UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04700
-----------
The Gabelli Equity Trust Inc.
--------------------------------------------
(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
--------------------------------------------
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
--------------------------------------------
(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
----------------
Date of fiscal year end: December 31
--------------
Date of reporting period: December 31, 2004
-------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
[LOGO OMITTED]
THE GABELLI EQUITY TRUST INC.
Annual Report
December 31, 2004
TO OUR SHAREHOLDERS,
The Sarbanes-Oxley Act requires a fund's principal executive and financial
officers to certify the entire contents of the semi-annual and annual
shareholder reports in a filing with the Securities and Exchange Commission on
Form N-CSR. This certification would cover the portfolio manager's commentary
and subjective opinions if they are attached to or a part of the financial
statements. Many of these comments and opinions would be difficult or impossible
to certify.
Because we do not want our portfolio managers to eliminate their opinions
and/or restrict their commentary to historical facts, we have separated their
commentary from the financial statements and investment portfolio and have sent
it to you separately. Both the commentary and the financial statements,
including the portfolio of investments, will be available on our website at
www.gabelli.com/funds.
Enclosed are the audited financial statements and the investment portfolio
as of December 31, 2004.
COMPARATIVE RESULTS
--------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 2004 (A)
----------------------------------------------------
Since Inception
QUARTER 1 YEAR 3 YEAR 5 YEAR 10 YEAR 15 YEAR (8/21/86)
------- ------ ------ ------ ------- ------- ---------------
GABELLI EQUITY TRUST NAV RETURN (B) .......... 16.56% 20.14% 10.52% 4.64% 11.83% 10.30% 12.07%
GABELLI EQUITY TRUST INVESTMENT RETURN (C) ... 11.77 24.04 4.48 5.05 11.77 9.98 11.82
S&P 500 Index ................................ 9.23 10.87 3.58 (2.30) 12.07 3.40 11.61
Dow Jones Industrial Average ................. 7.62 5.40 4.73 0.70 13.13 12.17 12.88
Nasdaq Composite Index ....................... 14.69 8.59 3.71 (11.77) 11.21 11.00 9.95
(a) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND THE PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE.
WHEN SHARES ARE SOLD, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE DATA PRESENTED.
VISIT WWW.GABELLI.COM FOR PERFORMANCE INFORMATION AS OF THE MOST RECENT
MONTH END. INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS AND
CHARGES AND EXPENSES OF THE FUND CAREFULLY BEFORE INVESTING. PERFORMANCE
FOR PERIODS LESS THAN ONE YEAR IS NOT ANNUALIZED. THE DOW JONES INDUSTRIAL
AVERAGE IS AN UNMANAGED INDEX OF 30 LARGE INDUSTRIAL STOCKS. THE S&P 500
AND THE NASDAQ COMPOSITE INDICES ARE UNMANAGED INDICATORS OF STOCK MARKET
PERFORMANCE. DIVIDENDS ARE CONSIDERED REINVESTED (EXCEPT FOR THE NASDAQ
COMPOSITE INDEX).
(b) TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN NET ASSET VALUE
("NAV"), REINVESTMENT OF DISTRIBUTIONS AT NAV ON THE EX-DIVIDEND DATE,
ADJUSTMENTS FOR RIGHTS OFFERINGS, SPIN-OFFS AND TAXES PAID ON UNDISTRIBUTED
LONG-TERM CAPITAL GAINS, AND ARE NET OF EXPENSES. SINCE INCEPTION RETURN
BASED ON AN INITIAL NET ASSET VALUE OF $9.34.
(c) TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN CLOSING MARKET
VALUES ON THE NEW YORK STOCK EXCHANGE, REINVESTMENT OF DISTRIBUTIONS AS OF
THE PAYABLE DATE, ADJUSTMENTS FOR RIGHTS OFFERINGS, SPIN-OFFS AND TAXES
PAID ON UNDISTRIBUTED LONG-TERM CAPITAL GAINS. SINCE INCEPTION RETURN BASED
ON AN INITIAL OFFERING PRICE OF $10.00.
--------------------------------------------------------------------------------
Sincerely yours,
/s/ Bruce N. Alpert
Bruce N. Alpert
President
February 24, 2005
THE GABELLI EQUITY TRUST INC.
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
Under SEC rules, all funds are required to include in their annual and
semi-annual shareholder reports a presentation of portfolio holdings in a table,
chart or graph by reasonably identifiable categories. The following table which
presents portfolio holdings as a percent of total net assets is provided in
compliance with such requirement.
Financial Services .................................... 7.7%
Food and Beverage ..................................... 7.7%
Repurchase Agreements ................................. 7.1%
Entertainment ......................................... 6.8%
Telecommunications .................................... 6.8%
Publishing ............................................ 6.5%
Energy and Utilities .................................. 6.3%
Diversified Industrial ................................ 5.3%
Cable and Satellite ................................... 4.3%
Consumer Products ..................................... 4.2%
Wireless Communications ............................... 4.0%
Automotive: Parts and Accessories ..................... 3.7%
Health Care ........................................... 3.4%
Hotels and Gaming ..................................... 3.3%
Equipment and Supplies ................................ 2.8%
Retail ................................................ 2.1%
Aviation: Parts and Services .......................... 1.9%
Consumer Services ..................................... 1.8%
Aerospace ............................................. 1.6%
Machinery ............................................. 1.5%
Agriculture ........................................... 1.4%
Automotive ............................................ 1.3%
Communications Equipment .............................. 1.3%
Specialty Chemicals ................................... 1.2%
Broadcasting .......................................... 1.1%
Real Estate ........................................... 1.1%
Environmental Services ................................ 0.9%
Electronics ........................................... 0.8%
Business Services ..................................... 0.6%
Metals and Mining ..................................... 0.5%
Manufactured Housing and Recreational Vehicles ........ 0.3%
Closed-End Funds ...................................... 0.2%
Paper and Forest Products ............................. 0.2%
Real Estate Investment Trusts ......................... 0.1%
Transportation ........................................ 0.1%
U.S. Government Obligations ........................... 0.1%
Computer Software and Services ........................ 0.0%
Other Assets and Liabilities - Net .................... 0.0%
------
100.0%
======
THE GABELLI EQUITY TRUST INC. (THE "EQUITY TRUST") FILES A COMPLETE SCHEDULE OF
PORTFOLIO HOLDINGS WITH THE SEC FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL
YEAR ON FORM N-Q, THE FIRST OF WHICH WAS FILED FOR THE QUARTER ENDED SEPTEMBER
30, 2004. SHAREHOLDERS MAY OBTAIN THIS INFORMATION AT WWW.GABELLI.COM OR BY
CALLING THE EQUITY TRUST AT 800-GABELLI (800-422-3554). THE EQUITY TRUST'S FORM
N-Q IS AVAILABLE ON THE SEC'S WEBSITE AT WWW.SEC.GOV AND MAY ALSO BE REVIEWED
AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC.
INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY
CALLING 1-800-SEC-0330.
PROXY VOTING: The Equity Trust files Form N-PX with its complete proxy voting
record for the 12 months ended June 30th, no later than August 31st of each
year. A description of the Equity Trust's proxy voting policies and procedures
are available (i) without charge, upon request, by calling 800-GABELLI
(800-422-3554); (ii) by writing to The Gabelli Funds at One Corporate Center,
Rye, NY 10580-1422; and (iii) by visiting the Securities and Exchange
Commission's website at www.sec.gov.
2
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
QUARTER ENDED DECEMBER 31, 2004
(UNAUDITED)
OWNERSHIP AT
DECEMBER 31,
SHARES 2004
------------ --------
NET PURCHASES
COMMON AND PREFERRED STOCKS
Agere Systems Inc., Cl. B .... 230,000 350,000
Ajinomoto Co. Inc. ........... 32,000 85,000
Albertson's Inc. ............. 10,000 180,000
H&R Block Inc. ............... 5,000 10,000
Calamos Asset Management Inc.,
Cl. A ..................... 7,500 7,500
Clorox Co .................... 30,000 30,000
Colgate-Palmolive Co ......... 3,000 3,000
Cooper Industries Ltd., Cl. A 10,000 160,000
Dreyer's Grand Ice Cream
Holdings Inc., Cl. A ...... 80,000 200,000
EchoStar Communications Corp.,
Cl. A ..................... 35,000 40,000
Fairchild Corp., Cl. A ....... 4,600 125,000
Freescale Semiconductor Inc.,
Cl. B (a) ................. 5,000 5,000
Gemstar-TV Guide
International Inc. ........ 20,000 420,000
Greif Inc., Cl. B ............ 1,600 5,000
ITT Industries Inc. .......... 2,000 120,000
Kerzner International Ltd. ... 10,200 10,200
Keyence Corp. ................ 1,500 4,500
Lin TV Corp., Cl. A .......... 15,000 35,000
Mandalay Resort Group ........ 20,000 40,000
Matsumotokiyoshi Co. Ltd. .... 8,000 38,000
Merck & Co. Inc. ............. 15,000 95,000
Modern Times Group, Cl. B .... 15,000 15,000
Mosaic Co. (b) ............... 10,000 10,000
Mueller Industries Inc. ...... 15,000 15,000
New York Times Co., Cl. A .... 2,500 117,500
News Corp., Cl. A (c) ........ 1,530,000 1,530,000
News Corp., Cl. B (d) ........ 20,000 20,000
News Corp., Cl. B, CDI (e) ... 60,000 60,000
Nippon Television
Network Corp. .............. 1,600 6,800
NiSource Inc. (f) ............ 12,270 12,270
Petroleo Brasileiro SA, ADR .. 15,000 15,000
Pfizer Inc. .................. 155,000 275,000
Rogers Communications Inc.,
Cl. B, ADR (g) ............ 297,500 407,845
Scripps Co (E.W.) Cl A ....... 5,000 145,000
Sequa Corp., $5 Cv. Pfd. ..... 100 3,100
Skyline Corp. ................ 14,000 20,000
Smith & Nephew plc ........... 40,000 80,000
Straumann Holding AG ......... 500 4,250
Telecom Italia SpA ........... 400,000 1,720,480
Telesp Celular Participacoes
SA, Pfd.,
Receipts .................. 3,852,990 3,852,990
Telesp Celular
Participacoes Sa,
ADR ....................... 23,417 90,217
Tim Participacoes SA, ADR (h) 32,165 32,165
UBS AG ....................... 3,000 23,000
VNU NV ....................... 1,000 1,000
William Demant Holding A/S ... 76,800 77,000
NET SALES
COMMON STOCKS
Acuity Brands Inc. ........... (10,000) 170,000
AGL Resources Inc. ........... (35,000) 10,000
Aliant Inc. .................. (5,000) --
Allstate Corp. ............... (40,000) 10,000
ALLTEL Corp. ................. (15,000) 10,000
America Movil SA de CV, Cl. L, ADR(1,000) 85,000
AMETEK Inc. .................. (10,000) 225,000
Andrew Corp. ................. (5,000) 70,000
Astrazeneca plc .............. (16,000) 19,146
OWNERSHIP AT
DECEMBER 31,
SHARES 2004
------------ --------
AT&T Corp. ................... (6,000) 294,000
AT&T Wireless
Services Inc. (i) ..........(2,332,800) --
Autonation Inc. .............. (40,000) 250,000
Biogen Idec Inc. ............. (2,000) 27,000
Boca Resorts Inc. Cl. A (j) .. (100,000) --
Brasil Telecom
Participacoes SA, ADR ...... (3,400) 30,000
Burlington Resources Inc. .... (5,000) 275,000
Cablevision Systems Corp.,
Cl. A ...................... (10,000) 1,500,000
Caesars Entertainment Inc. ... (190,000) 60,000
Catellus Development Corp. ... (60,000) 10,000
Central Europe and
Russia Fund Inc. ........... (1,333) 76,000
CenturyTel Inc. .............. (90,000) 10,000
Circor International Inc. .... (1,000) 94,000
Citizens Communications Co ... (5,000) 95,000
Clarcor Inc. ................. 0 100,000
Coldwater Creek Inc. ......... (3,750) 30,000
Commonwealth Telephone
Enterprises Inc. .......... (34,800) 220,000
Constellation Energy Group ... (2,000) 8,000
Corn Products
International Inc. ........ (15,000) 60,000
Curtiss-Wright Corp., Cl. B .. (640) 204,000
Del Monte Foods Co ........... (3,592) 70,000
Delphi Corp. ................. (20,000) --
Deutsche Bank AG, ADR ........ (3,000) 154,000
Donaldson Co. Inc. ........... (3,000) 217,000
Duke Energy Corp. ............ (35,000) 300,000
El Paso Electric Co .......... (30,000) 370,000
EMC Corp. .................... (60,000) --
Energizer Holdings Inc. ...... (1,000) 34,000
Fedders Corp. ................ (5,000) 75,000
Ford Motor Co ................ (7,000) 8,000
Franklin Elec Co., Inc. ...... (2,000) 24,000
GenCorp Inc. ................. (40,000) 220,000
General Motors Corp. ......... (50,000) 90,000
Gillette Co .................. (55,000) 135,000
GlaxoSmithKline plc .......... (10,000) 65,036
Greif Inc., Cl. A ............ (10,000) 235,000
Grupo Televisa SA, ADR ....... (10,100) 175,000
Harley-Davidson Inc. ......... (6,000) 44,000
Hershey Foods Corp. .......... (5,000) 30,000
Hibernia Corp., Cl. A ........ (2,000) 23,000
IDEX Corp. ................... (12,500) 250,000
IMC Global Inc. (b) .......... (10,000) --
Johnson Controls Inc. ........ (35,000) 145,000
Kellogg Co ................... (30,000) 215,000
Lamson & Sessions Co ......... (8,000) 390,000
Landauer, Inc. ............... (2,000) 96,000
Leucadia National Corp. ...... (6,000) 52,000
Liberty Media Corp., Cl. A ... (6,352) 2,210,000
Liberty Media International
Inc., Cl. A ................ (2,980) 130,000
Lockheed Martin Corp. ........ (22,000) 53,000
Loewen Group Inc. ............ (40,000) --
Lufkin Industries Inc. ....... (6,000) 54,000
Manitoba Telecom Services Inc. (5,000) --
Manulife Financial Corp. ..... (40,000) --
Metro-Goldwyn-Mayer Inc. ..... (82,788) --
MGM Mirage ................... (5,000) 65,000
Midland Co ................... (700) 189,300
Mitsubishi Securities Co. Ltd. (65,000) --
Mondavi (Robert) Corp.,
Cl. A (k) .................. (42,000) --
Motorola Inc. ................ (4,000) 110,000
National Presto
Industries Inc. ............ (4,000) 46,000
Navistar International Corp. . (50,000) 335,000
Newmont Mining Corp Holding Co (5,000) 125,000
News Corp. Ltd. (e) .......... (120,000) --
See accompanying notes to financial statements.
3
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES (CONTINUED)
QUARTER ENDED DECEMBER 31, 2004
(UNAUDITED)
OWNERSHIP AT
DECEMBER 31,
SHARES 2004
------------ --------
NET SALES -- (CONTINUED)
COMMON STOCKS -- (CONTINUED)
News Corp. Ltd., ADR (d) ..... (10,000) --
Nintendo Co. Ltd. ............ (10,700) --
NiSource Inc. (SAILS) (f) .... (100,000) --
Novartis AG, Registered ...... (3,000) 105,000
PACCAR Inc. .................. (2,000) 43,000
Pactiv Corp. ................. (5,000) 120,000
Park-Ohio Holdings Corp. ..... (12,000) 98,000
Paxson Communications Corp. .. (11,000) 129,000
Penton Media Inc. ............ (100,000) 200,000
PepsiCo Inc. ................. (15,000) 370,000
Ralcorp Holdings Inc. ........ (1,100) 58,900
Rogers Wireless
Communications Inc.,
Cl. B (g) ................. (177,000) --
Rollins Inc. ................. (47,600) 630,000
Royce Value Trust Inc. ....... (2,806) 34,000
RTL Group .................... (14,375) --
SBC Communications Inc. ...... (60,000) 150,000
Six Flags Inc. ............... (20,000) 180,000
Southwest Gas Corp. .......... (3,800) 16,200
Sprint Corp. ................. (50,000) 450,000
St. Joe. Co .................. (55,000) 185,000
Standard Motor Products Inc. . (3,000) 160,000
Swedish Match AB ............. (15,000) 890,000
T. Rowe Price Group Inc. ..... (1,500) 78,500
Tele Celular Sul Participacoes SA,
ADR (h) ................... (32,166) --
Tele Centro Oeste Celular
Participacoes SA, ADR (l) . (30,879) 24,787
Tele Leste Celular Participacoes SA,
ADR (m) ................... (1,420) 1,920
Telecom Italia SpA, RNC ...... (495,130) --
Telefonica SA, ADR ........... (11,000) 255,000
Telefonos de Mexico SA de CV,
Cl. L, ADR ................ (3,000) 32,000
Telephone & Data Systems Inc. (3,000) 402,000
TELUS Corp. .................. (5,250) 7,500
TELUS Corp., Non-Voting ...... (4,250) --
TELUS Corp., Non-Voting, ADR . (20,750) --
Terra Industries Inc. ........ (5,000) --
Titan Corp. .................. (20,000) 100,000
TRW Automotive Holdings
Corp. ..................... (45,000) 200,000
TXU Corp. .................... (5,000) 85,000
Unitrin Inc. ................. (60,000) --
Verizon Communications Inc. .. (120,000) 140,000
Viacom Inc., Cl. A ........... (5,000) 835,000
Wrigley (Wm.) Jr. Co ......... (10,000) 170,000
Young Broadcasting Inc., Cl. A (24,500) 115,500
OWNERSHIP AT
DECEMBER 31,
SHARES 2004
------------ --------
PREFERRED STOCKS
Citizens Communications Co.,
5.000% Cv. Pfd. (9,400) --
News Corp. Ltd., Pfd., ADR (c) (770,000) --
---------------------
(a) Spin-off -- .110415 shares of Freescale Semiconductor Inc., Cl. B for every
1 share of Motorola Inc
(b) Merger -- 1 share of Mosaic Co. for every 1 share of IMC
(c) Merger -- 2 shares of News Corp., Cl. A for every 1 share of News Corp.
