900 Vivendi ........................ 2,117,043 2,790,269
15,000 Xerox Corp. .................... 352,625 340,312
------------ -------------
8,663,000 13,132,641
------------ -------------
ELECTRONICS -- 0.9%
43,000 Fujitsu Ltd. ................... 1,290,916 1,961,241
3,000 Hitachi Ltd., ADR .............. 218,796 485,625
11,040 Koninklijke Philips
Electronics NV ................ 110,885 1,490,400
1,500 NEC Corp., ADR ................. 43,625 182,812
8,000 Sony Corp. ..................... 1,305,897 2,372,516
20,000 Sony Corp., ADR ................ 1,057,068 5,695,000
5,000 STMicroelectronics NV .......... 381,613 769,539
------------ -------------
4,408,800 12,957,133
------------ -------------
COMMUNICATIONS EQUIPMENT-- 0.8%
10,000 Alcatel SA, ADR ................ 435,167 450,000
300,000 Allen Telecom Inc.+ ............ 2,242,812 3,468,750
60,000 Dynatech Corp.+ ................ 221,124 405,000
50,000 Lucent Technologies Inc. ....... 549,723 3,740,625
5,000 Mannesmann AG .................. 668,362 1,218,773
8,000 Motorola Inc. .................. 150,168 1,178,000
5,500 Nokia Corp., Cl. A, ADR ........ 627,321 1,045,000
22,000 Scientific-Atlanta Inc. ........ 355,750 1,223,750
------------ -------------
5,250,427 12,729,898
------------ -------------
SPECIALTY CHEMICALS-- 0.8%
5,400 Ciba Specialty Chemicals,
ADR, 144A (c)+ ................ 21,140 193,050
45,000 Dexter Corp. ................... 1,363,246 1,788,750
12,000 du Pont de Nemours
(E.I.) & Co. .................. 393,000 790,500
310,000 Ferro Corp. .................... 5,602,526 6,820,000
105,000 General Chemical Group Inc. .... 348,186 242,813
40,000 Rohm & Haas Co. ................ 1,870,000 1,627,500
105,000 Sybron Chemicals Inc.+ ......... 2,249,913 1,233,750
------------ -------------
11,848,011 12,696,363
------------ -------------
AGRICULTURE -- 0.6%
725,000 Archer-Daniels-Midland
Co. (d) ....................... 11,849,043 8,835,937
------------ -------------
REAL ESTATE -- 0.6%
450,000 Catellus Development
Corp.+ ........................ 6,751,839 5,765,625
44,000 Florida East Coast
Industries Inc. ............... 523,108 1,837,000
55,000 Griffin Land & Nurseries
Inc.+ ......................... 513,143 632,500
4,753 Homefed Corp.+ ................. 851 4,159
------------ -------------
7,788,941 8,239,284
------------ -------------
See accompanying notes to financial statements.
17
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
CONSUMER SERVICES -- 0.5%
40,000 Loewen Group Inc. .............. $ 48,700 $ 17,500
510,000 Rollins Inc. ................... 5,737,037 7,650,000
------------ -------------
5,785,737 7,667,500
------------ -------------
TRANSPORTATION -- 0.5%
73,000 AMR Corp.+ ..................... 2,486,425 4,891,000
15,000 Kansas City Southern
Industries Inc. ............... 484,941 1,119,375
31,273 MIF Ltd.+ ...................... 449,997 312,125
27,000 Ryder System Inc. .............. 718,760 659,813
------------ -------------
4,140,123 6,982,313
------------ -------------
COMPUTER SOFTWARE AND SERVICES-- 0.4%
14,000 Capcom Co. Ltd. ................ 754,069 746,795
9,000 Cresco Ltd. .................... 809,746 1,039,444
3,300 Obic Co. Ltd. .................. 419,600 2,338,456
8,000 Square Co. Ltd. ................ 490,395 548,106
10,000 Sumisho Computer
Systems Corp. ................. 567,247 689,048
95,000 Tyler Technologies Inc. ........ 345,519 522,500
------------ -------------
3,386,576 5,884,349
------------ -------------
AVIATION: PARTS AND SERVICES-- 0.4%
100,000 Curtiss-Wright Corp. ........... 2,491,103 3,687,500
125,000 Fairchild Corp., Cl. A+ ........ 2,333,435 1,132,812
145,000 Hi-Shear Industries Inc. ....... 1,737,757 335,312
25,000 Precision Castparts Corp. ...... 926,612 656,250
------------ -------------
7,488,907 5,811,874
------------ -------------
SATELLITE -- 0.4%
100,000 COMSAT Corp. ................... 2,641,248 1,987,500
10,000 General Motors Corp., Cl. H+ ... 574,250 960,000
100,000 Loral Space &
Communications Ltd.+ .......... 1,242,688 2,431,250
------------ -------------
4,458,186 5,378,750
------------ -------------
AEROSPACE -- 0.3%
90,000 Northrop Grumman Corp. ......... 5,933,782 4,865,625
------------ -------------
CLOSED-END FUNDS -- 0.3%
59,000 Central European Equity
Fund Inc. ..................... 740,735 851,812
70,000 Dresdner RCM Europe
Fund Inc. ..................... 512,662 1,108,100
25,000 France Growth Fund Inc. ........ 246,844 382,812
40,250 Italy Fund Inc. ................ 360,845 684,250
68,000 New Germany Fund ............... 750,658 833,000
45,942 Royce Value Trust Inc. ......... 519,501 600,117
------------ -------------
3,131,245 4,460,091
------------ -------------
HOUSING RELATED -- 0.3%
150,000 Nortek Inc.+ ................... 1,988,594 4,200,000
5,000 Nortek Inc., Special
