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: June 30, 2008
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, 100 F Street, NE,
Washington, DC 20549. 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.
(THE GABELLI EQUITY TRUST INC. LOGO)
THE GABELLI EQUITY TRUST INC.
Semi-Annual Report
June 30, 2008
TO OUR SHAREHOLDERS,
The Gabelli Equity Trust's (the "Fund") net asset value ("NAV") total
return declined 15.1% during the first half of 2008, compared with decreases of
11.9% and 13.3% for the Standard & Poor's ("S&P") 500 Index and the Dow Jones
Industrial Average, respectively. The total return for the Fund's publicly
traded shares declined 7.8% during the first half of the year. On June 30, 2008,
the Fund's NAV per share was $7.45, while the price of the publicly traded
shares closed at $8.15 on the New York Stock Exchange.
COMPARATIVE RESULTS
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 2008 (a)
Since
Year to Inception
Quarter Date 1 Year 5 Year 10 Year 20 Year (08/21/86)
------- ------- ------ ------ ------- ------- ----------
GABELLI EQUITY TRUST
NAV TOTAL RETURN (b) ......... (3.80)% (15.05)% (14.65)% 13.58% 7.57% 10.85% 11.33%
INVESTMENT TOTAL RETURN (c) ..... (1.72) (7.78) (8.24) 13.27 8.67 11.80 11.38
S&P 500 Index ................... (2.72) (11.90) (13.11) 7.58 2.88 10.43 10.27(d)
Dow Jones Industrial Average .... (6.84) (13.29) (13.27) 7.23 4.54 11.45 11.39(d)
Nasdaq Composite Index .......... 0.61 (13.55) (11.92) 7.16 1.93 9.20 8.55
(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 PERFORMANCE DATA
PRESENTED. VISIT WWW.GABELLI.COM FOR PERFORMANCE INFORMATION AS OF THE MOST
RECENT MONTH END. PERFORMANCE RETURNS FOR PERIODS LESS THAN ONE YEAR ARE
NOT ANNUALIZED. INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT
OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE FUND BEFORE INVESTING. THE
DOW JONES INDUSTRIAL AVERAGE IS AN UNMANAGED INDEX OF 30 LARGE
CAPITALIZATION 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. YOU CANNOT INVEST
DIRECTLY IN AN INDEX.
(b) TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN NAV PER SHARE,
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 IS BASED ON
AN INITIAL NAV 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, AND
ADJUSTMENTS FOR RIGHTS OFFERINGS, SPIN-OFFS, AND TAXES PAID ON
UNDISTRIBUTED LONG-TERM CAPITAL GAINS. SINCE INCEPTION RETURN IS BASED ON
AN INITIAL OFFERING PRICE OF $10.00.
(d) FROM AUGUST 31, 1986, THE DATE CLOSEST TO THE FUND'S INCEPTION FOR WHICH
DATA IS AVAILABLE.
We have separated the portfolio manager's commentary from the financial
statements and investment portfolios due to corporate governance regulations
stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that
the content of the portfolio manager's commentary is unrestricted. The financial
statements and investment portfolios are mailed separately from the commentary.
Both the commentary and the financial statements, including the portfolios of
investments, will be available on our website at www.gabelli.com/funds.
THE GABELLI EQUITY TRUST INC.
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following tables present portfolio holdings as a percent of total
investments as of June 30, 2008:
LONG POSITIONS
Food and Beverage ................................................ 13.5%
Energy and Utilities ............................................. 8.9%
Financial Services ............................................... 7.7%
Diversified Industrial ........................................... 6.8%
Telecommunications ............................................... 5.8%
Cable and Satellite .............................................. 5.2%
Entertainment .................................................... 5.0%
Equipment and Supplies ........................................... 5.0%
Consumer Products ................................................ 4.8%
Health Care ...................................................... 4.5%
Publishing ....................................................... 3.4%
Business Services ................................................ 2.7%
Automotive: Parts and Accessories ................................ 2.4%
Machinery ........................................................ 2.0%
Specialty Chemicals .............................................. 1.8%
Aviation: Parts and Services ..................................... 1.6%
Metals and Mining ................................................ 1.6%
Retail ........................................................... 1.6%
Hotels and Gaming ................................................ 1.5%
Aerospace ........................................................ 1.4%
Consumer Services ................................................ 1.4%
Communications Equipment ......................................... 1.3%
Environmental Services ........................................... 1.3%
Agriculture ...................................................... 1.3%
Broadcasting ..................................................... 1.2%
Electronics ...................................................... 1.1%
Wireless Communications .......................................... 1.1%
U.S. Government Obligations ...................................... 1.1%
Automotive ....................................................... 0.9%
Transportation ................................................... 0.5%
Computer Software and Services ................................... 0.5%
Real Estate ...................................................... 0.5%
Closed-End Funds ................................................. 0.4%
Manufactured Housing and Recreational Vehicles ................... 0.1%
Real Estate Investment Trusts .................................... 0.1%
-----
100.0%
=====
THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") FOR THE FIRST AND THIRD QUARTERS
OF EACH FISCAL YEAR ON FORM N-Q, THE LAST OF WHICH WAS FILED FOR THE QUARTER
ENDED MARCH 31, 2008. SHAREHOLDERS MAY OBTAIN THIS INFORMATION AT
WWW.GABELLI.COM OR BY CALLING THE FUND AT 800-GABELLI (800-422-3554). THE FUND'S
FORM N-Q IS AVAILABLE ON THE SEC'S WEBSITE AT WWW.SEC.GOV AND MAY ALSO BE
REVIEWED AND COPIED AT THE SEC'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 Fund 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 Fund's proxy voting policies, procedures, and how the Fund voted proxies
relating to portfolio securities is available without charge, upon request, by
(i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One
Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC's website at
www.sec.gov.