Ltd., Pfd., ADR
(d) Merger -- 2 shares of News Corp., Cl. B for every 1 share of News Corp.
Ltd., ADR
(e) Merger -- 1 share of News Corp., Cl. B, CDI for every 2 shares of News
Corp. Ltd
(f) Merger -- .1227 share of NiSource Inc. for every 1 share of NiSource SAILS
(g) Exchange Shares -- 1.75 shares of Rogers Communications Inc., Cl. B, ADR
for 1 share of Rogers Wireless Communications Inc., Cl. B
(h) Name change from Tele Celular Sul Par to Tim Participacoes, ADR
(i) Cash Merger -- $15 for every share
(j) Cash Merger -- $24 for every share
(k) Cash Merger -- $56.50 for every share
(l) Tender Offer -- $11.05555 for 1 share
(m) Tender Offer -- $18.97821 for 1 share
See accompanying notes to financial statements.
4
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2004
MARKET
SHARES COST VALUE
------ ---- -------
COMMON STOCKS -- 92.4%
FINANCIAL SERVICES -- 7.7%
7,000 Allianz AG ............. $ 866,497 $ 928,640
10,000 Allstate Corp. ......... 418,128 517,200
550,000 American Express Co. ... 21,247,943 31,003,500
34,000 Argonaut Group Inc.+ ... 893,076 718,420
95,000 Aviva plc .............. 935,100 1,145,413
90,000 Banco Santander Central
Hispano SA, ADR ..... 322,130 1,113,300
110,000 Bank of Ireland ........ 635,101 1,831,589
77,000 Bank of New York Co. Inc. 2,834,050 2,573,340
275,000 Bankgesellschaft Berlin AG+ 5,495,399 755,063
260 Berkshire Hathaway Inc.,
Cl. A+ .............. 1,074,048 22,854,000
7,500 Calamos Asset Management
Inc., Cl. A+ ........ 135,000 202,500
185,000 Commerzbank AG, ADR+ ... 3,747,342 3,814,663
154,000 Deutsche Bank AG, ADR .. 9,919,608 13,707,540
20,000 Dun and Bradstreet Corp.+ 424,266 1,193,000
10,000 H&R Block Inc. ......... 329,930 490,000
23,000 Hibernia Corp., Cl. A .. 184,942 678,730
90,000 Irish Life & Permanent plc 702,922 1,688,188
140,000 Janus Capital Group Inc. 2,177,430 2,353,400
45,000 JPMorgan Chase & Co. ... 1,251,002 1,755,450
155,000 Kinnevik Investment AB,
Cl. B ............... 728,053 1,650,202
52,000 Leucadia National Corp. 1,905,290 3,612,960
95,000 Lloyds TSB Group plc ... 775,666 862,708
100,000 Mellon Financial Corp. . 3,140,094 3,111,000
189,300 Midland Co. ............ 1,388,194 5,919,411
30,000 Moody's Corp. .......... 1,024,050 2,605,500
257,500 Nikko Cordial Corp. .... 1,725,292 1,364,521
150,000 Phoenix Companies Inc. . 2,179,395 1,875,000
2,500 Prudential Financial Inc. 68,750 137,400
46,002 RAS SpA ................ 576,832 1,040,469
60,000 Riggs National Corp. ... 552,538 1,275,600
45,000 Schwab (Charles) Corp. . 657,562 538,200
80,000 State Street Corp. ..... 4,001,480 3,929,600
20,000 SunTrust Banks Inc. .... 419,333 1,477,600
78,500 T. Rowe Price Group Inc. 4,816,620 4,882,700
23,000 UBS AG ................. 1,094,361 1,928,634
60,000 Waddell & Reed Financial
Inc., Cl. A ......... 1,247,250 1,433,400
-------------- --------------
79,894,674 126,968,841
-------------- --------------
FOOD AND BEVERAGE -- 7.7%
85,000 Ajinomoto Co. Inc. ..... 998,444 1,012,004
30,000 Cadbury Schweppes plc,
ADR ................. 746,559 1,131,000
90,000 Campbell Soup Co. ...... 2,383,197 2,690,100
40,000 Coca-Cola Co. .......... 1,871,842 1,665,200
5,000 Coca-Cola Enterprises Inc. 77,194 104,250
40,000 Coca-Cola Hellenic
Bottling Co. SA ..... 519,295 977,572
60,000 Corn Products
International Inc. .. 1,658,919 3,213,600
70,000 Del Monte Foods Co.+ ... 595,339 771,400
10,108 Denny's Corp.+ ......... 14,358 45,486
100,000 Diageo plc ............. 1,037,393 1,426,487
224,000 Diageo plc, ADR ........ 9,660,541 12,965,120
200,000 Dreyer's Grand Ice Cream
Holdings Inc., Cl. A 15,737,691 16,086,000
60,000 Flowers Foods Inc. ..... 1,011,842 1,894,800
30,000 Fomento Economico
Mexicano SA de
CV, ADR ............. 1,094,322 1,578,300
90,000 General Mills Inc. ..... 4,162,848 4,473,900
40,000 Groupe Danone .......... 3,491,214 3,694,441
500,000 Grupo Bimbo SA de CV,
Cl. A ............... 1,052,379 1,263,120
20,000 Hain Celestial
Group Inc.+ ......... 267,663 413,400
130,000 Heinz (H.J.) Co. ....... 4,668,773 5,068,700
30,000 Hershey Foods Corp. .... 1,005,353 1,666,200
MARKET
SHARES COST VALUE
------ ---- -------
215,000 Kellogg Co. ............ $ 7,125,927 $ 9,601,900
75,000 Kerry Group plc, Cl. A . 860,877 1,809,497
12,100 LVMH Moet Hennessy
Louis Vuitton SA .... 419,053 926,784
2,500 Nestle SA .............. 513,610 654,076
550,000 PepsiAmericas Inc. ..... 9,711,426 11,682,000
370,000 PepsiCo Inc. ........... 17,894,457 19,314,000
6,750 Pernod-Ricard .......... 470,174 1,034,015
58,900 Ralcorp Holdings Inc. .. 923,976 2,469,677
70,000 Sara Lee Corp. ......... 1,266,240 1,689,800
2,000 Smucker (J.M.) Co. ..... 52,993 94,140
109,000 Tootsie Roll
Industries Inc. ..... 1,566,039 3,774,670
170,000 Wrigley (Wm.) Jr. Co. .. 10,436,095 11,762,300
-------------- --------------
103,296,033 126,953,939
-------------- --------------
ENTERTAINMENT -- 6.8%
160,000 Canal Plus, ADR ........ 34,011 251,200
110,000 EMI Group plc .......... 292,543 559,651
80,000 EMI Group plc, ADR ..... 947,487 814,040
120,000 Fox Entertainment Group
Inc., Cl. A+ ........ 2,783,871 3,751,200
50,000 GC Companies Inc.+(a) .. 54,500 43,000
420,000 Gemstar-TV Guide
International Inc.+ . 2,979,022 2,486,400
175,000 Grupo Televisa SA, ADR . 6,503,550 10,587,500
2,210,000 Liberty Media Corp.,
Cl. A+ .............. 22,983,152 24,265,800
160,000 Publishing &
roadcasting Ltd. .... 893,720 2,194,923
15,000 Regal Entertainment Group,
Cl. A ............... 285,000 311,250
180,000 Six Flags Inc.+ ........ 1,304,848 966,600
260,000 The Walt Disney Co. .... 5,453,387 7,228,000
750,000 Time Warner Inc.+ ...... 16,797,691 14,580,000
835,000 Viacom Inc., Cl. A ..... 34,674,976 30,961,800
43,900 Vivendi Universal SA+ .. 2,247,329 1,401,673
330,000 Vivendi Universal
SA, ADR+ ............ 8,718,814 10,583,100
-------------- --------------
106,953,901 110,986,137
-------------- --------------
TELECOMMUNICATIONS -- 6.7%
10,000 ALLTEL Corp. ........... 221,940 587,600
294,000 AT&T Corp. ............. 9,169,009 5,603,640
90,540 ATX Communications Inc.+ 151,570 3,622
290,000 BCE Inc. ............... 7,665,817 6,997,700
30,000 Brasil Telecom Participacoes
SA, ADR ............. 1,743,257 1,144,500
1,760,000 BT Group plc ........... 7,277,785 6,859,422
4,440,836 Cable & Wireless
Jamaica Ltd.+ ....... 101,639 119,393
10,000 CenturyTel Inc. ........ 322,000 354,700
950,000 Cincinnati Bell Inc.+ .. 7,398,927 3,942,500
95,000 Citizens
Communications Co. .. 1,124,779 1,310,050
220,000 Commonwealth Telephone
Enterprises Inc.+ ... 8,359,934 10,925,200
110,000 Compania de
Telecomunicaciones de
Chile SA, ADR ....... 1,634,847 1,236,400
170,000 Deutsche Telekom
AG, ADR+ ............ 2,827,195 3,855,600
15,000 Embratel Participacoes
SA, ADR+ ............ 266,400 157,800
5,000 France Telecom SA, ADR . 146,305 165,400
233 KDDI Corp. ............. 830,434 1,255,158
100,000 KPN NV ................. 232,728 950,115
1,000,000 Qwest Communications
International Inc.+ . 3,357,501 4,440,000
407,845 Rogers Communications
Inc., Cl. B, New York 5,045,177 10,665,147
9,655 Rogers Communications
Inc., Cl. B, Toronto 137,424 253,352
150,000 SBC Communications Inc. 4,625,306 3,865,500
450,000 Sprint Corp. ........... 14,920,599 11,182,500
See accompanying notes to financial statements.
5
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
MARKET
SHARES COST VALUE
------ ---- -------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
186,554 Tele Norte Leste
Participacoes SA, ADR $ 2,554,387 $ 3,147,166
50,000 Telecom Argentina SA,
Cl. B, ADR+ ......... 423,451 548,000
1,720,480 Telecom Italia SpA ..... 6,794,523 7,039,071
255,000 Telefonica SA, ADR ..... 13,102,022 14,407,500
17,595 Telefonica SA, BDR ..... 202,143 324,607
32,000 Telefonos de Mexico SA
de CV, Cl. L, ADR ... 482,044 1,226,240
7,500 TELUS Corp. ............ 132,504 226,724
52,500 TELUS Corp., ADR ....... 950,397 1,587,072
140,000 Verizon Communications
Inc. ................ 5,617,994 5,671,400
-------------- --------------
107,820,038 110,053,079
-------------- --------------
PUBLISHING -- 6.5%
20,000 Dow Jones & Co. Inc. ... 1,030,036 861,200
248,266 Independent News &
Media plc ........... 358,456 782,897
20,000 Knight-Ridder Inc. ..... 1,345,264 1,338,800
5,000 McClatchy Co., Cl. A ... 240,250 359,050
100,000 McGraw-Hill Companies Inc. 7,669,017 9,154,000
339,000 Media General Inc.,
Cl. A ............... 20,284,273 21,970,590
124,000 Meredith Corp. ......... 2,253,297 6,720,800
117,500 New York Times Co.,
Cl. A ............... 5,358,749 4,794,000
1,530,000 News Corp., Cl. A ...... 20,861,688 28,549,800
20,000 News Corp., Cl. B ...... 186,274 384,000
60,000 News Corp., Cl. B, CDI . 696,029 1,152,805
80,000 Pearson plc ............ 911,889 965,326
200,000 Penton Media Inc.+ ..... 439,128 18,000
400,000 PRIMEDIA Inc.+ ......... 1,948,569 1,520,000
90,000 Pulitzer Inc. .......... 5,077,945 5,836,500
175,000 Reader's Digest
Association Inc. .... 3,181,221 2,434,250
261,319 SCMP Group Ltd. ........ 191,790 108,425
145,000 Scripps (E.W.) Co., Cl. A 4,789,609 7,000,600
66,585 Seat Pagine Gialle SpA . 177,139 30,681
80,000 Thomas Nelson Inc. ..... 951,267 1,808,000
280,000 Tribune Co. ............ 12,804,576 11,799,200
1,000 VNU NV ................. 29,111 29,536
-------------- --------------
90,785,577 107,618,460
-------------- --------------
ENERGY AND UTILITIES -- 6.3%
70,000 AES Corp.+ ............. 397,267 956,900
10,000 AGL Resources Inc. ..... 174,924 332,400
120,000 Allegheny Energy Inc.+ . 1,090,388 2,365,200
70,000 Apache Corp. ........... 2,728,670 3,539,900
247,000 BP plc, ADR ............ 10,490,760 14,424,800
275,000 Burlington
Resources Inc. ...... 12,090,077 11,962,500
115,000 CH Energy Group Inc. ... 4,749,282 5,525,750
20,000 Cinergy Corp. .......... 607,416 832,600
100,000 CMS Energy Corp.+ ...... 640,176 1,045,000
100,000 ConocoPhillips ......... 7,227,891 8,683,000
8,000 Constellation Energy
Group Inc. .......... 189,742 349,680
26,000 DPL Inc. ............... 524,093 652,860
15,000 DTE Energy Co. ......... 663,290 646,950
300,000 Duke Energy Corp. ...... 6,568,900 7,599,000
110,000 Duquesne Light
Holdings Inc. ....... 1,848,062 2,073,500
195,000 El Paso Corp. .......... 2,391,453 2,028,000
370,000 El Paso Electric Co.+ .. 3,381,794 7,007,800
50,000 Energy East Corp. ...... 1,065,733 1,334,000
80,000 Eni SpA ................ 1,367,106 2,002,990
80,000 Exxon Mobil Corp. ...... 2,750,108 4,100,800
10,000 FPL Group Inc. ......... 556,256 747,500
70,000 Halliburton Co. ........ 1,726,011 2,746,800
35,000 Kerr-McGee Corp. ....... 2,046,290 2,022,650
150,000 Mirant Corp.+ .......... 201,190 57,750
MARKET
SHARES COST VALUE
------ ---- -------
12,270 NiSource Inc. .......... $ 264,419 $ 279,511
300,000 Northeast Utilities .... 5,660,050 5,655,000
15,000 Petroleo Brasileiro
SA, ADR ............. 586,890 596,700
100,000 Progress Energy
Inc., CVO+ .......... 52,000 13,000
30,000 SJW Corp. .............. 883,106 1,092,000
16,200 Southwest Gas Corp. .... 355,942 411,480
8,657 Total SA ............... 1,262,555 1,890,961
85,000 TXU Corp. .............. 1,756,396 5,487,600
255,000 Westar Energy Inc. ..... 4,319,800 5,831,850
-------------- --------------
80,618,037 104,296,432
-------------- --------------
DIVERSIFIED INDUSTRIAL -- 5.3%
170,000 Acuity Brands Inc. ..... 5,161,361 5,406,000
195,000 Ampco-Pittsburgh Corp. . 2,627,873 2,847,000
25,000 Bouygues SA ............ 724,706 1,155,362
160,000 Cooper Industries Ltd.,
Cl. A ............... 8,215,442 10,862,400
250,000 Crane Co. .............. 4,841,093 7,210,000
100,500 CRH plc ................ 1,259,458 2,691,110
110,000 GATX Corp. ............. 2,036,677 3,251,600
235,000 Greif Inc., Cl. A ...... 4,433,530 13,160,000
5,000 Greif Inc., Cl. B ...... 135,355 275,000
415,000 Honeywell International
Inc. ................ 13,837,698 14,695,150
120,000 ITT Industries Inc. .... 5,464,172 10,134,000
390,000 Lamson & Sessions Co.+ . 2,380,718 3,549,000
98,000 Park-Ohio Holdings
Corp.+ .............. 1,023,835 2,538,200
10,000 Smiths Group plc ....... 171,257 157,816
4,000 Sulzer AG .............. 850,053 1,590,889
7,500 Technip SA ............. 721,269 1,386,435
100,000 Thomas Industries Inc. . 1,388,525 3,992,000
50,000 Trinity Industries Inc. 945,000 1,704,000
-------------- --------------
56,218,022 86,605,962
-------------- --------------
CONSUMER PRODUCTS -- 4.2%
60,000 Altadis SA ............. 885,677 2,748,403
43,000 Christian Dior SA ...... 1,633,717 2,925,309
15,000 Church & Dwight Co. Inc. 99,535 504,300
30,000 Clorox Co. ............. 1,666,387 1,767,900
3,000 Colgate-Palmolive Co. .. 151,130 153,480
90,000 Compagnie Financiere
Richemont AG, Cl. A . 1,264,405 2,995,779
50,000 Department 56 Inc.+ .... 524,317 832,500
34,000 Energizer Holdings Inc.+ 924,111 1,689,460
35,000 Fortune Brands Inc. .... 2,451,519 2,701,300
30,000 Gallaher Group plc ..... 274,164 455,880
235,000 Gallaher Group plc, ADR 13,847,386 14,266,850
135,000 Gillette Co. ........... 4,307,149 6,045,300
2,000 Givaudan SA ............ 550,742 1,317,386
44,000 Harley-Davidson Inc. ... 2,044,082 2,673,000
15,000 Matsushita Electric
Industrial Co.