Common+ (a) ................... 72,155 140,000
------------ -------------
2,060,749 4,340,000
------------ -------------
BUILDING AND CONSTRUCTION-- 0.2%
105,000 CRH plc, ORD ................... 1,309,846 2,263,291
32,222 Huttig Building
Products Inc.+ ................ 81,163 159,097
15,000 Martin Marietta
Materials Inc. ................ 322,687 615,000
------------ -------------
1,713,696 3,037,388
------------ -------------
MARKET
SHARES COST VALUE
------ ---- ------
ENVIRONMENTAL SERVICES-- 0.2%
170,000 Waste Management Inc. .......... $ 3,390,089 $ 2,921,875
------------ -------------
METALS AND MINING -- 0.2%
3,500 Anglogold Ltd. ................. 168,824 180,032
10,000 Anglogold Ltd., ADR ............ 226,750 256,875
110,909 Antofagasta Holdings plc ....... 654,678 776,621
72,500 Harmony Gold Mining
Co. Ltd. ...................... 347,738 465,272
12,500 Harmony Gold Mining
Co. Ltd., ADR ................. 77,344 78,516
38,000 Newmont Mining Corp. ........... 996,944 931,000
20,000 Placer Dome Inc. ............... 225,856 215,000
------------ -------------
2,698,134 2,903,316
------------ -------------
TOTAL COMMON STOCKS ........................ 751,871,966 1,455,598,783
------------ -------------
PREFERRED STOCKS -- 0.5%
TELECOMMUNICATIONS -- 0.3%
10,000 Citizens Utilities Co.,
5.00% Cv. Pfd. ................ 467,375 563,750
40,000 Sprint Corp.,
8.25% Cv. Pfd. ................ 1,419,782 2,970,000
12,045,773 Telesp Participacoes de
Sao Paulo SA (Telesp),
Preference Shares ............. 206,541 292,059
------------ -------------
2,093,698 3,825,809
------------ -------------
PUBLISHING -- 0.1%
43,500 News Corp. Ltd., Pfd., ADR ..... 656,340 1,454,531
------------ -------------
CABLE -- 0.1%
8,000 Tele-Communications
Inc., Cl. B,
6.00%, Ex. Jr. Pfd. ........... 408,018 824,000
------------ -------------
BROADCASTING -- 0.0%
10,000 ProSieben Media AG, Pfd. ....... 568,909 581,184
------------ -------------
WIRELESS COMMUNICATIONS-- 0.0%
2,223,575 Telesp Celular SA, Pfd., Cl. B . 82,623 176,015
------------ -------------
TOTAL PREFERRED STOCKS ..................... 3,809,588 6,861,539
------------ -------------
PRINCIPAL
AMOUNT
------
CORPORATE BONDS -- 0.2%
AUTOMOTIVE: PARTS AND ACCESSORIES-- 0.1%
$1,250,000 Standard Motor Products Inc.
Sub. Deb. Cv.
6.75%, 07/15/09 ................ 1,250,895 997,656
------------ -------------
AVIATION: PARTS AND SERVICES -- 0.1%
1,000,000 Kaman Corp.
Sub. Deb. Cv.
6.00%, 03/15/12 ................ 941,316 940,000
------------ -------------
CONSUMER PRODUCTS -- 0.0%
1,000,000 Pillowtex Corp.
Sub. Deb. Cv.
6.00%, 03/15/12 ................ 361,163 360,000
------------ -------------
PUBLISHING-- 0.0%
200,000 News America Holdings Inc.,
Sub. Deb. Cv.,
Zero Coupon, 03/31/02 .......... 168,747 330,000
------------ -------------
TOTAL CORPORATE BONDS ...................... 2,722,121 2,627,656
------------ -------------
See accompanying notes to financial statements.
18
<PAGE>
THE GABELLI EQUITY TRUST INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
MARKET
SHARES COST VALUE
------ ---- ------
OPTIONS -- 0.0%
62,463 Advantica Restaurant
Group Inc. Warrants,
expires 01/07/05+ .............. $ 105,603 $ 12,688
------------ -------------
PRINCIPAL
AMOUNT
------
U.S. GOVERNMENT OBLIGATIONS -- 2.2%
$34,000,000 U.S. Treasury Bills,
5.17% to 5.29%++,
due 01/20/00 to 03/30/00 ....... 33,656,650 33,663,693
------------ -------------
REPURCHASE AGREEMENTS -- 0.3%
5,016,000 State Street Bank & Trust Co.,
3.25%, dated 12/31/99,
due 01/03/00, proceeds at
maturity $5,017,359 (g) ........ 5,016,000 5,016,000
------------ -------------
TOTAL
INVESTMENTS -- 100.0% (b) ................ $797,181,928 1,503,780,359
============
OTHER ASSETS, LIABILITIES AND
LIQUIDATION VALUE OF CUMULATIVE
PREFERRED STOCK -- (9.0%) .............................. (134,799,264)
-------------
NET ASSETS -- COMMON STOCK
(107,376,617 common shares outstanding)-- 91.0% ........ 1,368,981,095
-------------
NET ASSETS -- PREFERRED STOCK
(5,386,400 preferred shares outstanding)-- 9.0% ........ 134,660,000
-------------
TOTAL NET ASSETS -- 100.0% ............................... $1,503,641,095
=============
NET ASSET VALUE PER COMMON SHARE
($1,368,981,095 / 107,376,617 shares outstanding) ...... $12.75
======
FUTURES CONTRACTS -- SHORT POSITION
Number of Unrealized
Contracts Depreciation
--------- ------------
380 S&P 500 Index Futures
03/16/00 .................................... $(4,211,350)
-----------
SETTLEMENT UNREALIZED
DATE DEPRECIATION
---------- ------------
SCHEDULE OF FORWARD FOREIGN EXCHANGE CONTRACTS
FORWARD FOREIGN EXCHANGE CONTRACTS TO DELIVER
14,657,129 (h) Hong Kong Dollars
in exchange for
USD $1,860,750 ......... 08/24/00 $(19,673)
========
- --------------------
(a) Security fair valued under procedures established by the Board of
Directors.