SHAREHOLDER MEETING - FINAL RESULTS
The Annual Meeting of Shareholders was held on May 19, 2008 at the
Greenwich Library in Greenwich, Connecticut. At that meeting, common and
preferred shareholders, voting together as a single class, voted in favor of
Proposal 1 to elect Frank J. Fahrenkopf, Jr. and Salvatore J. Zizza as Directors
of the Fund. A total of 124,272,022 votes and 124,607,183 votes were cast in
favor of each Director and a total of 3,584,339 votes and 3,249,178 votes were
withheld for each Director, respectively. In addition, preferred shareholders,
voting as a separate class, elected Anthony J. Colavita as a Director of the
Fund. A total of 5,918,389 votes were cast in favor of this Director and a total
of 193,408 votes were withheld for this Director. Mario J. Gabelli, Thomas E.
Bratter, James P. Conn, Arthur V. Ferrara and Anthony R. Pustorino continue to
serve in their capacities as Directors of the Fund.
The Annual Meeting was adjourned to June 9, 2008 solely in regards to
Proposal 2, which concerned an amendment to the fundamental investment
restriction regarding borrowing, due to insufficient shareholder votes. The
reconvened meeting held on June 9, 2008 was adjourned with respect to Proposal 2
to June 30, 2008 and subsequently to July 15, 2008. On that date, common and
preferred shareholders, voting together as a single class, and preferred
shareholders, voting as a separate class, voted on Proposal 2. A total of
93,305,721 votes and 3,875,264 votes were cast in favor of the proposal,
6,242,574 votes and 321,785 votes were cast against the proposal, and 4,093,988
votes and 318,971 votes abstained, respectively. The requisite shareholder vote
was not obtained with respect to Proposal 2. The meeting was concluded after the
tabulation of the shareholder votes.
We thank you for your participation and appreciate your continued support.
2
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
QUARTER ENDED JUNE 30, 2008 (UNAUDITED)
OWNERSHIP AT
JUNE 30,
SHARES 2008
-------- ------------
NET PURCHASES
COMMON STOCKS
Advanced Micro Devices Inc. ......................................... 1,000 6,000
AutoNation Inc. ..................................................... 100,000 200,000
Bel Fuse Inc., Cl. A ................................................ 1,200 14,000
BHP Billiton Ltd. ................................................... 20,000 20,000
BPW Acquisition Corp ................................................ 10,000 310,000
Brookfield Asset Management Inc., Cl. A ............................. 2,000 2,000
Cadbury plc (a) ..................................................... 70,400 70,400
Cadbury plc, ADR (b) ................................................ 115,200 115,200
Cephalon Inc. ....................................................... 1,000 1,000
ChoicePoint Inc. .................................................... 20,000 235,000
Cincinnati Bell Inc. ................................................ 8,300 908,300
Clear Channel Outdoor Holdings Inc., Cl. A .......................... 8,700 110,000
CNH Global NV ....................................................... 2,000 17,000
CVS Caremark Corp. .................................................. 5,000 75,000
Dean Foods Co. ...................................................... 75,000 115,000
Diebold Inc. ........................................................ 30,000 110,000
Dr. Pepper Snapple Group Inc. (a)(b) ................................ 99,600 99,600
FairPoint Communications Inc. (c) ................................... 3,394 3,394
Fanuc Ltd. .......................................................... 1,000 14,000
Finmeccanica SpA .................................................... 30,000 30,000
Galp Energia SGPS SA, Cl. B ......................................... 45,000 45,000
General Motors Corp. ................................................ 60,000 210,000
Home Inns & Hotels Management Inc., ADR ............................. 2,000 22,000
Invitrogen Corp. (d) ................................................ 40,000 80,000
Japan Tobacco Inc. .................................................. 25 200
JPMorgan Chase & Co. (e) ............................................ 9,788 61,788
Keyence Corp. ....................................................... 1,000 5,920
Legg Mason Inc. ..................................................... 3,000 58,000
Liberty Media Corp. - Entertainment, Cl. A .......................... 122,000 430,000