Ltd., ADR ........... 178,325 240,750
100,000 Mattel Inc. ............ 1,549,565 1,949,000
60,000 Maytag Corp. ........... 1,389,460 1,266,000
46,000 National Presto
Industries Inc. ..... 1,654,936 2,093,000
200,000 Procter & Gamble Co. ... 9,738,104 11,016,000
10,000 Swatch Group AG, Cl. B . 584,263 1,467,769
890,000 Swedish Match AB ....... 9,252,561 10,312,397
-------------- --------------
54,971,535 69,421,763
-------------- --------------
CABLE AND SATELLITE -- 4.2%
1,500,000 Cablevision Systems Corp.,
Cl. A+ .............. 33,080,007 37,350,000
30,000 Charter Communications
Inc., Cl. A+ ........ 138,876 67,200
370,000 Comcast Corp., Cl. A+ .. 12,462,292 12,313,600
85,000 Comcast Corp., Cl. A,
Special+ ............ 756,584 2,791,400
153,444 DIRECTV Group Inc.+ .... 2,214,257 2,568,653
40,000 EchoStar Communications
Corp., Cl. A ........ 1,257,465 1,329,600
See accompanying notes to financial statements.
6
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
MARKET
SHARES COST VALUE
------ ---- -------
COMMON STOCKS (CONTINUED)
CABLE AND SATELLITE (CONTINUED)
130,000 Liberty Media International
Inc., Cl. A+ ........ $ 2,810,764 $ 6,009,900
50,000 Loral Space &
Communications Ltd.+ 11,250 8,500
20,000 Shaw Communications
Inc., Cl. B ......... 52,983 366,064
80,000 Shaw Communications
Inc., Cl. B,
Non-Voting .......... 329,198 1,463,200
461,472 UnitedGlobalCom Inc.,
Cl. A+ .............. 2,911,836 4,457,819
-------------- --------------
56,025,512 68,725,936
-------------- --------------
WIRELESS COMMUNICATIONS -- 4.0%
85,000 America Movil SA de CV,
Cl. L, ADR .......... 2,429,685 4,449,750
1,760,000 mm02 plc+ .............. 2,263,783 4,147,754
100,000 mm02 plc, ADR+ ......... 1,149,772 2,357,000
80,000 Nextel Communications
Inc., Cl. A+ ........ 2,038,544 2,400,000
1,500 NTT DoCoMo Inc. ........ 3,553,937 2,766,663
24,787 Tele Centro Oeste Celular
Participacoes SA, ADR 74,303 244,648
1,920 Tele Leste Celular
Participacoes SA, ADR+ 51,357 23,328
3,340 Tele Norte Celular
Participacoes SA, ADR 51,601 30,494
1,400,000 Telecom Italia Mobile SpA 10,157,273 10,466,223
90,000 Telefonica Moviles SA .. 660,946 1,132,799
8,350 Telemig Celular
Participacoes SA, ADR 241,320 235,720
402,000 Telephone & Data
Systems Inc. ........ 34,479,935 30,933,900
90,217 Telesp Celular Participacoes
SA, ADR+ ............ 2,244,813 613,478
3,852,990 Telesp Celular Participacoes
SA, Pfd., Receipts+ . 7,173 10,082
32,165 Tim Participacoes
SA, ADR ............. 390,212 495,984
30,000 United States
Cellular Corp.+ ..... 1,006,305 1,342,800
553,888 Vodafone Group plc ..... 975,799 1,502,067
100,000 Vodafone Group plc, ADR 2,378,590 2,738,000
-------------- --------------
64,155,348 65,890,690
-------------- --------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.6%
60,000 BorgWarner Inc. ........ 1,326,210 3,250,200
100,000 CLARCOR Inc. ........... 1,597,861 5,477,000
400,000 Dana Corp. ............. 6,377,042 6,932,000
300,000 Genuine Parts Co. ...... 9,098,465 13,218,000
145,000 Johnson Controls Inc. .. 6,514,052 9,198,800
116,000 Midas Inc.+ ............ 1,508,953 2,320,000
331,500 Modine Manufacturing Co. 8,839,589 11,194,755
80,500 Scheib (Earl) Inc.+ .... 637,614 263,235
160,000 Standard Motor
Products Inc. ....... 1,728,738 2,528,000
20,000 Superior Industries
International Inc. .. 510,238 581,000
105,000 TransPro Inc.+ ......... 936,807 640,500
200,000 TRW Automotive
Holdings Corp.+ ..... 5,295,120 4,140,000
-------------- --------------
44,370,689 59,743,490
-------------- --------------
HEALTH CARE -- 3.4%
10,000 Abbott Laboratories .... 398,848 466,500
55,000 Amgen Inc.+ ............ 3,215,239 3,528,250
19,146 AstraZeneca plc,
Stockholm ........... 710,674 695,783
27,000 Biogen Idec Inc.+ ...... 163,601 1,798,470
145,000 Bristol-Myers Squibb Co. 3,777,879 3,714,900
65,036 GlaxoSmithKline plc .... 1,653,252 1,525,822
4,000 GlaxoSmithKline plc, ADR 216,096 189,560
18,000 Henry Schein Inc.+ ..... 775,800 1,253,520
MARKET
SHARES COST VALUE
------ ---- -------
1,500 Hospira Inc.+ .......... $ 36,603 $ 50,250
16,000 INAMED Corp.+ .......... 698,771 1,012,000
47,000 Invitrogen Corp.+ ...... 2,339,924 3,155,110
18,750 IVAX Corp.+ ............ 170,440 296,625
95,000 Merck & Co. Inc. ....... 4,415,001 3,053,300
2,000 Nobel Biocare Holding AG 286,712 362,325
41,000 Novartis AG ............ 1,292,180 2,066,045
105,000 Novartis AG, ADR ....... 4,622,998 5,306,700
275,000 Pfizer Inc. ............ 7,832,051 7,394,750
18,100 Roche Holding AG ....... 1,644,615 2,083,625
31,808 Sanofi-Aventis ......... 1,786,487 2,542,219
100,000 Schering-Plough Corp. .. 1,917,839 2,088,000
80,000 Smith & Nephew plc ..... 752,722 818,646
4,250 Straumann Holding AG ... 873,571 882,069
60,000 Sybron Dental
Specialties Inc.+ ... 1,230,090 2,122,800
10,000 Synthes Inc. ........... 677,094 1,121,274
23,000 Takeda Pharmaceutical
Co. Ltd. ............ 1,140,219 1,158,193
77,000 William Demant
Holding A/S+ ........ 3,491,923 3,616,047
100,000 Wyeth .................. 4,105,470 4,259,000
-------------- --------------
50,226,099 56,561,783
-------------- --------------
HOTELS AND GAMING -- 3.3%
110,000 Aztar Corp.+ ........... 1,387,188 3,841,200
60,000 Caesars Entertainment
Inc.+ ............... 771,000 1,208,400
200,000 Gaylord Entertainment
Co.+ ................ 4,949,319 8,306,000
55,000 Greek Organization of
Football
Prognostics SA ...... 630,177 1,522,088
16,000 GTECH Holdings Corp. ... 69,219 415,200
2,525,000 Hilton Group plc ....... 9,029,400 13,791,849
650,000 Hilton Hotels Corp. .... 9,562,105 14,781,000
10,200 Kerzner International
Ltd.+ ............... 516,352 612,510
40,000 Mandalay Resort Group .. 2,785,464 2,817,200
65,000 MGM Mirage+ ............ 2,201,902 4,728,100
40,000 Starwood Hotels &
Resorts Worldwide Inc. 920,096 2,336,000
-------------- --------------
32,822,222 54,359,547
-------------- --------------
EQUIPMENT AND SUPPLIES -- 2.8%
225,000 AMETEK Inc. ............ 5,409,753 8,025,750
2,000 Amphenol Corp., Cl. A+ . 14,775 73,480
94,000 CIRCOR International
Inc. ................ 974,241 2,177,040
217,000 Donaldson Co. Inc. ..... 2,993,298 7,069,860
75,000 Fedders Corp. .......... 451,526 271,500
115,000 Flowserve Corp.+ ....... 2,167,080 3,167,100
24,000 Franklin Electric
Co. Inc. ............ 258,462 1,014,240
100,000 Gerber Scientific Inc.+ 1,060,701 761,000
70,000 GrafTech
International Ltd.+ . 850,486 662,200
250,000 IDEX Corp. ............. 8,425,135 10,125,000
20,000 Ingersoll-Rand Co.,
Cl. A ............... 870,760 1,606,000
54,000 Lufkin Industries Inc. . 1,045,848 2,155,032
1,000 Manitowoc Co. Inc. ..... 25,450 37,650
15,000 Mueller Industries Inc. 661,354 483,000
1,000 Sealed Air Corp.+ ...... 17,404 53,270
230,000 Watts Water Technologies
Inc., Cl. A ......... 3,240,796 7,415,200
100,000 Weir Group plc ......... 420,789 617,248
-------------- --------------
28,887,858 45,714,570
-------------- --------------
RETAIL -- 2.1%
180,000 Albertson's Inc. ....... 4,755,438 4,298,400
250,000 AutoNation Inc.+ ....... 3,160,834 4,802,500
30,000 Coldwater Creek Inc.+ .. 160,768 926,100
22,000 Ito-Yokado Co. Ltd. .... 749,555 923,197
38,000 Matsumotokiyoshi
Co. Ltd. ............ 1,037,783 1,082,853
323,500 Neiman Marcus Group Inc.,
Cl. B ............... 7,874,064 21,609,800
-------------- --------------
17,738,442 33,642,850
-------------- --------------
See accompanying notes to financial statements.
7
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
MARKET
SHARES COST VALUE
------ ---- -------
COMMON STOCKS (CONTINUED)
AVIATION: PARTS AND SERVICES -- 1.9%
204,000 Curtiss-Wright Corp.,
Cl. B ............... $ 5,811,547 $ 11,477,040
125,000 Fairchild Corp., Cl. A+ 1,043,863 461,250
220,000 GenCorp Inc. ........... 2,587,048 4,085,400
90,000 Precision Castparts Corp. 2,330,982 5,911,200
84,000 Sequa Corp., Cl. A+ .... 3,347,991 5,136,600
74,600 Sequa Corp., Cl. B+ .... 3,852,672 4,606,550
-------------- --------------
18,974,103 31,678,040
-------------- --------------
CONSUMER SERVICES -- 1.8%
460,000 IAC/InterActiveCorp+ ... 11,367,750 12,705,200
630,000 Rollins Inc. ........... 13,867,915 16,581,600
-------------- --------------
25,235,665 29,286,800
-------------- --------------
MACHINERY -- 1.5%
10,000 Caterpillar Inc. ....... 136,559 975,100
320,000 Deere & Co. ............ 19,641,708 23,808,000
-------------- --------------
19,778,267 24,783,100
-------------- --------------
AEROSPACE -- 1.5%
110,000 Boeing Co. ............. 4,638,808 5,694,700
53,000 Lockheed Martin Corp. .. 3,043,828 2,944,150
255,000 Northrop Grumman Corp. . 13,064,361 13,861,800
100,000 Titan Corp.+ ........... 2,000,473 1,620,000
-------------- --------------
22,747,470 24,120,650
-------------- --------------
AGRICULTURE -- 1.4%
1,000,000 Archer-Daniels-Midland Co. 14,500,966 22,310,000
5,000 Delta & Pine Land Co. .. 84,396 136,400
10,000 Mosaic Co.+ ............ 139,584 163,200
-------------- --------------
14,724,946 22,609,600
-------------- --------------
AUTOMOTIVE -- 1.3%
8,000 Ford Motor Co. ......... 191,044 117,120
90,000 General Motors Corp. ... 3,434,568 3,605,400
335,000 Navistar International
Corp.+ ............... 12,403,039 14,733,300
43,000 PACCAR Inc. ............ 431,444 3,460,640
-------------- --------------
16,460,095 21,916,460
-------------- --------------
COMMUNICATIONS EQUIPMENT -- 1.3%
350,000 Agere Systems Inc.,
Cl. B+ .............. 648,860 472,500
70,000 Andrew Corp.+ .......... 764,939 954,100
550,000 Corning Inc.+ .......... 5,012,562 6,473,500
130,000 Lucent Technologies Inc.+ 800,828 488,800
110,000 Motorola Inc. .......... 1,378,052 1,892,000
100,000 Nortel Networks Corp.+ . 686,285 349,000
44,000 Scientific-Atlanta Inc. 355,750 1,452,440
300,000 Thomas & Betts Corp.+ .. 5,741,097 9,225,000
-------------- --------------
15,388,373 21,307,340
-------------- --------------
SPECIALTY CHEMICALS -- 1.2%
5,400 Ciba Specialty Chemicals
AG, ADR ............. 8,652 206,442
20,000 E.I. du Pont de Nemours
and Co. ............. 802,600 981,000
330,000 Ferro Corp. ............ 6,975,503 7,652,700
40,000 Fuller (H.B.) Co. ...... 968,437 1,140,400
120,000 Hercules Inc.+ ......... 1,543,119 1,782,000
232,300 Omnova Solutions Inc.+ . 1,879,165 1,305,526
300,000 Sensient Technologies
Corp. ............... 5,529,921 7,197,000
10,000 Syngenta AG, ADR ....... 16,177 213,500
-------------- --------------
17,723,574 20,478,568
-------------- --------------
REAL ESTATE -- 1.1%
70,000 Cheung Kong (Holdings)
Ltd. ................ 815,521 697,956
100,000 Florida East Coast
Industries Inc. ..... 2,137,516 4,510,000
55,000 Griffin Land &
Nurseries Inc.+ ..... 513,144 1,416,250
185,000 St. Joe Co. ............ 5,480,119 11,877,000
-------------- --------------
8,946,300 18,501,206
-------------- --------------
MARKET
SHARES COST VALUE
------ ---- -------
BROADCASTING -- 1.1%
16,666 Corus Entertainment Inc.,
Cl. B ............... $ 62,035 $ 347,745
120,000 Gray Television Inc. ... 1,204,736 1,860,000
27,500 Gray Television Inc.,
Cl. A .............. 370,755 389,125
200,000 Liberty Corp. .......... 8,528,905 8,792,000
35,000 Lin TV Corp., Cl. A+ ... 717,566 668,500
165,000 Mediaset SpA ........... 1,326,669 2,092,497
15,000 Modern Times Group,
Cl. B+ .............. 385,867 408,553
6,800 Nippon Television
Network Corp. ....... 1,083,908 1,021,294
40,375 NRJ Group .............. 384,806 886,307
129,000 Paxson Communications
Corp.+ .............. 630,594 178,020
100,000 Television Broadcasts Ltd. 396,239 464,446
115,500 Young Broadcasting Inc.,
Cl. A+ .............. 1,966,857 1,219,680
-------------- --------------
17,058,937 18,328,167
-------------- --------------
ENVIRONMENTAL SERVICES -- 0.9%
65,000 Republic Services Inc. . 875,761 2,180,100
400,000 Waste Management Inc. .. 9,495,206 11,976,000
-------------- --------------
10,370,967 14,156,100
-------------- --------------
ELECTRONICS -- 0.8%
5,000 Freescale Semiconductor
Inc., Cl. B+ ........ 69,847 91,800
3,000 Hitachi Ltd., ADR ...... 218,796 208,290
4,500 Keyence Corp. .......... 937,548 1,008,295
20,000 Molex Inc., Cl. A ...... 519,697 533,000
7,500 NEC Corp., ADR ......... 43,625 45,975
9,500 Rohm Co. Ltd. .......... 1,408,684 982,727
38,800 Royal Philips Electronics
NV, ADR ............. 53,456 1,028,200
45,000 Sony Corp., ADR ........ 1,340,589 1,753,200
270,000 Texas Instruments Inc. . 6,577,535 6,647,400
14,400 Tokyo Electron Ltd. .... 783,746 886,737
-------------- --------------
11,953,523 13,185,624
-------------- --------------
BUSINESS SERVICES -- 0.6%
60,000 ANC Rental Corp.+ ...... 578,273 6
150,000 Cendant Corp. .......... 2,981,441 3,507,000
1,000 CheckFree Corp.+ ....... 9,040 38,080
212,500 Group 4 Securicor plc+ . 0 571,170
96,000 Landauer Inc. .......... 2,481,528 4,387,200
70,000 Nashua Corp.+ .......... 634,028 795,200
25,000 Secom Co. Ltd. ......... 1,095,891 1,000,293
-------------- --------------
7,780,201 10,298,949
-------------- --------------
METALS AND MINING -- 0.5%
72,500 Harmony Gold Mining
Co. Ltd. ............ 347,738 658,886
35,000 Harmony Gold Mining
Co. Ltd., ADR ....... 282,733 324,450
125,000 Newmont Mining Corp. ... 2,900,512 5,551,250
50,000 Placer Dome Inc. ....... 487,169 943,000
-------------- --------------
4,018,152 7,477,586
-------------- --------------
MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 0.3%
50,000 Champion Enterprises
Inc.+ ............... 466,465 591,000
50,000 Fleetwood Enterprises
Inc.+ ............... 642,160 673,000
32,222 Huttig Building
Products Inc.+ ...... 81,163 336,720
15,000 Martin Marietta
Materials Inc. ...... 322,688 804,900
10,000 Nobility Homes Inc. .... 195,123 233,000
80,000 Sekisui House Ltd. ..... 846,007 932,175
20,000 Skyline Corp. .......... 804,043 816,000
1,000 Southern Energy
Homes Inc.+ ......... 3,900 4,685
-------------- --------------
3,361,549 4,391,480
-------------- --------------
See accompanying notes to financial statements.