(b) For Federal tax purposes:
Aggregate cost ..................... $797,814,930
============
Gross unrealized appreciation ...... $734,935,684
Gross unrealized depreciation ...... (28,970,255)
------------
Net unrealized appreciation ........ $705,965,429
============
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. The market
value of these securities at December 31, 1999 was $967,210 representing
0.1% of total net assets.
(d) Security was pledged as collateral for futures contracts. (e) At December
31, 1999, 100,000 shares were pledged as collateral for futures contracts.
(f) At December 31, 1999, 188,000 shares were pledged as collateral for
futures contracts.
(g) Collateralized by U.S. Treasury Bond, 12.75%, due 11/15/10, market value
$5,120,500.
(h) Principal amount denoted in Hong Kong Dollars.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depositary Receipt
USD - United States Dollar
ORD - Ordinary Share
GDR - Global Depositary Receipt
% of
Market Market
Value Value
------ ------
GEOGRAPHIC DIVERSIFICATION
United States ..................... 78.2% $1,176,448,280
Europe ............................ 12.5 187,440,910
Canada ............................ 3.8 57,803,463
Asia/Pacific Rim .................. 2.9 43,133,471
Latin America ..................... 2.5 37,973,540
Africa ............................ 0.1 980,695
----- --------------
Total Investments ................. 100.0% $1,503,780,359
===== ==============
See accompanying notes to financial statements.
19
<PAGE>
THE GABELLI EQUITY TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS:
Investments, at value (Cost $797,181,928) .... $1,503,780,359
Cash and foreign currency, at value
(Cost $29,714) ............................. 25,394
Dividends and interest receivable ............ 1,421,156
Receivable for investments sold .............. 12,923,469
--------------
TOTAL ASSETS ................................ 1,518,150,378
--------------
LIABILITIES:
Payable for investments purchased ............ 6,157,473
Dividend payable ............................. 5,027,520
Payable for investment advisory fees ......... 2,460,883
Variation margin ............................. 323,000
Unrealized depreciation on forward foreign
exchange contracts ......................... 19,673
Payable to custodian ......................... 156,000
Accrued expenses and other payables .......... 364,734
--------------
TOTAL LIABILITIES ........................... 14,509,283
--------------
NET ASSETS .................................. $1,503,641,095
==============
NET ASSETS CONSIST OF:
Cumulative Preferred Stock (7.25% $25
liquidation value, $0.001 par value,
8,000,000 shares authorized with
5,386,400 shares issued and outstanding) ... $ 134,660,000
Capital stock, at par value .................. 107,377
Additional paid-in capital ................... 662,950,028
Accumulated net realized gain on
investments, futures contracts and foreign
currency transactions ...................... 3,578,348
Net unrealized appreciation on investments,
futures contracts and foreign currency
transactions ............................... 702,345,342
--------------
TOTAL NET ASSETS ............................ $1,503,641,095
==============
NET ASSET VALUE PER COMMON SHARE
($1,368,981,095 / 107,376,617 shares issued
and outstanding; 200,000,000 shares
authorized of $0.001 par value) ........... $12.75
======
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $229,250) ......................... $ 16,428,795
Interest ..................................... 3,958,460
------------
TOTAL INVESTMENT INCOME ...................... 20,387,255
------------
EXPENSES:
Investment advisory fees ..................... 14,000,719
Custodian fees ............................... 468,425
Shareholder communications ................... 381,146
Legal and audit fees ......................... 380,699
Shareholder services fees .................... 313,978
Directors' fees .............................. 164,048
Payroll ...................................... 149,681
Miscellaneous expenses ....................... 191,321
------------
TOTAL EXPENSES ............................... 16,050,017
------------
NET INVESTMENT INCOME ........................ 4,337,238
------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS, FUTURES CONTRACTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain on investments ............. 154,480,190
Net realized loss on foreign currency transactions (818,318)
Net realized loss on futures contracts ....... (19,749,211)
------------
Net realized gain on investments, futures
contracts and foreign currency transactions 133,912,661
------------
Net change in net unrealized appreciation on
investments, futures contracts and foreign
currency transactions ...................... 212,400,838
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS, FUTURES CONTRACTS AND
FOREIGN CURRENCY TRANSACTIONS .............. 346,313,499
------------
Net Increase in Net Assets Resulting
from Operations ............................ $350,650,737
============
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................................... $ 4,337,238 $ 7,455,206
Net realized gain on investments, futures contracts
and foreign currency transactions ...................................... 133,912,661 128,440,199
Net change in unrealized appreciation on investments,
futures contracts and foreign currency transactions .................... 212,400,838 (13,195,552)
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................... 350,650,737 122,699,853
-------------- --------------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income .................................................... (3,195,371) (a) (6,729,645)
Net realized gain on investments, futures contracts
and foreign currency transactions ...................................... (128,585,766) (a) (115,514,223)
Paid-in-capital .......................................................... (72,433,677) (a) --
-------------- --------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ....................... (204,214,814) (122,243,868)
-------------- --------------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income .................................................... (235,810) (302,666)
Net realized gain on investments, futures contracts
and foreign currency transactions ...................................... (9,545,528) (5,189,134)
-------------- --------------
TOTAL DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS .................... (9,781,338) (5,491,800)
-------------- --------------
Net increase in net assets from Equity Trust share transactions .............. 15,103,360 16,367,192
Net decrease from repurchase of preferred stock .............................. (306,572) --
Net proceeds from issuance of preferred stock ................................ -- 130,288,751
-------------- --------------
NET INCREASE IN NET ASSETS ............................................. 151,451,373 141,620,128
NET ASSETS:
Beginning of period ...................................................... 1,352,189,722 1,210,569,594
-------------- --------------
End of period (Including undistributed net investment income
of $0 and $55,868, respectively) ....................................... $1,503,641,095 $1,352,189,722
============== ==============
</TABLE>
(a) A distribution of $79,587,260 for The Gabelli Utility Trust spin-off from
net investment income, realized short-term gains, realized long-term gains,
and paid-in-capital were $1,091,937, $7,908,851, $36,310,892 and
$34,275,580, respectively.