Lin TV Corp., Cl. A ................................................. 5,000 90,000
Macrovision Solutions Corp. (f) ..................................... 65,341 65,341
Macy's Inc. ......................................................... 5,000 140,000
MGM Mirage .......................................................... 1,000 136,788
Mitsui & Co. Ltd. ................................................... 40,000 40,000
Modine Manufacturing Co. ............................................ 12,500 330,000
NCR Corp. ........................................................... 50,000 50,000
Nestle SA (g) ....................................................... 50,000 55,000
Nobel Biocare Holding AG (h) ........................................ 8,000 10,000
Northrop Grumman Corp. (i) .......................................... 24,600 102,600
Och-Ziff Capital Management Group LLC, Cl. A ........................ 1,000 3,000
O'Reilly Automotive Inc. ............................................ 45,000 155,000
OWNERSHIP AT
JUNE 30,
SHARES 2008
-------- ------------
Petroleo Brasileiro SA, ADR (d) ..................................... 27,000 54,000
Pfizer Inc. ......................................................... 20,000 470,000
Rockwell Automation Inc. ............................................ 24,000 24,000
Sulzer AG (g) ....................................................... 17,000 19,000
Syngenta AG ......................................................... 1,500 5,000
Telephone & Data Systems Inc. ....................................... 11,000 265,000
Telmex Internacional SAB de CV, ADR (j) ............................. 60,000 60,000
The DIRECTV Group Inc. .............................................. 150,000 450,000
The Interpublic Group of Companies Inc. ............................. 195,000 235,000
United States Cellular Corp. ........................................ 15,400 115,400
UnitedHealth Group Inc. ............................................. 30,000 130,000
Walgreen Co. ........................................................ 5,000 70,000
Wells Fargo & Co. ................................................... 50,000 280,000
Whole Foods Market Inc. ............................................. 5,000 25,000
Wm. Wrigley Jr. Co. ................................................. 10,000 180,000
NET SALES
COMMON STOCKS
America Movil SAB de CV, Cl. L, ADR ................................. (1,000) 95,000
AMETEK Inc. ......................................................... (8,000) 257,000
Ampco-Pittsburgh Corp. .............................................. (1,000) 162,000
Archer-Daniels-Midland Co. .......................................... (85,000) 405,000
Aviva plc ........................................................... (80,000) --
BCE Inc. ............................................................ (15,000) 70,000
BEA Systems Inc. (k) ................................................ (450,000) --
Berkshire Hathaway Inc., Cl. A ...................................... (1) 142
Boston Scientific Corp. ............................................. (5,000) 155,000
Cadbury Schweppes plc (a) ........................................... (110,000) --
Cadbury Schweppes plc, ADR (b) ...................................... (180,000) --
CLARCOR Inc. ........................................................ (1,000) 181,000
CMS Energy Corp. .................................................... (5,000) 65,000
Comcast Corp., Cl. A ................................................ (13,000) 52,000
Comcast Corp., Cl. A, Special ....................................... (7,500) 120,000
Corn Products International Inc. .................................... (5,000) 50,000
Crown Ltd. .......................................................... (100,000) --
Davide Campari-Milano SpA ........................................... (10,000) 290,000
Donaldson Co. Inc. .................................................. (900) 194,000
Duke Energy Corp. ................................................... (10,000) 220,000
Fomento Economico Mexicano SAB de CV, ADR ........................... (2,000) 97,000
Fortune Brands Inc. ................................................. (2,000) 58,000
Gemstar-TV Guide International Inc. (f) ............................. (600,603) --
Greif Inc., Cl. A ................................................... (10,000) 200,000
Groupe Danone ....................................................... (8,000) 360,000
See accompanying notes to financial statements.