8
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2004
MARKET
SHARES COST VALUE
------ ---- -------
COMMON STOCKS (CONTINUED)
CLOSED-END FUNDS -- 0.2%
76,000 Central Europe and Russia
Fund Inc. ........... $ 1,107,935 $ 2,128,000
70,000 New Germany Fund Inc. .. 754,518 633,500
34,000 Royce Value Trust Inc. . 420,900 694,960
-------------- --------------
2,283,353 3,456,460
-------------- --------------
PAPER AND FOREST PRODUCTS -- 0.2%
120,000 Pactiv Corp.+ .......... 1,259,210 3,034,800
-------------- --------------
TRANSPORTATION -- 0.1%
100,000 AMR Corp.+ ............. 1,924,248 1,095,000
15,000 Grupo TMM SA,
Cl. A, ADR+ ......... 80,460 54,900
-------------- --------------
2,004,708 1,149,900
-------------- --------------
REAL ESTATE INVESTMENT TRUSTS -- 0.1%
10,000 Catellus Development
Corp. ............... 216,006 306,000
16,656 Rayonier Inc. .......... 798,811 814,645
-------------- --------------
1,014,817 1,120,645
-------------- --------------
COMPUTER SOFTWARE AND SERVICES -- 0.0%
25,256 Telecom Italia
Media SpA+ .......... 26,868 11,432
-------------- --------------
TOTAL COMMON
STOCKS ............... 1,195,895,065 1,518,836,386
-------------- --------------
PREFERRED STOCKS -- 0.2%
AEROSPACE -- 0.1%
13,500 Northrop Grumman Corp.,
7.000% Cv. Pfd.,
Ser. B .............. 1,573,020 1,782,135
-------------- --------------
TELECOMMUNICATIONS -- 0.1%
26,000 Cincinnati Bell Inc.,
6.750% Cv. Pfd.,
Ser. B .............. 820,366 1,059,500
-------------- --------------
BROADCASTING -- 0.0%
90 Gray Television Inc.,
8.000% Cv. Pfd.,
Ser. C (a) .......... 900,000 969,423
-------------- --------------
AVIATION: PARTS AND SERVICES -- 0.0%
3,100 Sequa Corp.,
$5.00 Cv. Pfd. ...... 249,355 302,250
-------------- --------------
WIRELESS COMMUNICATIONS -- 0.0%
10,760,547 Telesp Celular
Participacoes
SA, Pfd.+ ........... 82,623 29,130
-------------- --------------
TOTAL PREFERRED
STOCKS ............... 3,625,364 4,142,438
-------------- --------------
PRINCIPAL
AMOUNT
--------
CORPORATE BONDS -- 0.2%
CABLE AND SATELLITE -- 0.1%
$ 1,000,000 Charter Communications Inc.,
Cv., 4.750%, 06/01/06 786,240 1,005,000
-------------- --------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1%
1,000,000 Standard Motor Products Inc.,
Sub. Deb. Cv., 6.750%,
07/15/09 ............ 950,625 977,500
-------------- --------------
AVIATION: PARTS AND SERVICES -- 0.0%
803,000 Kaman Corp., Sub. Deb. Cv.,
6.000%, 03/15/12 .... 766,877 793,966
-------------- --------------
TOTAL CORPORATE
BONDS ................ 2,503,742 2,776,466
-------------- --------------
MARKET
SHARES COST VALUE
------ ---- -------
WARRANTS -- 0.0%
FOOD AND BEVERAGE -- 0.0%
62,463 Denny's Corp., expires
01/07/05+(a) ........ $ 105,603 $ 0
-------------- --------------
PRINCIPAL
AMOUNT
--------
U.S. GOVERNMENT OBLIGATIONS -- 0.1%
$ 1,500,000 U.S. Treasury Bill,
1.786%++, 01/20/05 .. 1,498,607 1,498,607
-------------- --------------
REPURCHASE AGREEMENTS -- 7.1%
116,734,000 ABN AMRO, 1.450%,
dated 12/31/04, due 01/03/05,
proceeds at maturity,
$116,748,105 (b) .... 116,734,000 116,734,000
-------------- --------------
TOTAL INVESTMENTS -- 100.0% ........ $1,320,362,381 1,643,987,897
==============
LIABILITIES IN EXCESS OF OTHER ASSETS ............. (5,762,718)
PREFERRED STOCK
(9,556,900 preferred shares outstanding) ........ (418,742,500)
---------------
NET ASSETS -- COMMON STOCK
(140,332,964 common shares outstanding) ......... $1,219,482,679
==============
NET ASSET VALUE PER COMMON SHARE
($1,219,482,679 / 140,332,964 shares outstanding) $8.69
=====
NUMBER OF EXPIRATION UNREALIZED
CONTRACTS DATE APPRECIATION
--------- ---------- ------------
FUTURES CONTRACTS -- SHORT POSITION
50 S&P 500 Future (c) ....... 03/18/05 $ 10,500
--------------
-------------
For Federal tax purposes:
Aggregate cost ....................... $1,327,868,107
==============
Gross unrealized appreciation ........ $ 373,563,682
Gross unrealized depreciation ........ (57,443,892)
--------------
Net unrealized appreciation
(depreciation) ..................... $ 316,119,790
==============
--------------
(a) Security fair valued under procedures established by the Board of
Directors. At December 31, 2004, the market value of fair valued
securities amounted to $1,012,423 or 0.06% of total investments.
(b) Collateralized by U.S. Treasury Bonds, 6.125% and 6.750%, due 11/15/27
and 8/15/26, market value $119,498,363.
(c) Collateralized by U.S. Treasury Bill, due 2/10/05, market value $810,000.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depository Receipt.
BDR - Brazilian Depository Receipt.
CVO - Contingent Value Obligation.
CDI - CHESS Depositary Interest.
% OF
MARKET MARKET
VALUE VALUE
------ ------
GEOGRAPHIC DIVERSIFICATION
North America ................. 82.5% $1,356,730,142
Europe ........................ 14.3 235,155,202
Latin America ................. 1.8 30,011,143
Japan ......................... 1.1 17,642,325
Asia/Pacific .................. 0.2 3,465,749
South Africa .................. 0.1 983,336
------ --------------
Total Investments ............. 100.0% $1,643,987,897
====== ==============
See accompanying notes to financial statements.
9
THE GABELLI EQUITY TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
ASSETS:
Investments, at value (cost $1,320,362,381) ............... $1,643,987,897
Cash and foreign currency, at value (cost $373,179) ....... 372,146
Dividends and interest receivable ......................... 1,874,611
Receivable for investments sold ........................... 1,576,527
Variation Margin .......................................... 11,250
Other assets .............................................. 58,576
--------------
TOTAL ASSETS .............................................. 1,647,881,007
--------------
LIABILITIES:
Payable for investments purchased ......................... 142,731
Dividends payable ......................................... 257,141
Unrealized depreciation on swap contracts ................. 3,706,723
Payable for investment advisory fees ...................... 5,186,662
Payable for shareholder communications expenses ........... 142,753
Payable to custodian ...................................... 30,378
Other accrued expenses and liabilities .................... 189,440
--------------
TOTAL LIABILITIES ......................................... 9,655,828
--------------
PREFERRED STOCK:
Series B Cumulative Preferred Stock
(7.20%, $25 liquidation value, $0.001 par
value, 6,600,000 shares authorized
with 6,600,000 shares issued and
outstanding) ............................................. 165,000,000
Series C Cumulative Preferred Stock
(Auction Rate, $25,000 liquidation value,
$0.001 par value, 5,200 shares
authorized with 5,200 shares issued and
outstanding) ............................................ 130,000,000
Series D Cumulative Preferred Stock
(5.875%, $25 liquidation value, $0.001 par
value, 3,000,000 shares authorized
with 2,949,700 shares issued and
outstanding) ............................................ 73,742,500
Series E Cumulative Preferred Stock
(Auction Rate, $25,000 liquidation value,
$0.001 par value, 2,000 shares
authorized with 2,000 shares issued and
outstanding) ............................................ 50,000,000
--------------
TOTAL PREFERRED STOCK ..................................... 418,742,500
--------------
NET ASSETS ATTRIBUTABLE TO COMMON
STOCK SHAREHOLDERS ...................................... $1,219,482,679
==============
NET ASSETS ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS CONSIST OF:
Capital stock, at par value ............................... $ 140,333
Additional paid-in capital ................................ 905,217,947
Accumulated undistributed net investment income ........... 1,703,869
Accumulated net realized loss on investments,
futures contracts, swap contracts and foreign
currency transactions ................................... (7,518,727)
Net unrealized appreciation on investments,
futures contracts, swap contracts and foreign
currency translations ................................... 319,939,257
--------------
TOTAL NET ASSETS .......................................... $1,219,482,679
==============
NET ASSET VALUE PER COMMON SHARE
($1,219,482,679 / 140,332,964 shares outstanding;
182,000,000 shares authorized of $0.001 par value) ........ $8.69
=====
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign taxes of $565,918) ....... $ 23,040,641
Interest ........................................... 1,656,259
-------------
TOTAL INVESTMENT INCOME ............................ 24,696,900
-------------
EXPENSES:
Investment advisory fees ........................... 15,167,775
Shareholder communications expenses ................ 678,433
Payroll ............................................ 244,001
Shareholder services fees .......................... 221,367
Custodian fees ..................................... 196,758
Directors' fees .................................... 140,500
Legal and audit fees ............................... 112,856
Miscellaneous expenses ............................. 787,205
-------------
TOTAL EXPENSES ..................................... 17,548,895
LESS: CUSTODIAN FEE CREDIT ......................... (6,868)
-------------
NET EXPENSES ....................................... 17,542,027
-------------
NET INVESTMENT INCOME .............................. 7,154,873
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FUTURES CONTRACTS, SWAP
CONTRACTS AND FOREIGN CURRENCY:
Net realized gain on investments ................. 128,015,668
Net realized gain on foreign
currency transactions ........................... 108,552
Net realized loss on swap contracts ................ (3,804,500)
Net realized loss on futures contracts ............. (442,033)
-------------
Net realized gain on investments, futures contracts,
swap contracts and foreign currency transactions . 123,877,687
-------------
Net change in unrealized appreciation/depreciation
on investments, swap contracts and foreign
currency translations ............................ 97,428,111
-------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS, FUTURES CONTRACTS, SWAP
CONTRACTS AND FOREIGN CURRENCY ................... 221,305,798
-------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................................. 228,460,671
Total Distributions to Preferred Stock Shareholders (18,946,063)
-------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO
COMMON STOCK SHAREHOLDERS
RESULTING FROM OPERATIONs ........................ $ 209,514,608
=============
See accompanying notes to financial statements.
10
THE GABELLI EQUITY TRUST INC.
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
----------------- -----------------
OPERATIONS:
Net investment income .............................................. $ 7,154,873* $ 6,138,026*
Net realized gain on investments, futures contracts,
swap contracts and foreign currency transactions ................. 123,877,687* 105,487,156*
Net change in unrealized appreciation/depreciation
on investments, swap contracts
and foreign currency translations ................................ 97,428,111* 233,684,432*
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............... 228,460,671 345,309,614
--------------- ---------------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income .............................................. (200,307) (320,420)
Net realized short term gains on investments, futures
contracts and foreign currency transactions ...................... (1,205,026) (1,248,028)
Net realized long term gains on investments, futures
contracts and foreign currency transactions ...................... (17,540,730) (17,605,267)
--------------- ---------------
TOTAL DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS ................ (18,946,063) (19,173,715)
--------------- ---------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO
COMMON STOCK SHAREHOLDERS RESULTING FROM OPERATIONS .............. 209,514,608 326,135,899
--------------- ---------------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income .............................................. (1,170,403) (1,408,135)
Net realized short term gains on investments,
futures contracts and foreign currency transactions .............. (7,041,045) (6,188,838)
Net realized long term gains on investments, futures
contracts and foreign currency transactions ...................... (102,491,569) (85,161,394)
Return of capital .................................................. -- (558,040)
--------------- ---------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ................... (110,703,017) (93,316,407)
--------------- ---------------
TRUST SHARE TRANSACTIONS:
Net increase in net assets from common shares issued upon
reinvestment of dividends and distributions ...................... 25,998,112 22,608,759
Net increase in net assets from repurchase of preferred shares ..... 72,307 --
Offering costs for preferred shares charged to paid-in capital ..... 75,457 (3,305,944)
--------------- ---------------
NET INCREASE IN NET ASSETS FROM TRUST SHARE TRANSACTIONS ........... 26,145,876 19,302,815
--------------- ---------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS 124,957,467 252,122,307
NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS:
Beginning of period ................................................ 1,094,525,212 842,402,905
--------------- ---------------
End of period (includes undistributed net investment
income of $1,703,869 and $0, respectively) ....................... $ 1,219,482,679 $ 1,094,525,212
=============== ===============
----------------------
* As a result of changes in generally accepted accounting principles, the
Equity Trust has reclassified periodic payments made under interest rate swap
agreements, previously included within interest income, as a component of
realized and unrealized gain (loss) in the statement of operations. The
effect of this reclassification was to increase net investment income and
decrease realized and unrealized gain by $4,044,350 and $4,302,269 for years
ended December 31, 2004 and December 31, 2003, respectively.
See accompanying notes to financial statements.
11
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION. The Gabelli Equity Trust Inc. (the "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.
Effective August 1, 2002, the Equity Trust modified its non-fundamental
investment policy to increase, from 65% to 80%, the portion of its assets that
it will invest, under normal market conditions in equity securities (the "80%
Policy"). The 80% Policy may be changed without shareholder approval. However,
the Equity Trust has adopted a policy to provide shareholders with notice at
least 60 days prior to the implementation of any change in the 80% Policy.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with U.S. 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 Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price 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 the 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. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board of Directors (the "Board") so determines, by such other method as the
Board shall determine in good faith, to reflect its fair market value. 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.
Portfolio securities primarily traded on foreign markets are generally
valued at the preceding closing values of such securities on their respective
exchanges or if after the close of the foreign markets, but prior to the close
of business on the day the securities are being valued, market conditions change
significantly, certain foreign securities may be fair valued pursuant to
procedures established by the Board. Debt instruments that are not credit
impaired with remaining maturities of 60 days or less are valued at amortized
cost, unless the Board determines such does not reflect the securities' fair
value, in which case these securities will be valued at their fair value as
determined by the Board. Debt instruments having a maturity greater than 60 days
for which market quotations are readily available are valued at the latest
average of the bid and asked prices. If there were no asked prices quoted on
such day, the security is valued using the closing bid price. Futures contracts
are valued at the closing settlement price of the exchange or board of trade on
which the applicable contract is traded.