See accompanying notes to financial statements.
20
<PAGE>
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION. The Gabelli Equity Trust Inc. ("Equity Trust") is a closed-end,
non-diversified management investment company organized as a Maryland
corporation on May 20, 1986 and registered under the Investment Company Act of
1940, as amended (the "1940 Act"), whose primary objective is long-term growth
of capital. The Equity Trust had no operations until August 11, 1986, when it
sold 10,696 shares of common stock to Gabelli Funds, LLC (the "Adviser") for
$100,008. Investment operations commenced on August 21, 1986.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Equity Trust in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of closing bid and asked prices or, if there
were no asked prices quoted on that day, then the security is valued at the
closing bid price on that day). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. Portfolio securities traded on more
than one national securities exchange or market are valued according to the
broadest and most representative market, as determined by the Adviser.
Securities and assets for which market quotations are not readily available are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Board of Directors.
Short term debt securities with remaining maturities of 60 days or less are
valued at amortized cost, unless the Directors determine such does not reflect
the securities' fair value, in which case these securities will be valued at
their fair value as determined by the Directors. Debt instruments having a
greater maturity are valued at the highest bid price obtained from a dealer
maintaining an active market in those securities. Options are valued at the last
sale price on the exchange on which they are listed. If no sales of such options
have taken place that day, they will be valued at the mean between their closing
bid and asked prices.
REPURCHASE AGREEMENTS. The Equity Trust may enter into repurchase
agreements with government securities dealers recognized by the Federal Reserve
Board, with member banks of the Federal Reserve System or with other brokers or
dealers that meet credit guidelines established by the Directors. Under the
terms of a typical repurchase agreement, the Equity Trust takes possession of an
underlying debt obligation subject to an obligation of the seller to repurchase,
and the Equity Trust to resell, the obligation at an agreed-upon price and time,
thereby determining the yield during the Equity Trust's holding period. The
Equity Trust will always receive and maintain securities whose market value,
including accrued interest, will be at least equal to 100% of the dollar amount
invested by the Equity Trust in each agreement. The Equity Trust will make
payment for such securities only upon physical delivery or upon evidence of book
entry transfer of the collateral to the account of the custodian. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to maintain the adequacy of the
collateral. If the seller defaults and the value of the collateral declines or
if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Equity Trust may be delayed or
limited.
FUTURES CONTRACTS. The Equity Trust may engage in futures contracts for
the purpose of hedging against changes in the value of its portfolio securities
and in the value of securities it intends to purchase. Such investments will
only be made if they are economically appropriate to the reduction of risks
involved in the management of the Equity Trust's investments. Upon entering into
a futures contract, the Equity Trust is required to deposit with the broker an
amount of cash or cash equivalents equal to a certain percentage of the contract
amount. This is known as the "initial margin." Subsequent payments ("variation
margin") are made or received by the Equity Trust each day, depending on the
daily fluctuation of the value of the contract. The daily changes in the
contract are included in unrealized appreciation/depreciation on investments.
The Equity Trust recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as
a hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk the
Equity Trust may not be able to enter into a closing transaction because of an
illiquid secondary market.
FORWARD FOREIGN EXCHANGE CONTRACTS. The Equity Trust may engage in forward
foreign exchange contracts for hedging a specific transaction with respect to
either the currency in which the transaction is denominated or another currency
as deemed appropriate by the Adviser. Forward foreign exchange contracts are
valued at the forward rate and are marked-to-
21
<PAGE>
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
market daily. The change in market value is recorded by the Equity Trust as an
unrealized gain or loss. When the contract is closed, the Equity Trust records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate
fluctuations in the underlying prices of the Equity Trust's portfolio
securities, but it does establish a rate of exchange that can be achieved in the
future. Although forward foreign exchange contracts limit the risk of loss due
to a decline in the value of the hedged currency, they also limit any potential
gain that might result should the value of the currency increase. In addition,
the Equity Trust could be exposed to risks if the counterparties to the
contracts are unable to meet the terms of their contracts.