3
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES (CONTINUED)
QUARTER ENDED JUNE 30, 2008 (UNAUDITED)
OWNERSHIP AT
JUNE 30,
SHARES 2008
-------- ------------
NET SALES (CONTINUED)
COMMON STOCKS (CONTINUED)
Grupo Bimbo SAB de CV, Cl. A ........................................ (20,000) 980,000
Grupo Televisa SA, ADR .............................................. (5,000) 695,000
Il Sole 24 Ore ...................................................... (20,000) 1,980,000
Johnson Controls Inc. ............................................... (5,000) 200,000
Kellogg Co. ......................................................... (4,000) 86,000
Lenox Group Inc. .................................................... (35,000) --
Lockheed Martin Corp ................................................ (1,000) 9,000
MasterCard Inc., Cl. A .............................................. (14,000) 40,000
Mediaset SpA ........................................................ (120,000) --
News Corp., Cl. A ................................................... (15,000) 1,525,000
Next plc ............................................................ (27,000) --
PepsiCo Inc. ........................................................ (15,000) 300,000
PRIMEDIA Inc. ....................................................... (3,666) 60,000
Rank Group plc ...................................................... (20,000) 480,000
Telecom Italia SpA .................................................. (10,000) 1,440,000
Telefonica SA, ADR .................................................. (3,000) 225,000
Telemig Celular Participacoes SA, ADR (l) ........................... (3,263) 5,087
Tenaris SA, ADR ..................................................... (5,000) 75,000
The Bear Stearns Companies Inc. (e) ................................. (50,000) --
The E.W. Scripps Co., Cl. A ......................................... (30,000) 130,000
The Midland Co. (m) ................................................. (188,000) --
The Mosaic Co ....................................................... (6,500) 10,500
The Walt Disney Co .................................................. (15,000) 50,000
The Weir Group plc .................................................. (5,000) 95,000
Tootsie Roll Industries Inc. ........................................ (1) 122,384
Trinity Industries Inc. ............................................. (5,000) 70,000
Vivo Participacoes SA ............................................... (270) --
Vivo Participacoes SA, ADR .......................................... (4,112) 170,010
OWNERSHIP AT
JUNE 30,
SHARES 2008
-------- ------------
Vivo Participacoes SA, Preference ................................... (5,845) --
Westpac Banking Corp. ............................................... (50,000) --
Zimmer Holdings Inc. ................................................ (500) 3,000
CONVERTIBLE PREFERRED STOCKS
Northrop Grumman Corp.,
7.000% Cv. Pfd., Ser. B (i) ...................................... (13,500) --
----------
(a) Merger - 0.64 share of Cadbury plc and 0.12 share of Dr. Pepper Snapple
Group Inc. for 1 share of Cadbury Schweppes plc
(b) Merger - 0.64 share of Cadbury plc, ADR and 0.48 share of Dr. Pepper
Snapple Group Inc. for 1 share of Cadbury Schweppes plc, ADR
(c) Spin-off - 0.0189 share of FairPoint Communications Inc. for every 1 share
of Verizon Communications Inc.
(d) 2 for 1 stock split
(e) Merger - 0.21753 share of JPMorgan Chase & Co. for 1 share of The Bear
Stearns Companies Inc.
(f) Exchange - $3.6387 cash plus 0.1088 share of Macrovision Solutions Corp.
for every 1 share of Gemstar-TV Guide International Inc.
(g) 10 for 1 stock split
(h) 5 for 1 stock split
(i) Conversion - 1.822267 share of Northrop Grumman Corp. for every share of
Northrop Grumman Corp., 7.000% Cv. Pfd., Ser. B
(j) Spin-off - 1 share of Telmex Internacional SAB de CV, ADR for every 1 share
of Telephonos de Mexico SAB de CV, Cl. L, ADR
(k) Cash Merger - $19.375 for every 1 share
(l) Partial Tender Offer - 39.0754951% of shares held at $76.44594 for every 1
share
(m) Cash Merger - $65 for every 1 share
See accompanying notes to financial statements.
4
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
MARKET
SHARES COST VALUE
------------ -------------- --------------
COMMON STOCKS -- 98.6%
FOOD AND BEVERAGE -- 13.5%
85,000 Ajinomoto Co. Inc.............. $ 998,444 $ 803,692
40,000 Anheuser-Busch Companies Inc... 1,816,269 2,484,800
36,000 ARIAKE JAPAN Co. Ltd. ......... 857,851 552,281
24,000 Brown-Forman Corp., Cl. A...... 1,586,639 1,824,480
70,400 Cadbury plc.................... 806,916 886,923