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. Fair valuation
methodologies and procedures may include, but are not limited to: analysis and
review of available financial and non-financial information about the company;
comparisons to the valuation and changes in valuation of similar securities,
including a comparison of foreign securities to the equivalent U.S. dollar value
ADR securities at the close of the U.S. exchange; and evaluation of any other
information that could be indicative of the value of the security.
REPURCHASE AGREEMENTS. The Equity Trust may enter into repurchase
agreements with primary 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 Adviser and
reviewed by the Board. 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 as collateral whose market value, including accrued
interest, will be at least equal in value to 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.
12
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SWAP AGREEMENTS. The Equity Trust may enter into interest rate swap or cap
transactions. The use of interest rate swaps and caps is a highly specialized
activity that involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. In an interest rate
swap, the Equity Trust would agree to pay to the other party to the interest
rate swap (which is known as the "counterparty") periodically a fixed rate
payment in exchange for the counterparty agreeing to pay to the Equity Trust
periodically a variable rate payment that is intended to approximate the Equity
Trust's variable rate payment obligation on the Series C Preferred Stock. In an
interest rate cap, the Equity Trust would pay a premium to the interest rate cap
to the counterparty and, to the extent that a specified variable rate index
exceeds a predetermined fixed rate, would receive from the counterparty payments
of the difference based on the notional amount of such cap. Interest rate swap
and cap transactions introduce additional risk because the Equity Trust would
remain obligated to pay preferred stock dividends when due in accordance with
the Articles Supplementary even if the counterparty defaulted. Depending on the
general state of short term interest rates and the returns on the Equity Trust's
portfolio securities at that point in time, such a default could negatively
affect the Equity Trust's ability to make dividend payments for the Series C
Preferred Stock. In addition, at the time an interest rate swap or cap
transaction reaches its scheduled termination date, there is a risk that the
Equity Trust will not be able to obtain a replacement transaction or that the
terms of the replacement will not be as favorable as on the expiring
transaction. If this occurs, it could have a negative impact on the Equity
Trust's ability to make dividend payments on the Series C Preferred Stock.
The Equity Trust has entered into one interest rate swap agreement with
Citibank N.A. Under the agreement the Equity Trust receives a floating rate of
interest and pays a respective fixed rate of interest on the nominal value of
the swap. Details of the swap at December 31, 2004 are as follows:
NOTIONAL FLOATING RATE* TERMINATION UNREALIZED
AMOUNT FIXED RATE (RATE RESET MONTHLY) DATE DEPRECIATION
-------- ---------- -------------------- ----------- ------------
$130,000,000 4.494% 2.28% July 2, 2007 $(3,706,723)
-------------
*Based on Libor (London Interbank Offered Rate).
As a result of a FASB Emerging Issues Task Force consensus (and subsequent
related SEC staff guidance), the Equity Trust has reclassified periodic payments
made under the interest rate swap agreement, previously included within interest
income, as a component of realized gain (loss) in the statement of operations.
For consistency, similar reclassifications have been made to amounts appearing
in the previous year's statement of changes in net assets and the per share
amounts in prior years financial highlights. Prior years net investment income
ratios in the financial highlights have also been modified accordingly.
This reclassification increased net investment income and decreased net
realized and unrealized gains by $4,044,350, $4,302,269, and $1,813,999 for the
years ended December 31, 2004, December 31, 2003 and December 31, 2002
respectively, but had no effect on the Equity Trust's net asset value, either in
total or per share, or its total increase (decrease) in net assets from
operations during any period.
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 and futures
contracts. 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.
FOREIGN CURRENCY TRANSLATION. 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 at the exchange rate prevailing
on the respective dates of such transactions. Unrealized gains and losses, which
result from changes in foreign exchange rates and/or changes in market prices of
securities, have been included in unrealized appreciation/depreciation on
investments and foreign currency translations. 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
investments.
13
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOREIGN SECURITIES. The Equity Trust may directly purchase securities of
foreign issuers. Investing in securities of foreign issuers involves special
risks not typically associated with investing in securities of U.S. issuers. The
risks include possible revaluation of currencies, the ability to repatriate
funds, less complete financial information about companies and possible future
adverse political and economic developments. Moreover, securities of many
foreign issuers and their markets may be less liquid and their prices more
volatile than those of securities of comparable U.S. issuers.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for as of the trade date with realized gain or loss on investments
determined by using the identified 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. Distributions to shareholders of the
Equity Trust's 7.20% Series B Cumulative Preferred Stock, Series C Auction Rate
Cumulative Preferred Stock, 5.875% Series D Cumulative Preferred Stock, and
Series E Auction Rate Cumulative Preferred Stock ("Cumulative Preferred Stock")
are accrued on a daily basis and are determined as described in Note 5.
Income dividends and capital gain distributions are determined in
accordance with Federal income tax regulations which may differ from that
determined under U.S. 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 characterizations of distributions made by the Equity Trust.
For the year ended December 31, 2004, reclassifications were made to
decrease accumulated net investment income by $3,816,593 and decrease
accumulated net realized loss on investments, futures contracts, swap contracts
and foreign currency transactions by $3,816,593.
The tax character of distributions paid during the years ended December 31,
2004 and December 31, 2003 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
----------------------------- -----------------------------
COMMON PREFERRED COMMON PREFERRED
------------ ----------- ----------- -----------
DISTRIBUTIONS PAID FROM:
Ordinary income
(Inclusive of short-term
capital gain) ........................ $ 8,211,448 $ 1,405,333 $ 7,596,973 $ 1,568,448
Net long-term capital gain ............. 102,491,569 17,540,730 85,161,394 17,605,267
Non-taxable return of capital .......... -- -- 558,040 --
------------ ----------- ----------- -----------
Total distributions paid ............... $110,703,017 $18,946,063 $93,316,407 $19,173,715
============ =========== =========== ===========
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 (the "Code"). It is the Equity Trust's policy to comply
with the requirements of the Code applicable to regulated investment companies
and to distribute substantially all of its net investment company taxable income
and net capital gains. Therefore, no provision for Federal income taxes is
required.
As of December 31, 2004, the components of accumulated earnings/(losses) on
a tax basis were as follows:
Net unrealized appreciation on investments ........ $316,119,790
Net unrealized depreciation on foreign currency
translations and interest rate swaps ............ (3,456,909)
Other ............................................. (257,141)
Undistributed ordinary income ..................... 1,718,659
------------
Total accumulated gain ............................. $314,124,399
============
Other is primarily due to dividends payable on preferred stock at December
31, 2004.
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 plus liquidation value of
preferred stock. In accordance with the Advisory Agreement, the Adviser provides
a continuous investment program for the Equity Trust's portfolio 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
or corresponding swap rate of the Cumulative Preferred Stock.
14
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Equity Trust's total return on the net asset value of the common shares
is monitored on a monthly basis to assess whether the total return on the net
asset value of the common shares exceeds the stated dividend rate of the
Cumulative Preferred Stock for the period. For the year ended December 31, 2004,
the Equity Trust's total return on the net asset value of the common shares
exceeded the stated dividend rate or corresponding swap rate of all outstanding
preferred stock. Thus management fees were accrued on these assets.
During the year ended December 31, 2004, Gabelli & Company, Inc., ("Gabelli
&Company") an affiliate of the Adviser, received $835,136 in brokerage
commissions as a result of executing agency transactions in portfolio securities
on behalf of the Equity Trust.
The cost of calculating the Equity Trust's net asset value per share is an
Equity Trust expense pursuant to the Investment Advisory Agreement between the
Equity Trust and the Adviser. During the year ended December 31, 2004, the
Equity Trust reimbursed the Adviser $34,800 in connection with the cost of
computing the Equity Trust's net asset value.
The Equity Trust is assuming its portion of the allocated cost of the
Gabelli Funds' Chief Compliance Officer in the amount of $7,897 for the period
of October 1, 2004 through December 31, 2004, which is included in payroll
expense on the Statement of Operations.
4. PORTFOLIO SECURITIES. Cost of purchases and proceeds from sales of
securities, other than short term securities, for the year ended December 31,
2004 aggregated $428,157,129 and $408,373,915, respectively.
5. CAPITAL. The charter permits the Equity Trust to issue 182,000,000 shares of
common stock (par value $0.001). The Board of the Equity Trust has authorized
the repurchase of its shares on the open market when the shares are trading at a
discount of 10% or more (or such other percentage as the Board may determine
from time to time) from the net asset value of the shares. During the year ended
December 31, 2004, the Equity Trust did not repurchase any shares of its common
stock in the open market.
Transactions in common stock were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
------------------------ -----------------------
Shares Amount Shares Amount
--------- ------------ --------- -----------
Shares issued upon reinvestment
of dividends and distributions ......... 3,143,080 $25,998,112 3,129,917 $22,608,759
--------- ----------- --------- -----------
Net increase ............................. 3,143,080 $25,998,112 3,129,917 $22,608,759
========= =========== ========= ===========
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 1940
Act 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 Equity Trust's subclassification
as a closed-end investment company or changes in its fundamental investment
restrictions. The Equity Trust's Articles of Incorporation, as amended,
authorize the issuance of up to 16,006,000 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 as required by the 1940
Act and by the Articles Supplementary 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 7.20% Series B, Series C Auction Rate, 5.875% Series D, and Series E Auction
Rate Cumulative Preferred Stock at a redemption price of $25, $25,000, $25, and
$25,000, respectively, 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. The income received on the Equity Trust's assets may vary in a manner
unrelated to the fixed and variable rates, which could have either a beneficial
or detrimental impact on net investment income and gains available to common
shareholders.
Under Emerging Issues Task Force (EITF) promulgating Topic D-98,
Classification and Measurement of Redeemable Securities, which was issued on
July 19, 2001, preferred securities that are redeemable for cash or other assets
are to be classified outside of permanent equity to the extent that the
redemption is at a fixed or determinable price and at the option of the holder
or upon the occurrence of an event that is not solely within the control of the
issuer. In accordance with the guidance of the EITF, the Equity Trust's
Cumulative Preferred Stock is classified outside of permanent equity (net assets
attributable to common stock shareholders) in the accompanying financial
statements.
15
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Equity Trust, as authorized by the Board, redeemed all (5,367,900
shares) of its outstanding 7.25% Series A Cumulative Preferred Stock. The
redemption date was June 17, 2003 and the redemption price was $25.4078 per
Preferred Share, which consisted of $25.00 per Preferred Share (the "liquidation
value") plus accrued dividends through the redemption date of $0.4078 per
Preferred Share. The Preferred Shares were callable at any time at the
liquidation value of $25.00 per share plus accrued dividends following the
expiration of the five-year call protection on June 9, 2003.
On June 20, 2001, the Equity Trust received net proceeds of $159,329,175
(after underwriting discounts of $5,197,500 and offering expenses of $473,325)
from the public offering of 6,600,000 shares of 7.20% Series B Cumulative
Preferred Stock. Commencing June 20, 2006 and thereafter, the Equity Trust, at
its option, may redeem the 7.20% Series B Cumulative Preferred Stock in whole or
in part at the liquidation value. During the year ended December 31, 2004, the
Equity Trust did not repurchase any shares of 7.20% Series B Cumulative
Preferred Stock. At December 31, 2004, 6,600,000 shares of the 7.20% Series B
Cumulative Preferred Stock were outstanding and accrued dividends amounted to
$165,000.
On June 27, 2002, the Equity Trust received net proceeds of $128,246,557
(after underwriting discounts of $1,300,000 and offering expenses of $453,443)
from the public offering of 5,200 shares of Series C Auction Rate Cumulative
Preferred Stock. The dividend rate, as set by the auction process, which is
generally held every 7 days, is expected to vary with short term interest rates.
The Rates of Series C Auction Rate Cumulative Preferred Stock ranged from 1.02%
to 2.61% for the year ended December 31, 2004. Existing shareholders may submit
an order to hold, bid or sell such shares on each auction date. Series C Auction
Rate Cumulative Preferred Stock shareholders may also trade shares in the
secondary market. The Equity Trust, at its option, may redeem the Series C
Auction Rate Cumulative Preferred Stock in whole or in part at the liquidation
value price at any time. During the year ended December 31, 2004, the Equity
Trust did not redeem any shares of Series C Auction Rate Cumulative Preferred
Stock. At December 31, 2004, 5,200 shares of the Series C Auction Rate
Cumulative Preferred Stock were outstanding with an annualized dividend rate of
2.61 percent and accrued dividends amounted to $28,275.
On October 7, 2003, the Equity Trust received net proceeds of $72,387,500
(after underwriting discounts of $2,362,500 and offering expenses of $264,522)
from the public offering of 3,000,000 shares of 5.875% Series D Cumulative
Preferred Stock. Commencing October 7, 2008 and thereafter, the Equity Trust, at
its option, may redeem the 5.875% Series D Cumulative Preferred Stock in whole
or in part at the liquidation value price. During the year ended December 31,
2004, the Equity Trust repurchased 50,300 shares of 5.875% Series D Cumulative
Preferred Stock in the open market at a cost of $1,185,193 and an average
discount of approximately 5.83% from its liquidation value of $25.00 per share.
All repurchased shares of 5.875% Series D Cumulative Preferred Stock have been
retired. At December 31, 2004, 2,949,700 shares of the 5.785% Series D
Cumulative Preferred Stock were outstanding and accrued dividends amounted to
$60,171.
On October 7, 2003, the Equity Trust received net proceeds of $49,260,000
(after underwriting discounts of $500,000 and offering expenses of $149,991)
from the public offering of 2,000 shares of Series E Auction Rate Cumulative
Preferred Stock. The dividend rate, as set by the auction process, which is
generally held every 7 days, is expected to vary with short term interest rates.
The Rates of Series E Auction Rate Cumulative Preferred Stock ranged from 1.02%
to 2.66% for the year ended December 31, 2004. Existing shareholders may submit
an order to hold, bid or sell such shares on each auction date. Series E Auction
Rate Cumulative Preferred Stock shareholders may also trade shares in the
secondary market. The Equity Trust, at its option, may redeem the Series E
Auction Rate Cumulative Preferred Stock in whole or in part at the liquidation
value price at any time. During the year ended December 31, 2004, the Equity
Trust did not redeem any shares of Series E Auction Rate Cumulative Preferred
Stock. At December 31, 2004, 2,000 shares of the Series E Auction Rate
Cumulative Preferred Stock were outstanding with an annualized dividend rate of
2.66 percent and accrued dividends amounted to $3,695.
6. OTHER MATTERS. The Adviser and/or affiliates have received subpoenas from the
Attorney General of the State of New York and the SEC requesting information on
mutual fund shares trading practices. Gabelli Asset Management Inc., the
Adviser's parent company, is responding to these requests. The Equity Trust does
not believe that these matters will have a material adverse effect on the Equity
Trust's financial position or the results of its operations.