FOREIGN CURRENCY. The books and records of the Equity Trust are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated on the respective dates of such
transactions. Unrealized gains and losses, which result from changes in foreign
exchange rates as well as changes in market prices of securities, have been
included in unrealized appreciation/depreciation on investments. Net realized
foreign currency gains and losses resulting from changes in exchange rates
include foreign currency gains and losses between trade date and settlement date
on investment securities transactions, foreign currency transactions and the
difference between the amounts of interest and dividends recorded on the books
of the Equity Trust and the amounts actually received. The portion of foreign
currency gains and losses related to fluctuation in exchange rates between the
initial trade date and subsequent sale trade date is included in realized
gain/(loss) on securities transactions.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for as of the trade date with realized gain or loss on investments
determined using specific identification as the cost method. Interest income
(including amortization of premium and accretion of discount) is recorded as
earned. Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders
are recorded on the ex-dividend date. Income distributions and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments of income and gains on various investment
securities held by the Equity Trust, timing differences and differing
characterization of distributions made by the Equity Trust. Distributions to
shareholders of the Equity Trust, 7.25% Tax Advantaged Cumulative Preferred
Stock ("Cumulative Preferred Stock") are accrued on a daily basis and are
determined as described in Note 5.
For the year ended December 31, 1999, reclassifications were made to
decrease undistributed net investment income and increase accumulated net
realized gain on investments, futures contracts and foreign currency
transactions for $1,278,524.
PROVISION FOR INCOME TAXES. The Equity Trust intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
Dividends and interest from non-U.S. sources received by the Equity Trust
are generally subject to non-U.S. withholding taxes at rates ranging up to 30%.
Such withholding taxes may be reduced or eliminated under the terms of
applicable U.S. income tax treaties, and the Equity Trust intends to undertake
any procedural steps required to claim the benefits of such treaties. If the
value of more than 50% of the Equity Trust's total net assets at the close of
any taxable year consists of stocks or securities of non-U.S. corporations, the
Equity Trust is permitted and may elect to treat any non-U.S. taxes paid by it
as paid by its shareholders.
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES. The Equity Trust has entered
into an investment advisory agreement (the "Advisory Agreement") with the
Adviser which provides that the Equity Trust will pay the Adviser a fee,
computed weekly and paid monthly, equal on an annual basis to 1.00% of the value
of the Equity Trust's average weekly net assets. In accordance with the Advisory
Agreement, the Adviser manages the Equity Trust's portfolio, makes investment
decisions for the Equity Trust, places orders to purchase and sell securities on
behalf of the Equity Trust and oversees the administration of all aspects of the
Equity Trust's business and affairs. The Adviser has agreed to reduce the
management fee on the incremental assets attributable to the Cumulative
Preferred Stock if the total return of the net asset value of the common shares
of the Equity Trust, including distributions and advisory fee subject to
reduction, does not exceed the stated dividend rate of the Cumulative Preferred
Stock. For the year ended December 31, 1999, the Equity Trust's total return on
the net asset value
22
<PAGE>
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
of the common shares exceeded the stated dividend rate of the Cumulative
Preferred Stock. The management fee earned on the assets attributable to the
Cumulative Preferred Stock was $1,349,472 for the year ended December 31, 1999.
During the year ended December 31, 1999, Gabelli & Company, Inc. ("Gabelli
& Company") and its affiliates received $554,925 in brokerage commissions as a
result of executing agency transactions in portfolio securities on behalf of the
Equity Trust.
Having received the Board of Directors and shareholders approval, on July
9, 1999 the Equity Trust contributed $79,487,260 in cash and securities in
exchange for shares of a newly formed, wholly owned investment company
subsidiary, The Gabelli Utility Trust ("Utility Trust"), and on the same date
distributed such shares to holders of record on July 1, 1999 at the rate of one
share of the Utility Trust for every ten shares of the Equity Trust. The
distribution was equivalent to $0.75 per share of the Equity Trust, of which
$0.01029, $0.07453, $0.34218 and $0.32300 was derived from undistributed net
investment income, short term capital gains, long term capital gains and
paid-in-capital, respectively.
4. PORTFOLIO SECURITIES. Cost of purchases and proceeds from sales of
securities, other than short-term securities, aggregated $505,940,490 and
$603,207,740, respectively, for the year ended December 31, 1999.
5. CAPITAL. The Articles of Incorporation, dated May 19, 1986, permit the Equity
Trust to issue 200,000,000 shares of common stock (par value $0.001).
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
12/31/1999 12/31/1998
----------------------- ------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares issued upon reinvestment
of dividends and distributions .... 1,260,270 $15,103,360 1,439,964 $16,367,192
--------- ----------- --------- -----------
Net increase ........................ 1,260,270 $15,103,360 1,439,964 $16,367,192
========= =========== ========= ===========
</TABLE>
The Equity Trust's Articles of Incorporation authorize the issuance of up
to 8,000,000 shares of $0.001 par value Cumulative Preferred Stock. The
Cumulative Preferred Stock is senior to the common stock and results in the
financial leveraging of the common stock. Such leveraging tends to magnify both
the risks and opportunities to Common Shareholders. Dividends on shares of the
Cumulative Preferred Stock are cumulative. The Equity Trust is required to meet
certain asset coverage tests with respect to the Cumulative Preferred Stock. If
the Equity Trust fails to meet these requirements and does not correct such
failure, the Equity Trust may be required to redeem, in part or in full, the
Cumulative Preferred Stock at a redemption price of $25.00 per share plus an
amount equal to the accumulated and unpaid dividends whether or not declared on
such shares in order to meet these requirements. Additionally, failure to meet
the foregoing asset requirements could restrict the Equity Trust's ability to
pay dividends to Common Shareholders and could lead to sales of portfolio
securities at inopportune times. Commencing June 9, 2003 and thereafter, the
Equity Trust, at its option, may redeem the Cumulative Preferred Stock in whole
or in part at the redemption price. During the year ended December 31, 1999, the
Equity Trust repurchased 13,600 shares of Cumulative Preferred Stock at a cost
of $306,572 and at an average price of $22.542 per share. At December 31, 1999,
5,386,400 shares of the Cumulative Preferred Stock were outstanding at the fixed
dividend rate of 7.25 percent per share and accrued dividends amounted to
$135,595. The income received on the Equity Trust's assets may vary in a manner
unrelated to the fixed rate, which could have either a beneficial or detrimental
impact on net investment income and gains available to Common Shareholders.