115,200 Cadbury plc, ADR............... 5,525,885 5,796,864
80,000 Campbell Soup Co............... 2,204,647 2,676,800
32,000 Cermaq ASA..................... 483,179 381,685
40,000 China Mengniu Dairy Co. Ltd.... 127,345 113,373
20,000 Coca-Cola Enterprises Inc...... 376,514 346,000
57,000 Coca-Cola Hellenic Bottling
Co. SA...................... 492,259 1,552,571
104,000 Constellation Brands Inc.,
Cl. A+...................... 2,519,496 2,065,440
50,000 Corn Products
International Inc........... 693,731 2,455,500
290,000 Davide Campari-Milano SpA ..... 3,034,727 2,424,505
115,000 Dean Foods Co.+................ 2,655,941 2,256,300
60,000 Del Monte Foods Co............. 564,374 426,000
80,000 Diageo plc..................... 1,174,064 1,472,363
224,000 Diageo plc, ADR................ 9,660,541 16,546,880
99,600 Dr. Pepper Snapple
Group Inc.+................. 2,586,637 2,089,608
90,000 Flowers Foods Inc.............. 658,030 2,550,600
97,000 Fomento Economico Mexicano SAB
de CV, ADR.................. 1,332,725 4,414,470
180,000 General Mills Inc.............. 8,693,258 10,938,600
360,000 Groupe Danone.................. 17,945,141 25,279,466
980,000 Grupo Bimbo SAB de CV, Cl. A... 2,664,370 6,452,182
100,000 H.J. Heinz Co.................. 3,532,093 4,785,000
20,000 Hain Celestial Group Inc.+..... 267,662 469,600
25,000 Heineken NV.................... 1,274,538 1,276,097
200,000 ITO EN Ltd..................... 4,714,194 3,149,221
60,000 ITO EN Ltd., Preference........ 1,329,645 638,508
86,000 Kellogg Co..................... 3,095,861 4,129,720
75,000 Kerry Group plc, Cl. A......... 860,877 2,229,399
200,000 Kraft Foods Inc., Cl. A........ 6,312,501 5,690,000
12,100 LVMH Moet Hennessy Louis
Vuitton SA.................. 419,052 1,268,410
10,000 Meiji Seika Kaisha Ltd......... 50,608 42,661
70,000 Morinaga Milk
Industry Co. Ltd............ 299,202 181,947
MARKET
SHARES COST VALUE
------------ -------------- --------------
55,000 Nestle SA...................... $ 1,872,691 $ 2,485,243
300,000 Nissin Food Products Co. Ltd... 10,746,621 10,057,918
600,000 PepsiAmericas Inc.............. 11,494,293 11,868,000
300,000 PepsiCo Inc.................... 15,248,155 19,077,000
51,200 Pernod-Ricard SA............... 5,251,206 5,259,943
68,200 Ralcorp Holdings Inc.+......... 1,308,415 3,371,808
26,000 Remy Cointreau SA.............. 1,673,518 1,421,702
330,000 Sara Lee Corp.................. 5,273,525 4,042,500
110,000 Tesco plc...................... 965,257 809,142
200,000 The Coca-Cola Co............... 8,929,955 10,396,000
70,000 The Hershey Co................. 2,941,476 2,294,600
2,000 The J.M. Smucker Co............ 52,993 81,280
122,384 Tootsie Roll Industries Inc.... 1,562,907 3,075,510
180,000 Wm. Wrigley Jr. Co............. 9,027,115 14,000,400
42,500 Wm. Wrigley Jr. Co., Cl. B..... 2,191,580 3,306,500
550,000 YAKULT HONSHA Co. Ltd.......... 15,388,597 15,487,122
-------------- --------------
185,543,520 227,686,614
-------------- --------------
ENERGY AND UTILITIES -- 8.9%
5,000 AGL Resources Inc.............. 88,898 172,900
68,000 Allegheny Energy Inc........... 1,081,525 3,407,480
70,000 Apache Corp.................... 2,728,670 9,730,000
800,000 Aquila Inc.+................... 3,203,330 3,016,000
100,000 BP plc......................... 1,238,539 1,161,737
247,000 BP plc, ADR.................... 15,155,797 17,183,790
105,000 CH Energy Group Inc............ 4,342,243 3,734,850
65,000 CMS Energy Corp................ 416,572 968,500
315,000 ConocoPhillips................. 19,291,860 29,732,850
8,000 Constellation Energy
Group Inc .................. 449,608 656,800
2,000 Diamond Offshore
Drilling Inc ............... 234,464 278,280
60,000 DPL Inc........................ 1,411,620 1,582,800
14,000 DTE Energy Co.................. 619,460 594,160
220,000 Duke Energy Corp............... 3,981,986 3,823,600
270,000 El Paso Corp................... 3,253,601 5,869,800
280,000 El Paso Electric Co.+.......... 4,523,624 5,544,000
50,000 Energy East Corp............... 1,065,733 1,236,000
80,000 Exxon Mobil Corp............... 2,750,108 7,050,400
25,000 FPL Group Inc.................. 951,662 1,639,500
45,000 Galp Energia SGPS SA, Cl. B.... 1,197,484 1,003,243
210,000 Halliburton Co................. 3,809,429 11,144,700
32,000 Imperial Oil Ltd............... 1,248,749 1,762,401
20,000 Marathon Oil Corp.............. 242,414 1,037,400
10,000 Mirant Corp.+.................. 192,014 391,500
140,000 Mirant Corp., Escrow+ (a)...... 0 0
2,000 Niko Resources Ltd., New York.. 110,842 191,703
See accompanying notes to financial statements.