7. INDEMNIFICATIONS. The Equity Trust enters into contracts that contain a
variety of indemnifications. The Equity Trust's maximum exposure under these
arrangements is unknown. However, the Equity Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
16
THE GABELLI EQUITY TRUST INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR AN EQUITY TRUST COMMON SHARE OUTSTANDING THROUGHOUT EACH
PERIOD:
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
2004(A)(B)(G) 2003(A)(B)(G) 2002(A)(B)(G) 2001(A) 2000(A)
------------ ------------ ------------ ---------- ----------
OPERATING PERFORMANCE:
Net asset value, beginning of period ................... $ 7.98 $ 6.28 $ 8.97 $ 10.89 $ 12.75
---------- ---------- ---------- ---------- ----------
Net investment income .................................. 0.02 0.04 0.07 0.08 0.05
Net realized and unrealized gain (loss) on investments . 1.63 2.50 (1.65) (0.16) (0.51)
---------- ---------- ---------- ---------- ----------
Total from investment operations ....................... 1.65 2.54 (1.58) (0.08) (0.46)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income .................................. (0.00)(c) (0.00)(c) (0.01) (0.01) (0.00)(c)
Net realized gain on investments ....................... (0.14) (0.14) (0.16) (0.11) (0.09)
---------- ---------- ---------- ---------- ----------
Total distributions to preferred stock shareholders .... (0.14) (0.14) (0.17) (0.12) (0.09)
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS RESULTING FROM OPERATIONS ................. 1.51 2.40 (1.75) (0.20) (0.55)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income .................................. (0.01) (0.01) (0.05) (0.06) (0.04)
Net realized gain on investments ....................... (0.79) (0.68) (0.90) (1.02) (1.27)
Return of capital ...................................... -- (0.00)(c) (0.00)(c) -- --
---------- ---------- ---------- ---------- ----------
Total distributions to common stock shareholders ....... (0.80) (0.69) (0.95) (1.08) (1.31)
---------- ---------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Increase in net asset value from common
stock share transactions ............................ 0.00(c) 0.01 0.02 0.03 --
Decrease in net asset value from
shares issued in rights offering .................... -- -- -- (0.62) --
Increase in net asset value from
repurchase of preferred shares ...................... 0.00(c) -- -- -- --
Offering costs for preferred shares
charged to paid-in capital ........................... 0.00(c) (0.02) (0.01) (0.05) --
---------- ---------- ---------- ---------- ----------
Total capital share transactions ....................... 0.00(c) (0.01) 0.01 (0.64) --
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS, END OF PERIOD .......................... $ 8.69 $ 7.98 $ 6.28 $ 8.97 $ 10.89
========== ========== ========== ========== ==========
Net Asset Value Total Return + ......................... 19.81% 39.90% (21.00)% (3.68)% (4.39)%
========== ========== ========== ========== ==========
Market Value, End of Period ............................ $ 9.02 $ 8.00 $ 6.85 $ 10.79 $ 11.44
========== ========== ========== ========== ==========
Total Investment Return ++ ............................. 24.04% 28.58% (28.36)% 10.32% 1.91%
========== ========== ========== ========== ==========
RATIOS AND SUPPLEMENTAL DATA:
Net assets including liquidation value
of preferred shares,
end of period (in 000's) ............................. $1,638,225 $1,514,525 $1,271,600 $1,465,369 $1,318,263
Net assets attributable to common shares,
end of period (in 000's) ............................. $1,219,483 $1,094,525 $ 842,403 $1,166,171 $1,184,041
Ratio of net investment income to
average net assets
attributable to common shares ........................ 0.64% 0.67% 0.99% 0.81% 0.42%
Ratio of operating expenses to
average net assets
attributable to common shares (b)(e) ................. 1.57% 1.62% 1.19% 1.12% 1.14%
Ratio of operating expenses to
average total net assets
including liquidation value of
preferred shares (b)(e) .............................. 1.14% 1.14% 0.87% 0.95% 1.03%
Portfolio turnover rate ................................ 28.6% 19.2% 27.1% 23.9% 32.1%
PREFERRED STOCK:
7.25% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............ -- -- $ 134,198 $ 134,198 $ 134,223
Total shares outstanding (in 000's) .................... -- -- 5,368 5,368 5,369
Liquidation preference per share ....................... -- -- $ 25.00 $ 25.00 $ 25.00
Average market value (d) ............................... -- -- $ 25.75 $ 25.39 $ 22.62
Asset coverage per share ............................... -- -- $ 74.07 $ 122.44 $ 245.54
7.20% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............ $ 165,000 $ 165,000 $ 165,000 $ 165,000 --
Total shares outstanding (in 000's) .................... 6,600 6,600 6,600 6,600 --
Liquidation preference per share ....................... $ 25.00 $ 25.00 $ 25.00 $ 25.00 --
Average market value (d) ............................... $ 26.57 $ 27.06 $ 26.40 $ 25.60 --
Asset coverage per share ............................... $ 97.81 $ 90.15 $ 74.07 $ 122.44 --
AUCTION RATE SERIES C CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............ $ 130,000 $ 130,000 $ 130,000 -- --
Total shares outstanding (in 000's) .................... 5 5 5 -- --
Liquidation preference per share ....................... $ 25,000 $ 25,000 $ 25,000 -- --
Average market value (d) ............................... $ 25,000 $ 25,000 $ 25,000 -- --
Asset coverage per share ............................... $ 97,806 $ 90,150 $ 74,068 -- --
See accompanying notes to financial statements.
17
THE GABELLI EQUITY TRUST INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
2004(A) 2003(A) 2002(A)(B) 2001(A) 2000(A)
------------ ------------ ------------ ---------- ----------
5.875% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............. $ 73,743 $ 75,000 -- -- --
Total shares outstanding (in 000's) ..................... 2,950 3,000 -- -- --
Liquidation preference per share ........................ $ 25.00 $ 25.00 -- -- --
Average market value (d) ................................ $ 24.81 $ 25.10 -- -- --
Asset coverage per share ................................ $ 97.81 $ 90.15 -- -- --
AUCTION RATE SERIES E CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............. $ 50,000 $ 50,000 -- -- --
Total shares outstanding (in 000's) ..................... 2 2 -- -- --
Liquidation preference per share ........................ $ 25,000 $ 25,000 -- -- --
Average market value (d) ................................ $ 25,000 $ 25,000 -- -- --
Asset coverage per share ................................ $ 97,806 $ 90,150 -- -- --
ASSET COVERAGE (f) ...................................... 391% 361% 296% 490% 982%
--------------------------
+ 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.
++ 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.
(a) Per share amounts have been calculated using the monthly average shares
outstanding method.
(b) See Note 2 to Financial Statements (Swap Agreements).
(c) Amount represents less than $0.005 per share.
(d) Based on weekly prices.
(e) The ratios do not include a reduction of expenses for custodian fee credits
on cash balances maintained with the custodian. Including such custodian fee
credits for the years ended December 31, 2002, 2001 and 2000, the ratios of
operating expenses to average net assets attributable to common stock would
be 1.19%, 1.11% and 1.14%, respectively, and the ratios of operating
expenses to average total net assets including liquidation value of
preferred shares would be 0.88%, 0.94% and 1.03%, respectively. For the
fiscal year ended December 31, 2004 and 2003, the effect of the custodian
fee credits was minimal.
(f) Asset coverage is calculated by combining all series of preferred stock.
(g) As a result of changes in accounting principles, the Equity Trust has
reclassified periodic payments made under interest rate swap agreements,
previously included within net investment income, to components of realized
and unrealized gain (loss) in the Statement of Operations. The effect of
this reclassification for the years ended December 31, 2004, December 31,
2003 and December 31, 2002 was net investment income per share increased by
$0.03, $0.03 and $0.01, respectively, ratios of net investment income to
average net assets attributable to common shares increased by 0.36%, 0.47%
and 0.18%, respectively, ratios of operating expenses to average net assets
attributable to common shares decreased by 0.36%, 0.47% and 0.18%,
respectively, and ratios of operating expenses to average total net assets
including liquidation value of preferred shares decreased by 0.26%, 0.33%
and 0.13%, respectively.
See accompanying notes to financial statements.
18
THE GABELLI EQUITY TRUST INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 schedule 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 (the
"Trust") at December 31, 2004, 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 of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards 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, 2004 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 28, 2005
19
THE GABELLI EQUITY TRUST INC.
ADDITIONAL FUND INFORMATION (UNAUDITED)
The business and affairs of Equity Trust are managed under the direction
of the Trust's Board of Directors. Information pertaining to the Directors and
officers of the Trust is set forth below. The Trust's Statement of Additional
Information includes additional information about The Gabelli Equity Trust Inc.
Directors and is available, without charge, upon request, by calling 800-GABELLI
(800-422-3554) or by writing to The Gabelli Equity Trust Inc. at One Corporate
Center, Rye, NY 10580-1422.
TERM OF NUMBER OF
OFFICE AND FUNDS IN FUND
NAME, POSITION(S) LENGTH OF COMPLEX
ADDRESS 1 TIME OVERSEEN BY PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE SERVED 2 DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 5
----------------- -------- ------------- ---------------------- -------------------
INTERESTED DIRECTORS 3:
----------------------
MARIO J. GABELLI Since 1986** 24 Chairman of the Board, Chief Executive Director of
Director and Officer of Gabelli Asset Management Inc. and Morgan Group
Chief Investment Officer Chief Investment Officer of Gabelli Funds, Holdings, Inc.
Age: 62 LLC and GAMCO Investors, Inc.; Vice (holding company)
Chairman and Chief Executive Officer
of Lynch Interactive Corporation
(multimedia and services)
KARL OTTO POHL Since 1992* 34 Member of the Shareholder Committee of Sal Director of
Director Oppenheim Jr. & Cie, Zurich (private Gabelli Asset
Age: 75 investment bank); Former President of the Management Inc.
Deutsche Bundesbank and Chairman of its (investment
Central Bank Council (1980-1991) management);
Chairman, Incentive
Capital and
Incentive Asset
Management (Zurich);
Director at
Sal Oppenheim
Jr. & Cie, Zurich
(banking)
NON-INTERESTED DIRECTORS:
------------------------
THOMAS E. BRATTER Since 1986** 3 Director, President and Founder, The John --
Director Dewey Academy (residential college
Age: 65 preparatory therapeutic high school)
ANTHONY J. COLAVITA 4 Since 1999*** 36 President and Attorney at Law in the law firm --
Director of Anthony J. Colavita, P.C.
Age: 69
JAMES P. CONN 4 Since 1989* 13 Former Managing Director and Chief Investment Director of
Director Officer of Financial Security Assurance Holdings LaQuinta Corp.
Age: 66 Ltd. (1992-1998) (hotels) and
First Republic
Bank (banking)
FRANK J. FAHRENKOPF JR. Since 1998*** 4 President and Chief Executive Officer of the Director of First
Director American Gaming Association since June Republic Bank
Age: 65 1995; Partner in the law firm of Hogan & (banking)
Hartson; Co-Chairman of the Commission
on Presidential Debates; Former Chairman
of the Republican National Committee
ARTHUR V. FERRARA Since 2001*** 9 Formerly, Chairman of the Board and Chief Director of The
Director Executive Officer of The Guardian Life Guardian Life
Age: 74 Insurance Company of America from January Insurance Company
1993 to December 1995; President, Chief and of America;
Executive Officer and a Director prior thereto Director of The
Guardian Insurance
Annuity Company,
Inc., Guardian
Investors Services,
and 25 mutual
funds within
the Guardian
Fund Complex
ANTHONY R. PUSTORINO Since 1986* 17 Certified Public Accountant; Professor Director of
Director Emeritus, Pace University Lynch Corporation
Age: 79 (diversified
manufacturing)
SALVATORE J. ZIZZA Since 1986*** 24 Chairman, Hallmark Electrical Supplies Corp. Director of
Director Hollis Eden
Age: 59 Pharmaceuticals and
Earl Scheib, Inc.
(automotive services)
20
THE GABELLI EQUITY TRUST INC.
ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED)
TERM OF NUMBER OF
OFFICE AND FUNDS IN FUND
NAME, POSITION(S) LENGTH OF COMPLEX
ADDRESS 1 TIME OVERSEEN BY PRINCIPAL OCCUPATION(S)
AND AGE SERVED 2 DIRECTOR DURING PAST FIVE YEARS
----------------- -------- ------------- ----------------------
OFFICERS:
--------
BRUCE N. ALPERT Since 2003 -- Executive Vice President and Chief Operating
President and Treasurer Officer of Gabelli Funds, LLC since 1988 and
Age: 53 an officer of all mutual funds advised by
Gabelli Funds, LLC and its affiliates.
Director and President of Gabelli Advisers, Inc.
CARTER W. AUSTIN Since 2000 -- Vice President at the Trust since 2000.
Vice President Vice President of Gabelli Funds, LLC
Age: 38 since 1996
DAWN M.DONATO Since 2004 -- Assistant Vice President of Gabelli and Company,
Assistant Vice President Inc. since 2004, Registered Representative for Gabelli
Age: 37 & Company,Inc. since 2002. Prior to 2002, Senior
Sales Representative for Manulife Financial
JAMES E. MCKEE Since 1995 -- Vice President, General Counsel and Secretary
Secretary of Gabelli Asset Management Inc. since 1999
Age: 41 and GAMCO Investors, Inc. since 1993; Secretary
of all mutual funds advised by Gabelli Advisers,
Inc. and Gabelli Funds, LLC
PETER D. GOLDSTEIN Since 2004 -- Director of Regulatory Affairs at Gabelli Asset Management
Chief Compliance Officer Inc. since February 2004; Vice President of Goldman Sachs
Age: 51 Asset Management from November 2000 through January
2004; Deputy GeneralCounsel at Gabelli Asset Management
Inc. from February 1998 through November 2000
---------------------
1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted.
2 The Trust's Board of Directors is divided into three classes, each class
having a term of three years. Each year the term of office of one class
expires and the successor or successors elected to such class serve for a
three year term. The three year term for each class expires as follows:
* - Term expires at the Trust's 2006 Annual Meeting of Shareholders and until
their successors are duly elected and qualified.
** - Term expires at the Trust's 2007 Annual Meeting of Shareholders and until
their successors are duly elected and qualified.
*** - Term expires at the Trust's 2005 Annual Meeting of Shareholders and until
their successors are duly elected and qualified.
Each officer will hold office for an indefinite term until the date he or she
resigns or retires or until his or her successor is elected and qualified.
3 "Interested person" of the Trust as defined in the Investment Company Act of
1940. Messrs. Gabelli and Pohl are each considered an "interested person"
because of their affiliation with Gabelli Funds, LLC which acts as the
Trust's investment adviser.
4 Represents holders of the Trust's Preferred Stock.
5 This column includes only directorships of companies required to report to
the SEC under the Securities Exchange Act of 1934 (i.e. public companies) or
other investment companies registered under the 1940 Act.
CERTIFICATIONS
Equity Trust's Chief Executive Officer has certified to the New York Stock
Exchange that, as of June 7, 2004, he was not aware of any violation by Equity
Trust of applicable NYSE corporate governance listing standards. Equity Trust
reports to the SEC on Form N-CSR which contains certifications by Equity Trust's
principal executive officer and principal financial officer that relate to
Equity Trust's disclosure in such reports and that are required by Rule 30a-2(a)
under the Investment Company Act.
21
THE GABELLI EQUITY TRUST INC.
INCOME TAX INFORMATION (UNAUDITED)
DECEMBER 31, 2004
CASH DIVIDENDS AND DISTRIBUTIONS
TOTAL AMOUNT ORDINARY LONG-TERM DIVIDEND
PAYABLE RECORD PAID INVESTMENT CAPITAL REINVESTMENT
DATE DATE PER SHARE (A) INCOME (A) GAINS (A) PRICE
------- ------ ------------- ---------- --------- ------------
COMMON SHARES
03/25/04 03/17/04 $0.1600 $0.0139 $0.1461 $8.0085
06/24/04 06/16/04 0.1600 0.0139 0.1461 8.0200
09/24/04 09/16/04 0.1800 0.0155 0.1645 8.1605
12/27/04 12/16/04 0.3000 0.0259 0.2741 8.6450
------- ------- -------
$0.8000 $0.0692 $0.7308
7.20% PREFERRED SHARES
03/26/04 03/19/04 $0.4500 $0.0389 $0.4111
06/28/04 06/21/04 0.4500 0.0389 0.4111
09/27/04 09/20/04 0.4500 0.0389 0.4111
12/27/04 12/17/04 0.4500 0.0389 0.4111
------- ------- -------
$1.8000 $0.1556 $1.6444
5.875% PREFERRED SHARES
03/26/04 03/19/04 $0.3672 $0.0318 $0.3354
06/28/04 06/21/04 0.3672 0.0318 0.3354
09/27/04 09/20/04 0.3672 0.0318 0.3354
12/27/04 12/17/04 0.3672 0.0318 0.3354
------- ------- -------
$1.4688 $0.1272 $1.3416
SERIES C AND E AUCTION RATE PREFERRED SHARES
Auction Rate Preferred Shares pay dividends weekly based on a rate set at
auction, usually held every seven days. The percentage of 2004 distributions
derived from long-term capital gains for the Series C and Series E Auction Rate
Preferred Shares was 91.35%.
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 2004 tax returns. Ordinary income distributions include net investment
income and realized net short-term capital gains. Ordinary income is reported in
box 1a of Form 1099-DIV. Capital gain distributions are reported in box 2a of
Form 1099-DIV.
CORPORATE DIVIDENDS RECEIVED DEDUCTION, QUALIFIED DIVIDEND INCOME AND U.S.
GOVERNMENT SECURITIES INCOME
The Equity Trust paid to common shareholders an ordinary income dividend
totalling $0.0692 per share in 2004. The Equity Trust paid to 7.20% Series B
preferred shareholders and 5.875% Series D preferred shareholders an ordinary
income dividend totalling $0.1556 per share and $0.1272 per share, respectively,
in 2004. The Equity Trust paid to Series C and E Auction Rate preferred
shareholders an ordinary income dividend totalling $32.83 per share and $33.36
per share, respectively, in 2004. For the fiscal year ended December 31, 2004,
100% of the ordinary income dividend qualifies for the dividend received
deduction available to corporations, and 100% of the ordinary income
distribution was deemed qualifying dividend income and is reported in box 1b on
Form 1099-DIV. The percentage of the ordinary income dividends paid by the
Equity Trust during 2004 derived from U.S. Government Securities was 5.14%. The
percentage of U.S.Government Securities held as of December 31, 2004 was 0.09%.
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 quarters
during 2004.
22
THE GABELLI EQUITY TRUST INC.