The holders of Cumulative Preferred Stock have voting rights equivalent to
those of the holders of common stock (one vote per share) and will vote together
with holders of shares of common stock as a single class. In addition, the
Investment Company Act of 1940 requires that along with approval of a majority
of the holders of common stock, approval of a majority of the holders of any
outstanding shares of Cumulative Preferred Stock, voting separately as a class,
would be required to (a) adopt any plan of reorganization that would adversely
affect the Cumulative Preferred Stock, and (b) take any action requiring a vote
of security holders, including, among other things, changes in the Trust's
subclassification as a closed-end investment company or changes in its
fundamental investment restrictions.
23
<PAGE>
THE GABELLI EQUITY TRUST INC.
FINANCIAL HIGHLIGHTS
PER SHARE AMOUNTS FOR AN EQUITY TRUST COMMON
SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1999(A) 1998(A) 1997(A) 1996(A) 1995(A)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period ............ $ 11.47 $ 11.56 $ 9.77 $ 9.95 $ 9.46
------- ------- ------- ------ ------
Net investment income ........................... 0.04 0.07 0.08 0.11 0.13
Net realized and unrealized gain
on investments ................................ 3.25 1.09 2.75 0.71 1.74
------- ------- ------- ------ ------
Total from investment operations ................ 3.29 1.16 2.83 0.82 1.87
------- ------- ------- ------ ------
Decrease in net asset value from
Equity Trust share transactions ............... -- -- -- -- (0.37)
Offering expenses charged to capital surplus .... -- (0.04) -- -- (0.01)
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income ........................... (0.03)(c) (0.06) (0.08) (0.11) (0.13)(b)
In excess of net investment income .............. -- -- (0.00)(d) -- --
Net realized gains .............................. (1.21)(c) (1.10) (0.92) (0.78) (0.47)(b)
In excess of net realized gains ................. -- -- (0.01) (0.00)(d) (0.02)
Paid-in capital ................................. (0.68)(c) -- (0.03) (0.11) (0.38)(b)
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ........................... (0.00)(d) (0.00)(d) -- -- --
Net realized gains .............................. (0.09) (0.05) -- -- --
------- ------- ------- ------ ------
Total distributions ............................. (2.01) (1.21) (1.04) (1.00) (1.00)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD .................. $ 12.75 $ 11.47 $ 11.56 $ 9.77 $ 9.95
======= ======= ======= ====== ======
Market value, end of period ..................... $12.563 $11.563 $11.688 $9.375 $9.375
======= ======= ======= ====== ======
Net Asset Value Total Return** .................. 29.49% 9.55% 30.46% 9.00% 20.60%
======= ======= ======= ====== ======
Total Investment Return* ........................ 26.57% 9.23% 37.46% 11.00% 11.70%
======= ======= ======= ====== ======
RATIOS TO AVERAGE NET ASSETS AVAILABLE TO COMMON
STOCK SHAREHOLDERS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ............$1,503,641 $1,352,190 $1,210,570 $1,015,437 $1,034,091
Net assets attributable to common shares,
end of year (in 000's) ........................$1,368,981 $1,217,190 $1,210,570 $1,015,437 $1,034,091
Ratio of net investment income to average
net assets attributable to common stock ....... 0.34% 0.60% 0.76% 1.07% 1.26%
Ratio of operating expenses to average
net assets attributable to common stock ....... 1.27% 1.15% 1.14% 1.18% 1.21%
Ratio of operating expenses to average
total net assets (f) .......................... 1.15% 1.09% 1.14% 1.18% 1.21%
Portfolio turnover rate ......................... 38.0% 39.8% 39.2% 18.9% 25.1%
PREFERRED STOCK:
Liquidation value, end of period (in 000's) .... $ 134,660 $ 135,000 -- -- --
Total shares outstanding (in 000's) ............ 5,386 5,400 -- -- --
Asset coverage ................................. 1,117% 1,001% -- -- --
Liquidation preference per share ............... $ 25.00 $ 25.00 -- -- --
Average market value (e) ....................... $ 24.43 $ 25.63 -- -- --
</TABLE>
--------------------------
* Based on market value per share, adjusted for reinvestment of distributions,
including the effect of shares issued pursuant to rights offering, assuming
full subscription by shareholder.
** Based on net asset value per share, adjusted for reinvestment of
distributions, including the effect of shares issued pursuant to rights
offering, assuming full subscription by shareholder.
(a) Per share amounts have been calculated using the monthly average shares
outstanding method.
(b) A distribution equivalent to $0.75 per share for The Gabelli Global
Multimedia Trust Inc. spin-off from net investment income, realized
short-term gains, and paid-in-capital were $0.064, $0.031, and $0.655,
respectively.
(c) A distribution equivalent to $0.75 per share for the Gabelli Utility Trust
spin-off from net investment income, realized short-term gains, realized
long-term gains, and paid-in-capital were $0.01029, $0.07453, $0.34218 and
$0.32300, respectively.
(d) Amount represents less than $0.005 per share.
(e) Based on weekly prices.