5
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2008 (UNAUDITED)
MARKET
SHARES COST VALUE
------------ -------------- --------------
COMMON STOCKS (CONTINUED)
ENERGY AND UTILITIES (CONTINUED)
1,000 Niko Resources Ltd., Toronto .. $ 55,421 $ 95,852
10,000 NiSource Inc................... 215,500 179,200
240,000 Northeast Utilities............ 4,631,542 6,127,200
19,000 Oceaneering
International Inc.+......... 512,207 1,463,950
1,300 PetroChina Co. Ltd., ADR ...... 94,298 167,518
54,000 Petroleo Brasileiro SA, ADR.... 949,398 3,824,820
100,000 Progress Energy Inc.,
CVO+ (a).................... 52,000 33,000
200,000 Rowan Companies Inc............ 7,527,869 9,350,000
65,000 Saipem SpA..................... 1,284,362 3,052,792
5,000 SJW Corp....................... 68,704 132,000
20,000 Southwest Gas Corp............. 451,132 594,600
120,000 Spectra Energy Corp............ 3,113,666 3,448,800
60,000 The AES Corp.+................. 342,618 1,152,600
24,128 Total SA....................... 1,468,664 2,058,975
3,000 Transocean Inc.+............... 409,400 457,170
270,000 Westar Energy Inc.............. 4,552,840 5,807,700
-------------- --------------
99,319,853 150,860,571
-------------- --------------
FINANCIAL SERVICES -- 7.7%
2,800 Allianz SE..................... 552,300 493,309
575,000 American Express Co............ 27,278,920 21,660,250
60,000 American International
Group Inc................... 3,819,505 1,587,600
8,000 Ameriprise Financial Inc....... 232,843 325,360
19,452 Argo Group International
Holdings Ltd.+.............. 752,879 652,809
158,600 AXA Asia Pacific
Holdings Ltd................ 948,512 711,558
90,000 Banco Santander SA, ADR........ 322,130 1,637,100
142 Berkshire Hathaway Inc.,
Cl. A+...................... 419,028 17,146,500
7,500 Calamos Asset
Management Inc., Cl. A...... 135,000 127,725
350,000 Citigroup Inc.................. 16,094,034 5,866,000
155,000 Commerzbank AG, ADR............ 3,145,338 4,608,243
148,000 Deutsche Bank AG............... 12,989,137 12,631,800
40,000 Federal National Mortgage
Association................. 1,340,436 780,400
20,000 Fortress Investment Group
LLC, Cl. A.................. 303,268 246,400
20,000 H&R Block Inc.................. 329,930 428,000
20,000 Interactive Brokers Group
Inc., Cl. A+................ 577,120 642,600
180,000 Janus Capital Group Inc........ 3,245,221 4,764,600
MARKET
SHARES COST VALUE
------------ -------------- --------------
61,788 JPMorgan Chase & Co............ $ 1,741,026 $ 2,119,946
58,000 Legg Mason Inc................. 4,958,770 2,527,060
133,000 Leucadia National Corp......... 1,662,878 6,243,020
5,000 Loews Corp .................... 214,164 234,500
265,000 Marsh & McLennan
Companies Inc............... 8,158,378 7,035,750
65,000 Moody's Corp................... 3,285,357 2,238,600
3,000 Och-Ziff Capital Management
Group LLC, Cl. A ........... 68,636 57,030
2,500 Prudential Financial Inc....... 68,750 149,350
45,000 Schroders plc.................. 1,132,014 819,241
45,000 Standard Chartered plc......... 1,002,768 1,281,744
80,000 State Street Corp.............. 4,001,480 5,119,200
20,000 SunTrust Banks Inc............. 419,333 724,400
150,000 T. Rowe Price Group Inc........ 4,610,820 8,470,500
5,000 The Allstate Corp.............. 209,064 227,950
146,038 The Bank of New York
Mellon Corp................. 5,010,363 5,524,618
5,000 The Blackstone Group LP........ 111,313 91,050
44,500 The Charles Schwab Corp........ 650,256 914,030
18,000 The Dun & Bradstreet Corp...... 395,898 1,577,520
135,000 The Phoenix Companies Inc...... 1,924,073 1,027,350
3,000 The Travelers Companies Inc.... 113,277 130,200
100,000 Waddell & Reed Financial
Inc., Cl. A................. 2,058,579 3,501,000
280,000 Wells Fargo & Co............... 8,659,774 6,650,000
-------------- --------------
122,942,572 130,974,313
-------------- --------------
DIVERSIFIED INDUSTRIAL -- 6.8%
9,000 Acuity Brands Inc.............. 229,522 432,720
162,000 Ampco-Pittsburgh Corp.......... 2,124,696 7,205,760
155,000 Baldor Electric Co............. 5,270,000 5,421,900
24,000 Bayer AG....................... 1,009,688 2,020,090
25,000 Bouygues SA ................... 1,244,322 1,659,477
245,000 Cooper Industries Ltd.,
Cl. A....................... 6,743,377 9,677,500
260,000 Crane Co....................... 5,942,015 10,017,800
77,500 CRH plc ....................... 1,027,655 2,281,780
300,000 Enodis plc..................... 1,055,126 1,903,196
150,000 General Electric Co............ 5,455,245 4,003,500
200,000 Greif Inc., Cl. A.............. 2,401,677 12,806,000
18,000 Greif Inc., Cl. B.............. 559,808 1,021,860
450,000 Honeywell International Inc.... 15,285,048 22,626,000
253,000 ITT Corp....................... 6,660,852 16,022,490
40,000 Mitsui & Co. Ltd............... 924,238 883,364
See accompanying notes to financial statements.