INCOME TAX INFORMATION (CONTINUED) (UNAUDITED)
DECEMBER 31, 2004
HISTORICAL DISTRIBUTION SUMMARY
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 (A) COST BASIS
---------- --------- ------- --------- ---------- ----------- ----------------- ----------
COMMON STOCK
2004 ................ $0.01930 $0.04990 $0.73080 -- -- -- $0.80000 --
2003 ................ 0.01140 0.04480 0.63380 -- -- -- 0.69000 --
2002 ................ 0.05180 0.01550 0.88270 -- -- -- 0.95000 --
2001 (d) ............ 0.06700 0.06400 0.94900 -- -- -- 1.08000 --
2000 ................ 0.04070 0.15500 1.11430 -- -- -- 1.31000 --
1999 (e) ............ 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 (f) ............ 0.12890 -- 0.49310 0.37800 -- -- 1.00000 0.37800 -
1994 (g) ............ 0.13536 0.06527 0.30300 1.38262 -- -- 1.88625 1.38262 -
1993 (h) ............ 0.13050 0.02030 0.72930 0.22990 -- -- 1.11000 0.22990 -
1992 (i) ............ 0.20530 0.04050 0.29660 0.51760 -- -- 1.06000 0.51760 -
1991 (j) ............ 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 --
7.20% PREFERRED STOCK
2004 ................ $0.04340 $0.11224 $1.64436 -- -- -- $1.80000 --
2003 ................ 0.03000 0.11640 1.65360 -- -- -- 1.80000 --
2002 ................ 0.09800 0.02960 1.67240 -- -- -- 1.80000 --
2001 ................ 0.05870 0.05440 0.81690 -- -- -- 0.93000 --
5.875% PREFERRED STOCK
2004 ................ $0.03542 $0.09159 $1.34174 -- -- -- $1.46875 --
2003 ................ 0.00535 0.02086 0.29610 -- -- -- 0.32231 --
AUCTION RATE PREFERRED C SHARES
2004 ................ $9.15570 $23.67550 $346.83810 -- -- -- $379.66930 --
2003 ................ 5.42000 21.05000 298.41000 -- -- -- 324.88000 --
2002 ................ 12.28350 3.71450 209.89200 -- -- -- 225.89000 --
AUCTION RATE PREFERRED E SHARES
2004 ................ $9.30280 $24.05620 $352.41090 -- -- -- $385.76000 --
2003 ................ 1.07000 4.18000 59.32000 -- -- -- 64.57000 --
--------------------------
(a) Total amounts may differ 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 January 10, 2001, the Company also distributed Rights equivalent to $0.56
per share based upon full subscription of all issued shares.
(e) On July 9, 1999, the Company also distributed shares of The Gabelli Utility
Trust valued at $9.8125 per share.
(f) On October 19, 1995, the Company also distributed Rights equivalent to $0.37
per share based upon full subscription of all issued shares.
(g) On November 15, 1994, the Company also distributed shares of The Gabelli
Global Multimedia Trust Inc. valued at $8.0625 per share.
(h) On July 14, 1993, the Company also distributed Rights equivalent to $0.50
per share based upon full subscription of all issued shares.
(i) On September 28, 1992, the Company also distributed Rights equivalent to
$0.36 per share based upon full subscription of all issued shares.
(j) On October 21, 1991, the Company also distributed Rights equivalent to $0.42
per share based upon full subscription of all issued shares.
- Decrease in cost basis.
+ Increase in cost basis.
23
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 EquiServe Trust Company ("EquiServe") 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 EquiServe
P.O. Box 43011
Providence, RI 02940-3011
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 EquiServe at (800) 336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at EquiServe 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, EquiServe will buy Common Stock in the open
market, or on the New York Stock Exchange or elsewhere, for the participants'
accounts, except that EquiServe 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 EquiServe 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 EquiServe for investments in the Equity Trust's
shares at the then current market price. Shareholders may send an amount from
$250 to $10,000. EquiServe will use these funds to purchase shares in the open
market on or about the 1st and 15th of each month. EquiServe 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 EquiServe, P.O. Box 43011, Providence, RI
02940-3011 such that EquiServe receives such payments approximately 10 days
before the investment date. Funds not received at least five days before the
investment date shall be held for investment in the following period. A payment
may be withdrawn without charge if notice is received by EquiServe 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 Gabelli Equity Trust's stockholders will be held at
9:00 A.M. on Monday, May 9, 2005, in Greenwich, Connecticut.
--------------------------------------------------------------------------------
26
[GRAPHIC OMITTED]
MULTIPLE FLAGS
DIRECTORS AND OFFICERS
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER, RYE, NY 10580-1422
DIRECTORS
Mario J. Gabelli, CFA
CHAIRMAN & CHIEF INVESTMENT OFFICER,
GABELLI ASSET MANAGEMENT INC.
Dr. Thomas E. Bratter
PRESIDENT, JOHN DEWEY ACADEMY
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
James P. Conn
FORMER CHIEF INVESTMENT OFFICER,
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
Frank J. Fahrenkopf, Jr.
PRESIDENT & CHIEF EXECUTIVE OFFICER,
AMERICAN GAMING ASSOCIATION
Arthur V. Ferrara
FORMER CHAIRMAN & CHIEF EXECUTIVE OFFICER,
GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
Karl Otto Pohl
FORMER PRESIDENT, DEUTSCHE BUNDESBANK
Anthony R. Pustorino
CERTIFIED PUBLIC ACCOUNTANT
PROFESSOR EMERITUS, PACE UNIVERSITY
Salvatore J. Zizza
CHAIRMAN, HALLMARK ELECTRICAL SUPPLIES CORP.
OFFICERS
Bruce N. Alpert
PRESIDENT AND TREASURER
Carter W. Austin
VICE PRESIDENT
Dawn M. Donato
ASSISTANT VICE PRESIDENT
James E. McKee
SECRETARY
Peter D. Goldstein
CHIEF COMPLIANCE OFFICER
INVESTMENT ADVISER
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
CUSTODIAN
Mellon Trust of New England, N.A.
COUNSEL
Willkie Farr & Gallagher LLP
TRANSFER AGENT AND REGISTRAR
EquiServe Trust Company
STOCK EXCHANGE LISTING
7.20% 5.875%
COMMON PREFERRED PREFERRED
------ --------- ---------
NYSE-Symbol: GAB GABPrB GAB PrD
Shares Outstanding: 140,332,964 6,600,000 2,949,700
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 800-GABELLI
(800-422-3554), fax us at 914-921-5118, visit Gabelli Funds' Internet homepage
at: WWW.GABELLI.COM or e-mail us at: closedend@gabelli.com
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Equity Trust may, from time to time,
purchase shares of its common stock in the open market when the Equity Trust
shares are trading at a discount of 10% or more from the net asset value of
the shares. The Equity Trust may also, from time to time, purchase shares of
its Cumulative Preferred Stock in the open market when the shares are trading
at a discount to the Liquidation Value of $25.00.
--------------------------------------------------------------------------------
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER, RYE, NY 10580-1422
PHONE: 800-GABELLI (800-422-3554)
FAX: 914-921-5118 INTERNET: WWW.GABELLI.COM
E-MAIL: CLOSEDEND@GABELLI.COM
GBFCM-AR-12/04
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's Board of
Directors has determined that Anthony R. Pustorino is qualified to serve as an
audit committee financial expert serving on its audit committee and that he is
"independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
----------
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$43,658 in 2004 and $84,911 in 2003.
Audit-Related Fees
------------------
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $20,600 in 2004 and $12,500 in 2003.
Audit-related fees represent services provided in the preparation of
Preferred Shares Reports.
Tax Fees
--------
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $2,550 in 2004 and $2,450
in 2003.
Tax fees represent tax compliance services provided in connection with
the review of the Registrant's tax returns.
All Other Fees
--------------
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are $0
for 2004 and $0 for 2003.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X.
Pre-Approval Policies and Procedures. The Audit Committee
("Committee") of the registrant is responsible for pre-approving
(i) all audit and permissible non-audit services to be provided by
the independent auditors to the registrant and (ii) all
permissible non-audit services to be provided by the independent
auditors to the Adviser, Gabelli Funds, LLC, and any affiliate of
Gabelli Funds, LLC ("Gabelli") that provides services to the
registrant (a "Covered Services Provider") if the independent
auditors' engagement related directly to the operations and
financial reporting of the registrant. The Committee may delegate
its responsibility to pre-approve any such audit and permissible
non-audit services to the Chairperson of the Committee, and the
Chairperson must report to the Committee, at its next regularly
scheduled meeting after the Chairperson's pre-approval of such
services, his or her decision(s). The Committee may also establish
detailed pre-approval policies and procedures for pre-approval of
such services in accordance with applicable laws, including the
delegation of some or all of the Committee's pre-approval
responsibilities to the other persons (other than Gabelli or the
registrant's officers). Pre-approval by the Committee of any
permissible non-audit services is not required so long as: (i) the
aggregate amount of all such permissible non-audit services
provided to the registrant, Gabelli and any Covered Services
Provider constitutes not more than 5% of the total amount of
revenues paid by the registrant to its independent auditors during
the fiscal year in which the permissible non-audit services are
provided; (ii) the permissible non-audit services were not
recognized by the registrant at the time of the engagement to be
non-audit services; and (iii) such services are promptly brought
to the attention of the Committee and approved by the Committee or
Chairperson prior to the completion of the audit.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X
are as follows:
(b) 100%
(c) 100%
(d) N/A
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was zero percent (0%).
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $0 in 2004 and $0 in 2003.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately designated audit committee consisting of the
following members: Anthony J. Colavita, Anthony R. Pustorino and Salvatore J.
Zizza.
ITEM 6. SCHEDULE OF INVESTMENTS
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Proxy Voting Policies are attached herewith.
GABELLI ASSET MANAGEMENT INC. AND AFFILIATES
------------------------------------------------------------------------------
THE VOTING OF PROXIES ON BEHALF OF CLIENTS
-------------------------------------------------------------------------------
Rules 204(4)-2 and 204-2 under the Investment Advisers Act of 1940 and
Rule 30b1-4 under the Investment Company Act of 1940 require investment advisers
to adopt written policies and procedures governing the voting of proxies on
behalf of their clients.
These procedures will be used by GAMCO Investors, Inc., Gabelli Funds,
LLC and Gabelli Advisers, Inc. (collectively, the "Advisers") to determine how
to vote proxies relating to portfolio securities held by their clients,
including the procedures that the Advisers use when a vote presents a conflict
between the interests of the shareholders of an investment company managed by
one of the Advisers, on the one hand, and those of the Advisers; the principal
underwriter; or any affiliated person of the investment company, the Advisers,
or the principal underwriter. These procedures will not apply where the Advisers
do not have voting discretion or where the Advisers have agreed with a client to
vote the client's proxies in accordance with specific guidelines or procedures
supplied by the client (to the extent permitted by ERISA).
I. PROXY VOTING COMMITTEE
The Proxy Voting Committee was originally formed in April 1989 for the
purpose of formulating guidelines and reviewing proxy statements within the
parameters set by the substantive proxy voting guidelines originally published
by GAMCO Investors, Inc. in 1988 and updated periodically, a copy of which are
appended as Exhibit A. The Committee will include representatives of Research,
Administration, Legal, and the Advisers. Additional or replacement members of
the Committee will be nominated by the Chairman and voted upon by the entire
Committee. As of December 31, 2004, the members are:
Bruce N. Alpert, Chief Operating Officer of Gabelli Funds, LLC
Ivan Arteaga, Portfolio Manager
Caesar M. P. Bryan, Portfolio Manager
Stephen DeTore, Deputy General Counsel
Joshua Fenton, Director of Buy-Side Research
Douglas R. Jamieson, Chief Operating Officer of GAMCO
James E. McKee, General Counsel
Karyn-Marie Prylucki, Director of Proxy Voting Services
William S. Selby, Managing Director of GAMCO
Howard F. Ward, Portfolio Manager
Peter D. Zaglio, Senior Vice President
Peter D. Zaglio currently chairs the Committee. In his absence, the
Director of Research will chair the Committee. Meetings are held on an as needed
basis to form views on the manner in which the Advisers should vote proxies on
behalf of their clients.
In general, the Director of Proxy Voting Services, using the Proxy
Guidelines, recommendations of Institutional Shareholder Corporate Governance
Service ("ISS"), other third-party services and the analysts of Gabelli &
Company, Inc., will determine how to vote on each issue. For non-controversial
matters, the Director of Proxy Voting Services may vote the proxy if the vote is
(1) consistent with the recommendations of the issuer's Board of Directors and
not contrary to the Proxy Guidelines; (2) consistent with the recommendations of
the issuer's Board of Directors and is a non-controversial issue not covered by
the Proxy Guidelines; or (3) the vote is contrary to the recommendations of the
Board of Directors but is consistent with the Proxy Guidelines. In those
instances, the Director of Proxy Voting Services or the Chairman of the
Committee may sign and date the proxy statement indicating how each issue will
be voted.
All matters identified by the Chairman of the Committee, the Director
of Proxy Voting Services or the Legal Department as controversial, taking into
account the recommendations of ISS or other third party services and the
analysts of Gabelli & Company, Inc., will be presented to the Proxy Voting
Committee. If the Chairman of the Committee, the Director of Proxy Voting
Services or the Legal Department has identified the matter as one that (1) is
controversial; (2) would benefit from deliberation by the Proxy Voting
Committee; or (3) may give rise to a conflict of interest between the Advisers
and their clients, the Chairman of the Committee will initially determine what
vote to recommend that the Advisers should cast and the matter will go before
the Committee.
For matters submitted to the Committee, each member of the Committee
will receive, prior to the meeting, a copy of the proxy statement, any relevant
third party research, a summary of any views provided by the Chief Investment
Officer and any recommendations by Gabelli & Company, Inc. analysts. The Chief
Investment Officer or the Gabelli & Company, Inc. analysts may be invited to
present their viewpoints. If the Legal Department believes that the matter
before the committee is one with respect to which a conflict of interest may
exist between the Advisers and their clients, counsel will provide an opinion to
the Committee concerning the conflict. If the matter is one in which the
interests of the clients of one or more of Advisers may diverge, counsel will so
advise and the Committee may make different recommendations as to different
clients. For any matters where the recommendation may trigger appraisal rights,
counsel will provide an opinion concerning the likely risks and merits of such
an appraisal action.
Each matter submitted to the Committee will be determined by the vote
of a majority of the members present at the meeting. Should the vote concerning
one or more recommendations be tied in a vote of the Committee, the Chairman of
the Committee will cast the deciding vote. The Committee will notify the proxy
department of its decisions and the proxies will be voted accordingly.
Although the Proxy Guidelines express the normal preferences for the
voting of any shares not covered by a contrary investment guideline provided by
the client, the Committee is not bound by the preferences set forth in the Proxy
Guidelines and will review each matter on its own merits. Written minutes of all
Proxy Voting Committee meetings will be maintained. The Advisers subscribe to
ISS, which supplies current information on companies, matters being voted on,
regulations, trends in proxy voting and information on corporate governance
issues.
If the vote cast either by the analyst or as a result of the
deliberations of the Proxy Voting Committee runs contrary to the recommendation
of the Board of Directors of the issuer, the matter will be referred to legal
counsel to determine whether an amendment to the most recently filed Schedule
13D is appropriate.
II. SOCIAL ISSUES AND OTHER CLIENT GUIDELINES
If a client has provided special instructions relating to the voting of
proxies, they should be noted in the client's account file and forwarded to the
proxy department. This is the responsibility of the investment professional or
sales assistant for the client. In accordance with Department of Labor
guidelines, the Advisers' policy is to vote on behalf of ERISA accounts in the
best interest of the plan participants with regard to social issues that carry
an economic impact. Where an account is not governed by ERISA, the Advisers will
vote shares held on behalf of the client in a manner consistent with any
individual investment/voting guidelines provided by the client. Otherwise the
Advisers will abstain with respect to those shares.
III. CLIENT RETENTION OF VOTING RIGHTS
If a client chooses to retain the right to vote proxies or if there is
any change in voting authority, the following should be notified by the
investment professional or sales assistant for the client.
- Operations
- Legal Department
- Proxy Department
- Investment professional assigned to the account
In the event that the Board of Directors (or a Committee thereof) of
one or more of the investment companies managed by one of the Advisers has
retained direct voting control over any security, the Proxy Voting Department
will provide each Board Member (or Committee member) with a copy of the proxy
statement together with any other relevant information including recommendations
of ISS or other third-party services.
IV. VOTING RECORDS
The Proxy Voting Department will retain a record of matters voted upon
by the Advisers for their clients. The Advisers' staff may request proxy-voting
records for use in presentations to current or prospective clients. Requests for
proxy voting records should be made at least ten days prior to client meetings.
If a client wishes to receive a proxy voting record on a quarterly,
semi-annual or annual basis, please notify the Proxy Voting Department. The
reports will be available for mailing approximately ten days after the quarter
end of the period. First quarter reports may be delayed since the end of the
quarter falls during the height of the proxy season.