(f) Amounts are attributable to both common and preferred stock assets. Prior to
1998, there was no preferred stock outstanding.
24
<PAGE>
THE GABELLI EQUITY TRUST INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
The Gabelli Equity Trust Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Gabelli Equity Trust Inc. (the
"Equity Trust") at December 31, 1999, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Equity Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 11, 2000
25
<PAGE>
THE GABELLI EQUITY TRUST INC.
INCOME TAX INFORMATION (UNAUDITED)
DECEMBER 31, 1999
CASH DIVIDENDS AND DISTRIBUTIONS
<TABLE>
<CAPTION>
TOTAL AMOUNT ORDINARY NON-TAXABLE LONG-TERM DIVIDEND
PAYABLE RECORD PAID INVESTMENT RETURN OF CAPITAL REINVESTMENT
DATE DATE PER SHARE (A) INCOME CAPITAL (A) GAINS (A) PRICE
-------- -------- ------------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON SHARES
03/29/99 03/19/99 $0.27000 $0.03110 $0.10160 $0.13730 $12.215005
06/28/99 06/18/99 0.27000 0.03050 0.11630 0.12320 11.823343
07/09/99 07/01/99 0.98125 0.11098 0.42258 0.44769 N/A
09/27/99 09/17/99 0.27000 0.03050 0.11630 0.12320 11.721468
12/27/99 12/17/99 0.36000 0.04080 0.15500 0.16420 12.592067
-------- -------- -------- --------
$2.15125 $0.24388 $0.91176 $0.99561
PREFERRED SHARES
03/29/99 03/22/99 $0.4531 $0.0900 -- $0.3631
06/28/99 06/21/99 0.4531 0.0900 -- 0.3631
09/27/99 09/20/99 0.4531 0.0900 -- 0.3631
12/27/99 12/20/99 0.4531 0.0900 -- 0.3631
-------- -------- -------- --------
$1.8125 $0.3600 -- $1.4524
</TABLE>
A Form 1099-DIV has been mailed to all shareholders of record for the
distributions mentioned above, setting forth specific amounts to be included in
the 1999 tax returns. Ordinary income distributions include net investment
income and realized net short-term capital gains. 100% of the long-term capital
gains paid by the Equity Trust in 1999 was classified as "20% Rate Gains"
subject to a maximum tax rate of 20% (or 10% depending on an individual's tax
bracket). Capital gain distributions are reported in box 2a of Form 1099-DIV.
NON-TAXABLE RETURN OF CAPITAL
The amount received as a non-taxable (return of capital) distribution should
be applied to reduce the tax cost of shares. The Equity Trust paid to common
shareholders a return of capital distribution of $0.91176 per share in 1999.
CORPORATE DIVIDENDS RECEIVED DEDUCTION AND U.S. GOVERNMENT SECURITIES INCOME
The Equity Trust paid to common and preferred shareholders an ordinary
income dividend of $0.24388 per share and $0.36010 per share, respectively, in
1999. The percentage of such dividends that qualifies for the dividends received
deduction available to corporations is 44.64% for all such dividends paid in
1999. The percentage of the ordinary income dividends paid by the Equity Trust
during 1999 derived from U.S. Government Securities was 6.34%. However, it
should be noted that the Equity Trust did not hold more than 50% of its assets
in U.S. Government Securities at the end of each calendar quarter during 1999.
DISTRIBUTION OF SHARES OF THE GABELLI UTILITY TRUST
On July 9, 1999 the Equity Trust distributed shares of the Gabelli Utility
Trust at the rate of one Utility Trust share for every ten Equity Trust common
shares owned as of July 1, 1999. A portion of the Equity Trust's net investment
income, short-term and long-term capital gains were allocated to the spin-off
distribution as detailed in the table above. The initial cost basis of the
Utility Trust shares is $9.8125 per share, the fair market value on the
distribution date, determined by averaging the high and low trading price on the
distribution date. The holding period for the Utility Trust shares begins on
July 12, 1999.
HISTORICAL DISTRIBUTION SUMMARY - COMMON STOCK
<TABLE>
<CAPTION>
SHORT- LONG- UNDISTRIBUTED TAXES PAID ON
TERM TERM NON-TAXABLE LONG-TERM UNDISTRIBUTED ADJUSTMENT
INVESTMENT CAPITAL CAPITAL RETURN OF CAPITAL CAPITAL TOTAL TO
INCOME GAINS (B) GAINS CAPITAL GAINS GAINS (C) DISTRIBUTIONS COST BASIS
---------- --------- -------- ----------- ------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 (d) $0.03010 $0.21378 $0.99561 $0.91176 -- -- $2.15125 $0.91176 -
1998 0.06420 -- 1.10080 -- -- -- 1.16500 --
1997 0.07610 0.00210 0.93670 0.02510 -- -- 1.04000 0.02500 -
1996 0.10480 -- 0.78120 0.11400 -- -- 1.00000 0.11400 -
1995 (e) 0.12890 -- 0.49310 0.37800 -- -- 1.00000 0.37800 -
1994 (f) 0.13536 0.06527 0.30300 1.38262 -- -- 1.88625 1.38262 -
1993 (g) 0.13050 0.02030 0.72930 0.22990 -- -- 1.11000 0.22990 -
1992 (h) 0.20530 0.04050 0.29660 0.51760 -- -- 1.06000 0.51760 -
1991 (i) 0.22590 0.03990 0.14420 0.68000 -- -- 1.09000 0.68000 -
1990 0.50470 -- 0.22950 0.44580 -- -- 1.18000 0.44580 -
1989 0.29100 0.35650 0.66250 -- $0.6288 $0.2138 1.31000 0.41500 +
1988 0.14500 0.20900 0.19600 -- 0.2513 0.0854 0.55000 0.16590 +
1987 0.25600 0.49100 0.33500 -- -- -- 1.08200 --
HISTORICAL DISTRIBUTION SUMMARY - PREFERRED STOCK
1999 $0.0437 $0.3164 $1.4524 -- -- -- $1.81250 --
1998 0.0560 -- 0.9610 -- -- -- 1.01700 --
</TABLE>
- --------------------------
(a) Amounts may not foot due to rounding.