6
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2008 (UNAUDITED)
SHARES/ MARKET
UNITS COST VALUE
------------ -------------- --------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED INDUSTRIAL (CONTINUED)
100,000 Park-Ohio Holdings Corp.+...... $ 1,062,045 $ 1,476,000
1,000 Pentair Inc.................... 31,908 35,020
19,000 Sulzer AG...................... 403,775 2,412,315
69,000 Swire Pacific Ltd., Cl. A...... 777,910 705,729
30,000 Technip SA..................... 2,101,417 2,776,868
70,000 Trinity Industries Inc......... 899,679 2,428,300
200,000 Tyco International Ltd......... 9,828,342 8,008,000
-------------- --------------
71,038,345 115,825,669
-------------- --------------
TELECOMMUNICATIONS -- 5.7%
70,000 BCE Inc........................ 2,672,084 2,436,700
1,000 Bell Aliant Regional
Communications
Income Fund................. 28,950 28,518
16,000 Bell Aliant Regional
Communications
Income Fund+ (a)(b)......... 510,683 465,280
30,000 Brasil Telecom
Participacoes SA, ADR....... 1,743,257 2,201,100
1,700,000 BT Group plc................... 7,029,679 6,768,846
4,440,836 Cable & Wireless
Jamaica Ltd. (c)............ 101,639 48,210
908,300 Cincinnati Bell Inc.+.......... 6,219,001 3,615,034
90,000 Citizens Communications Co..... 1,320,038 1,020,600
110,000 Compania de
Telecomunicaciones de
Chile SA, ADR............... 1,634,846 633,600
168,000 Deutsche Telekom AG, ADR....... 2,793,519 2,750,160
3,394 FairPoint Communications Inc... 32,949 24,471
5,000 France Telecom SA, ADR......... 146,305 148,150
100,000 Koninklijke KPN NV............. 232,728 1,716,157
15,000 Orascom Telecom
Holding SAE, GDR............ 1,052,562 965,136
540,000 Qwest Communications
International Inc........... 1,920,386 2,122,200
700,000 Sprint Nextel Corp............. 16,509,047 6,650,000
186,554 Tele Norte Leste
Participacoes SA, ADR....... 2,477,755 4,647,060
60,000 Tele2 AB, Cl. B................ 1,005,048 1,175,601
48,000 Telecom Argentina
SA, ADR+.................... 369,540 684,000
1,440,000 Telecom Italia SpA............. 5,890,798 2,902,037
225,000 Telefonica SA, ADR............. 11,203,712 17,905,500
60,000 Telefonos de Mexico
SAB de CV, Cl. L, ADR....... 269,512 1,420,800
MARKET
SHARES COST VALUE
------------ -------------- --------------
265,000 Telephone & Data Systems Inc... $ 12,354,090 $ 12,526,550
355,000 Telephone & Data
Systems Inc., Special....... 15,604,660 15,655,500
60,000 Telmex Internacional
SAB de CV, ADR+............. 187,288 966,000
15,000 TELUS Corp..................... 280,203 630,627
180,000 Verizon Communications Inc..... 6,573,098 6,372,000
5,169 Windstream Corp................ 19,996 63,785
-------------- --------------
100,183,373 96,543,622
-------------- --------------
CABLE AND SATELLITE -- 5.2%
1,550,000 Cablevision Systems Corp.,
Cl. A+...................... 33,168,055 35,030,000
52,000 Comcast Corp., Cl. A........... 1,055,528 986,440
120,000 Comcast Corp., Cl. A,
Special..................... 715,303 2,251,200
133,700 DISH Network Corp., Cl. A+..... 3,833,237 3,914,736
26,740 EchoStar Corp., Cl. A+......... 841,442 834,823
156,770 Liberty Global Inc., Cl. A+.... 2,194,421 4,927,281
139,001 Liberty Global Inc., Cl. C+.... 2,941,276 4,220,070
500,690 Rogers Communications Inc.,
Cl. B, New York............. 4,303,427 19,356,675
19,310 Rogers Communications Inc.,
Cl. B, Toronto.............. 137,424 749,146
160,000 Shaw Communications Inc.,
Cl. B, New York............. 329,198 3,257,600
40,000 Shaw Communications Inc.,
Cl. B, Toronto.............. 52,983 816,711
450,000 The DIRECTV Group Inc.+........ 11,454,958 11,659,500
-------------- --------------
61,027,252 88,004,182
-------------- --------------
ENTERTAINMENT -- 5.0%
100,000 Aruze Corp..................... 3,267,519 2,966,521
32,000 Canal+ Groupe.................. 34,010 307,334
2,002 Chestnut Hill Ventures+ (a).... 54,500 56,356
269,000 Discovery Holding Co.,
Cl. A+...................... 4,351,029 5,907,240
3,000 DreamWorks Animation
SKG Inc., Cl. A+............ 68,959 89,430
695,000 Grupo Televisa SA, ADR......... 8,080,952 16,415,900
430,000 Liberty Media Corp. -
Entertainment, Cl. A+....... 8,493,064 10,418,900
125 Live Nation Inc.+.............. 1,296 1,322
65,341 Macrovision Solutions Corp.+... 1,341,728 977,501
50,000 Pinnacle Entertainment Inc.+... 1,414,859 524,500
See accompanying notes to financial statements.