A letter is sent to the custodians for all clients for which the
Advisers have voting responsibility instructing them to forward all proxy
materials to:
[Adviser name]
Attn: Proxy Voting Department
One Corporate Center
Rye, New York 10580-1433
The sales assistant sends the letters to the custodians along with the
trading/DTC instructions. Proxy voting records will be retained in compliance
with Rule 204-2 under the Investment Advisers Act.
V. VOTING PROCEDURES
1. Custodian banks, outside brokerage firms and First Clearing Corporation are
responsible for forwarding proxies directly to GAMCO.
Proxies are received in one of two forms:
o Shareholder Vote Authorization Forms (VAFs) - Issued by ADP. VAFs must be
voted through the issuing institution causing a time lag. ADP is an outside
service contracted by the various institutions to issue proxy materials.
o Proxy cards which may be voted directly.
2. Upon receipt of the proxy, the number of shares each form represents is
logged into the proxy system according to security.
3. In the case of a discrepancy such as an incorrect number of shares, an
improperly signed or dated card, wrong class of security, etc., the issuing
custodian is notified by phone. A corrected proxy is requested. Any arrangements
are made to insure that a proper proxy is received in time to be voted
(overnight delivery, fax, etc.). When securities are out on loan on record date,
the custodian is requested to supply written verification.
4. Upon receipt of instructions from the proxy committee, the votes are cast and
recorded for each account on an individual basis.
Since January 1, 1992, records have been maintained on the Proxy Edge system.
The system is backed up regularly. From 1990 through 1991, records were
maintained on the PROXY VOTER system and in hardcopy format. Prior to 1990,
records were maintained on diskette and in hardcopy format.
PROXY EDGE records include:
Security Name and Cusip Number
Date and Type of Meeting (Annual, Special, Contest)
Client Name
Adviser or Fund Account Number
Directors' Recommendation
How the Adviser voted for the client on each issue
The rationale for the vote when it is appropriate
Records prior to the institution of the PROXY EDGE system include:
Security name
Type of Meeting (Annual, Special, Contest)
Date of Meeting
Name of Custodian
Name of Client
Custodian Account Number
Adviser or Fund Account Number
Directors' recommendation
How the Adviser voted for the client on each issue
Date the proxy statement was received and by whom
Name of person posting the vote
Date and method by which the vote was cast
o From these records individual client proxy voting records are compiled. It
is our policy to provide institutional clients with a proxy voting record
during client reviews. In addition, we will supply a proxy voting record at
the request of the client on a quarterly, semi-annual or annual basis. On
an annual basis, all registered investment companies file their Proxy
Voting History for the period July 1 - June 30 on Form N-PX.
5. VAFs are kept alphabetically by security. Records for the current proxy
season are located in the Proxy Voting Department office. In preparation for the
upcoming season, files are transferred to an offsite storage facility during
January/February.
6. Shareholder Vote Authorization Forms issued by ADP are always sent directly
to a specific individual at ADP.
7. If a proxy card or VAF is received too late to be voted in the conventional
matter, every attempt is made to vote on one of the following manners:
o VAFs can be faxed to ADP up until the time of the meeting. This is followed
up by mailing the original form.
o When a solicitor has been retained, the solicitor is called. At the
solicitor's direction, the proxy is faxed.
8. In the case of a proxy contest, records are maintained for each opposing
entity.
9. Voting in Person
a) At times it may be necessary to vote the shares in person. In this case, a
"legal proxy" is obtained in the following manner:
o Banks and brokerage firms using the services at ADP:
A call is placed to ADP requesting legal proxies. The VAFs are then sent
overnight to ADP. ADP issues individual legal proxies and sends them back
via overnight. A lead-time of at least two weeks prior to the meeting is
needed to do this. Alternatively, the procedures detailed below for banks
not using ADP may be implemented.
o Banks and brokerage firms issuing proxies directly: The bank is called
and/or faxed and a legal proxy is requested.
All legal proxies should appoint:
"REPRESENTATIVE OF [ADVISER NAME] WITH FULL POWER OF SUBSTITUTION."
b) The legal proxies are given to the person attending the meeting along with
the following supplemental material:
o A limited Power of Attorney appointing the attendee an Adviser
representative.
o A list of all shares being voted by custodian only. Client names and
account numbers are not included. This list must be presented, along with
the proxies, to the Inspectors of Elections and/or tabulator at least
one-half hour prior to the scheduled start of the meeting. The tabulator
must "qualify" the votes (i.e. determine if the vote have previously been
cast, if the votes have been rescinded, etc. votes have previously been
cast, etc.).
o A sample ERISA and Individual contract.
o A sample of the annual authorization to vote proxies form.
o A copy of our most recent Schedule 13D filing (if applicable).
APPENDIX A
PROXY GUIDELINES
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PROXY VOTING GUIDELINES
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GENERAL POLICY STATEMENT
It is the policy of GABELLI ASSET MANAGEMENT INC. to vote in the best economic
interests of our clients. As we state in our Magna Carta of Shareholders Rights,
established in May 1988, we are neither FOR nor AGAINST management. We are for
shareholders.
At our first proxy committee meeting in 1989, it was decided that each proxy
statement should be evaluated on its own merits within the framework first
established by our Magna Carta of Shareholders Rights. The attached guidelines
serve to enhance that broad framework.
We do not consider any issue routine. We take into consideration all of our
research on the company, its directors, and their short and long-term goals for
the company. In cases where issues that we generally do not approve of are
combined with other issues, the negative aspects of the issues will be factored
into the evaluation of the overall proposals but will not necessitate a vote in
opposition to the overall proposals.
BOARD OF DIRECTORS
The advisers do not consider the election of the Board of Directors a routine
issue. Each slate of directors is evaluated on a case-by-case basis.
Factors taken into consideration include:
o Historical responsiveness to shareholders
This may include such areas as:
-Paying greenmail
-Failure to adopt shareholder resolutions receiving a majority of
shareholder votes
o Qualifications
o Nominating committee in place
o Number of outside directors on the board
o Attendance at meetings
o Overall performance
SELECTION OF AUDITORS
In general, we support the Board of Directors' recommendation for auditors.
BLANK CHECK PREFERRED STOCK
We oppose the issuance of blank check preferred stock.
Blank check preferred stock allows the company to issue stock and establish
dividends, voting rights, etc. without further shareholder approval.
CLASSIFIED BOARD
A classified board is one where the directors are divided into classes with
overlapping terms. A different class is elected at each annual meeting.
While a classified board promotes continuity of directors facilitating long
range planning, we feel directors should be accountable to shareholders on an
annual basis. We will look at this proposal on a case-by-case basis taking into
consideration the board's historical responsiveness to the rights of
shareholders.
Where a classified board is in place, we will generally not support attempts to
change to an annually elected board.
When an annually elected board is in place, we generally will not support
attempts to classify the board.
INCREASE AUTHORIZED COMMON STOCK
The request to increase the amount of outstanding shares is considered on a
case-by-case basis.
Factors taken into consideration include:
o Future use of additional shares
-Stock split
-Stock option or other executive compensation plan
-Finance growth of company/strengthen balance sheet
-Aid in restructuring
-Improve credit rating
-Implement a poison pill or other takeover defense
o Amount of stock currently authorized but not yet issued or reserved for
stock option plans
o Amount of additional stock to be authorized and its dilutive effect
We will support this proposal if a detailed and verifiable plan for the use of
the additional shares is contained in the proxy statement.
CONFIDENTIAL BALLOT
We support the idea that a shareholder's identity and vote should be treated
with confidentiality.
However, we look at this issue on a case-by-case basis.
In order to promote confidentiality in the voting process, we endorse the use of
independent Inspectors of Election.
CUMULATIVE VOTING
In general, we support cumulative voting.
Cumulative voting is a process by which a shareholder may multiply the number of
directors being elected by the number of shares held on record date and cast the
total number for one candidate or allocate the voting among two or more
candidates.
Where cumulative voting is in place, we will vote against any proposal to
rescind this shareholder right.
Cumulative voting may result in a minority block of stock gaining representation
on the board. When a proposal is made to institute cumulative voting, the
proposal will be reviewed on a case-by-case basis. While we feel that each board
member should represent all shareholders, cumulative voting provides minority
shareholders an opportunity to have their views represented.
DIRECTOR LIABILITY AND INDEMNIFICATION
We support efforts to attract the best possible directors by limiting the
liability and increasing the indemnification of directors, except in the case of
insider dealing.
EQUAL ACCESS TO THE PROXY
The SEC's rules provide for shareholder resolutions. However, the resolutions
are limited in scope and there is a 500 word limit on proponents' written
arguments. Management has no such limitations. While we support equal access to
the proxy, we would look at such variables as length of time required to
respond, percentage of ownership, etc.
FAIR PRICE PROVISIONS
Charter provisions requiring a bidder to pay all shareholders a fair price are
intended to prevent two-tier tender offers that may be abusive. Typically, these
provisions do not apply to board-approved transactions.
We support fair price provisions because we feel all shareholders should be
entitled to receive the same benefits.
Reviewed on a case-by-case basis.
GOLDEN PARACHUTES
Golden parachutes are severance payments to top executives who are terminated or
demoted after a takeover.
We support any proposal that would assure management of its own welfare so that
they may continue to make decisions in the best interest of the company and
shareholders even if the decision results in them losing their job. We do not,
however, support excessive golden parachutes. Therefore, each proposal will be
decided on a case-by- case basis.
NOTE: CONGRESS HAS IMPOSED A TAX ON ANY PARACHUTE THAT IS MORE THAN THREE TIMES
THE EXECUTIVE'S AVERAGE ANNUAL COMPENSATION.
ANTI-GREENMAIL PROPOSALS
We do not support greenmail. An offer extended to one shareholder should be
extended to all shareholders equally across the board.
LIMIT SHAREHOLDERS' RIGHTS TO CALL SPECIAL MEETINGS
We support the right of shareholders to call a special meeting.
CONSIDERATION OF NONFINANCIAL EFFECTS OF A MERGER
This proposal releases the directors from only looking at the financial effects
of a merger and allows them the opportunity to consider the merger's effects on
employees, the community, and consumers.
As a fiduciary, we are obligated to vote in the best economic interests of our
clients. In general, this proposal does not allow us to do that. Therefore, we
generally cannot support this proposal.
Reviewed on a case-by-case basis.
MERGERS, BUYOUTS, SPIN-OFFS, RESTRUCTURINGS
Each of the above is considered on a case-by-case basis. According to the
Department of Labor, we are not required to vote for a proposal simply because
the offering price is at a premium to the current market price. We may take into
consideration the long term interests of the shareholders.
MILITARY ISSUES
Shareholder proposals regarding military production must be evaluated on a
purely economic set of criteria for our ERISA clients. As such, decisions will
be made on a case-by-case basis.
In voting on this proposal for our non-ERISA clients, we will vote according to
the client's direction when applicable. Where no direction has been given, we
will vote in the best economic interests of our clients. It is not our duty to
impose our social judgment on others.
NORTHERN IRELAND
Shareholder proposals requesting the signing of the MacBride principles for the
purpose of countering the discrimination of Catholics in hiring practices must
be evaluated on a purely economic set of criteria for our ERISA clients. As
such, decisions will be made on a case-by-case basis.
In voting on this proposal for our non-ERISA clients, we will vote according to
client direction when applicable. Where no direction has been given, we will
vote in the best economic interests of our clients. It is not our duty to impose
our social judgment on others.
OPT OUT OF STATE ANTI-TAKEOVER LAW
This shareholder proposal requests that a company opt out of the coverage of the
state's takeover statutes. Example: Delaware law requires that a buyer must
acquire at least 85% of the company's stock before the buyer can exercise
control unless the board approves.
We consider this on a case-by-case basis. Our decision will be based on the
following:
o State of Incorporation
o Management history of responsiveness to shareholders
o Other mitigating factors
POISON PILL
In general, we do not endorse poison pills.
In certain cases where management has a history of being responsive to the needs
of shareholders and the stock is very liquid, we will reconsider this position.
REINCORPORATION
Generally, we support reincorporation for well-defined business reasons. We
oppose reincorporation if proposed solely for the purpose of reincorporating in
a state with more stringent anti-takeover statutes that may negatively impact
the value of the stock.
STOCK OPTION PLANS
Stock option plans are an excellent way to attract, hold and motivate directors
and employees. However, each stock option plan must be evaluated on its own
merits, taking into consideration the following:
o Dilution of voting power or earnings per share by more than 10%
o Kind of stock to be awarded, to whom, when and how much
o Method of payment
o Amount of stock already authorized but not yet issued under existing
stock option plans
SUPERMAJORITY VOTE REQUIREMENTS
Supermajority vote requirements in a company's charter or bylaws require a level
of voting approval in excess of a simple majority of the outstanding shares. In
general, we oppose supermajority-voting requirements. Supermajority requirements
often exceed the average level of shareholder participation. We support
proposals' approvals by a simple majority of the shares voting.
LIMIT SHAREHOLDERS RIGHT TO ACT BY WRITTEN CONSENT
Written consent allows shareholders to initiate and carry on a shareholder
action without having to wait until the next annual meeting or to call a special
meeting. It permits action to be taken by the written consent of the same
percentage of the shares that would be required to effect proposed action at a
shareholder meeting.
Reviewed on a case-by-case basis.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not yet applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Provide the information specified in the table with respect to any purchase made
by or on behalf of the registrant or any "affiliated purchaser" as defined in
Rule 10b-18(a)(3) under the Exchange Act (17CFR 240-10b-18(a)(3)), of shares or
other units of any class of the registrant's equity securities that is
registered by the registrant pursuant to Section 12 of the Exchange Act (15
U.S.C. 781).
REGISTRANT PURCHASES OF EQUITY SECURITIES
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(C) TOTAL NUMBER OF SHARES (OR (D) MAXIMUM NUMBER (OR APPROXIMATE
(A) TOTAL NUMBER (B) AVERAGE UNITS) PURCHASED AS PART OF DOLLAR VALUE) OF SHARES (OR UNITS) THAT
OF SHARES (OR PRICE PAID PER PUBLICLY ANNOUNCED PLANS OR MAY YET BE PURCHASED UNDER
PERIOD UNITS) PURCHASED SHARE (OR UNIT) PROGRAMS THE PLANS OR PROGRAMS
------------------------------------------------------------------------------------------------------------------------------------
Month #1 Common - N/A Common - N/A Common - N/A Common - 138,506,636
07/01/04
through Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - 6,600,000
07/31/04
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
------------------------------------------------------------------------------------------------------------------------------------
Month #2 Common - N/A Common - N/A Common - N/A Common - 138,506,636
08/01/04
through Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - 6,600,000
08/31/04
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
------------------------------------------------------------------------------------------------------------------------------------
Month #3 Common - N/A Common - N/A Common - N/A Common - 138,506,636
09/01/04
through Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - 6,600,000
09/30/04
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
------------------------------------------------------------------------------------------------------------------------------------
Month #4 Common - N/A Common - N/A Common - N/A Common - 139,214,947
10/01/04
through Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - 6,600,000
10/31/04
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
------------------------------------------------------------------------------------------------------------------------------------
Month #5 Common - N/A Common - N/A Common - N/A Common - 139,214,947
11/01/04
through Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - 6,600,000
11/30/04
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
------------------------------------------------------------------------------------------------------------------------------------
Month #6 Common - N/A Common - N/A Common - N/A Common - 139,214,947
12/01/04
through Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - 6,600,000
12/31/04
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
------------------------------------------------------------------------------------------------------------------------------------
Total Common - N/A Common - N/A Common - N/A N/A
Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - N/A
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A
------------------------------------------------------------------------------------------------------------------------------------
Footnote columns (c) and (d) of the table, by disclosing the following
information in the aggregate for all plans or programs publicly announced:
a. The date each plan or program was announced - The notice of the potential
repurchase of common and preferred shares occurs quarterly in the Fund's
quarterly report in accordance with Section 23(c) of the Investment Company Act
of 1940, as amended.
b. The dollar amount (or share or unit amount) approved - Any or all common
shares outstanding may be repurchased when the Fund's common shares are trading
at a discount of 10% or more from the net asset value of the shares.
Any or all preferred shares outstanding may be repurchased when the
Fund's preferred shares are trading at a discount to the liquidation value of
$25.00.
c. The expiration date (if any) of each plan or program - The Fund's
repurchase plans are ongoing.
d. Each plan or program that has expired during the period covered by the table
- The Fund's repurchase plans are ongoing.
e. Each plan or program the registrant has determined to terminate prior to
expiration, or under which the registrant does not intend to make further
purchases. - The Fund's repurchase plans are ongoing.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's Board of Directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, that is the subject of disclosure required by Item
2, filed as exhibit (a)(1) to the Registrant's Form N-CSR, filed
on March 10, 2004 (Accession No. 0000935069-04-000487).
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) The Gabelli Equity Trust Inc.
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By (Signature and Title)* /s/ Bruce N. Alpert
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Bruce N. Alpert, Principal Executive Officer
Date March 9, 2005
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Bruce N. Alpert
-------------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
& Principal Financial Officer
Date March 9, 2005
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.