(b) Taxable as ordinary income.
(c) Net Asset Value is reduced by this amount on the last business day of the
year.
(d) On July 9, 1999, the Company distributed shares of The Gabelli Utility Trust
valued at $9.8125 per share.
(e) On October 19, 1995, the Company distributed Rights equivalent to $0.37 per
share based upon full subscription of all issued shares.
(f) On November 15, 1994, the Company distributed shares of The Gabelli Global
Multimedia Trust Inc. valued at $8.0625 per share.
(g) On July 14, 1993, the Company distributed Rights equivalent to $0.50 per
share based upon full subscription of all issued shares.
(h) On September 28, 1992, the Company distributed Rights equivalent to $0.36
per share based upon full subscription of all issued shares.
(i) On October 21, 1991, the Company distributed Rights equivalent to $0.42 per
share based upon full subscription of all issued shares.
- - Decrease in cost basis.
+ Increase in cost basis.
26
<PAGE>
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
ENROLLMENT IN THE PLAN
It is the policy of The Gabelli Equity Trust Inc. ("Equity Trust") to
automatically reinvest dividends. As a "registered" shareholder you
automatically become a participant in the Equity Trust's Automatic Dividend
Reinvestment Plan (the "Plan"). The Plan authorizes the Equity Trust to issue
shares to participants upon an income dividend or a capital gains distribution
regardless of whether the shares are trading at a discount or a premium to net
asset value. All distributions to shareholders whose shares are registered in
their own names will be automatically reinvested pursuant to the Plan in
additional shares of the Equity Trust. Plan participants may send their stock
certificates to State Street Bank and Trust Company ("State Street") to be held
in their dividend reinvestment account. Registered shareholders wishing to
receive their distribution in cash must submit this request in writing to:
The Gabelli Equity Trust Inc.
c/o State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Shareholders requesting this cash election must include the shareholder's
name and address as they appear on the share certificate. Shareholders with
additional questions regarding the Plan may contact State Street at 1 (800)
336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at State Street Bank
must do so in writing or by telephone. Please submit your request to the above
mentioned address or telephone number. Include in your request your name,
address and account number. The cost to liquidate shares is $2.50 per
transaction as well as the brokerage commission incurred. Brokerage charges are
expected to be less than the usual brokerage charge for such transactions.
If your shares are held in the name of a broker, bank or nominee, you should
contact such institution. If such institution is not participating in the Plan,
your account will be credited with a cash dividend. In order to participate in
the Plan through such institution, it may be necessary for you to have your
shares taken out of "street name" and re-registered in your own name. Once
registered in your own name your dividends will be automatically reinvested.
Certain brokers participate in the Plan. Shareholders holding shares in "street
name" at participating institutions will have dividends automatically
reinvested. Shareholders wishing a cash dividend at such institution must
contact their broker to make this change.
The number of shares of Common Stock distributed to participants in the Plan
in lieu of cash dividends is determined in the following manner. Under the Plan,
whenever the market price of the Equity Trust's Common Stock is equal to or
exceeds net asset value at the time shares are valued for purposes of
determining the number of shares equivalent to the cash dividends or capital
gains distribution, participants are issued shares of Common Stock valued at the
greater of (i) the net asset value as most recently determined or (ii) 95% of
the then current market price of the Equity Trust's Common Stock. The valuation
date is the dividend or distribution payment date or, if that date is not a New
York Stock Exchange trading day, the next trading day. If the net asset value of
the Common Stock at the time of valuation exceeds the market price of the Common
Stock, participants will 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.
- --------------------------------------------------------------------------------
The Annual Meeting of the Equity Trust's stockholders will be held at 9:00 A.M.
on Monday, May 15, 2000, at the Greenwich Public Library, 101 West Putnam Avenue
in Greenwich, Connecticut.
- --------------------------------------------------------------------------------
27
<PAGE>
[This page intentionally left blank]
28
<PAGE>
DIRECTORS AND OFFICERS
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER, RYE, NY 10580-1434
DIRECTORS
Mario J. Gabelli, CFA
CHAIRMAN & CHIEF INVESTMENT OFFICER,
GABELLI FUNDS, LLC
Dr. Thomas E. Bratter
PRESIDENT, JOHN DEWEY ACADEMY
Felix J. Christiana
FORMER SENIOR VICE PRESIDENT,
DOLLAR DRY DOCK SAVINGS BANK
Anthony J. Colovita
ATTORNEY-AT-LAW,
ANTHONY J. COLOVITA, 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,
iTHE BETHLEHEM CORP.
OFFICERS
Mario J. Gabelli, CFA
PRESIDENT & CHIEF INVESTMENT OFFICER
Bruce N. Alpert
VICE PRESIDENT & TREASURER
Marc S. Diagonale
VICE PRESIDENT
James E. McKee
SECRETARY
INVESTMENT ADVISOR
Gabelli Funds, 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 5,386,400
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 also may, 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
PHONE: 1-800-GABELLI (1-800-422-3554)
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