7
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2008 (UNAUDITED)
MARKET
SHARES COST VALUE
------------ -------------- --------------
COMMON STOCKS (CONTINUED)
ENTERTAINMENT (CONTINUED)
480,000 Rank Group plc ................ $ 3,392,366 $ 767,254
12,000 Regal Entertainment Group,
Cl. A ...................... 161,111 183,360
75,000 Six Flags Inc.+ ............... 360,725 86,250
50,000 The Walt Disney Co ............ 799,578 1,560,000
920,000 Time Warner Inc ............... 19,618,517 13,616,000
110,000 Tokyo Broadcasting
System Inc ................. 3,402,663 2,087,395
20,200 Triple Crown Media Inc.+ ...... 217,899 9,494
370,000 Viacom Inc., Cl. A+ ........... 17,788,126 11,325,700
453,900 Vivendi ....................... 14,205,500 17,222,959
-------------- --------------
87,054,401 84,523,416
-------------- --------------
EQUIPMENT AND SUPPLIES -- 5.0%
257,000 AMETEK Inc .................... 4,331,123 12,135,540
4,000 Amphenol Corp., Cl. A ......... 14,775 179,520
94,000 CIRCOR International Inc. ..... 974,241 4,605,060
194,000 Donaldson Co. Inc ............. 2,985,328 8,660,160
50,000 Fedders Corp.+ ................ 71,252 350
150,000 Flowserve Corp ................ 5,544,523 20,505,000
23,000 Franklin Electric Co. Inc. .... 250,434 891,940
90,000 Gerber Scientific Inc.+ ....... 988,544 1,024,200
75,000 GrafTech International Ltd.+ .. 785,966 2,012,250
320,000 IDEX Corp ..................... 7,694,243 11,788,800
40,000 Ingersoll-Rand Co. Ltd.,
Cl. A ...................... 855,377 1,497,200
102,000 Lufkin Industries Inc ......... 990,973 8,494,560
11,000 Mueller Industries Inc ........ 485,034 354,200
2,000 Sealed Air Corp ............... 17,404 38,020
75,000 Tenaris SA, ADR ............... 3,425,248 5,587,500
4,000 The Manitowoc Co. Inc ......... 25,450 130,120
95,000 The Weir Group plc ............ 399,750 1,774,922
190,000 Watts Water Technologies
Inc., Cl. A ................ 2,957,983 4,731,000
-------------- --------------
32,797,648 84,410,342
-------------- --------------
CONSUMER PRODUCTS -- 4.8%
84,000 Avon Products Inc ............. 2,420,145 3,025,680
25,000 British American
Tobacco plc ................ 944,285 865,949
42,000 Christian Dior SA ............. 3,082,702 4,331,329
15,000 Church & Dwight Co. Inc. ...... 99,536 845,250
30,000 Clorox Co ..................... 1,664,986 1,566,000
69,000 Compagnie Financiere
Richemont SA, Cl. A ........ 2,879,288 3,843,277
112,000 Energizer Holdings Inc.+ ...... 4,856,276 8,186,080
58,000 Fortune Brands Inc ............ 3,995,824 3,619,780
2,000 Givaudan SA ................... 550,742 1,787,480
MARKET
SHARES COST VALUE
------------ -------------- --------------
60,000 Hanesbrands Inc.+ ............. $ 1,376,148 $ 1,628,400
32,000 Harley-Davidson Inc ........... 1,486,605 1,160,320
200 Japan Tobacco Inc ............. 1,123,054 853,228
2,000 Jarden Corp.+ ................. 65,069 36,480
15,000 Matsushita Electric
Industrial Co. Ltd., ADR ... 178,325 321,300
15,000 Mattel Inc .................... 270,000 256,800
21,000 National Presto
Industries Inc ............. 711,533 1,347,780
2,000 Nintendo Co. Ltd .............. 620,613 1,128,220
10,000 Oil-Dri Corp. of America ...... 171,255 179,500
112,000 Pactiv Corp.+ ................. 1,176,060 2,377,760
300,000 Procter & Gamble Co ........... 15,983,165 18,243,000
60,000 Reckitt Benckiser Group plc ... 1,849,650 3,041,529
30,000 Svenska Cellulosa AB, Cl. B .. 423,932 424,661
1,000,000 Swedish Match AB .............. 11,131,012 20,506,604
37,500 The Swatch Group AG ........... 2,105,126 1,754,687
-------------- --------------
59,165,331 81,331,094
-------------- --------------
HEALTH CARE -- 4.5%
8,000 Abbott Laboratories ........... 313,458 423,760
130,000 Advanced Medical
Optics Inc.+ ............... 4,241,837 2,436,200
14,046 Allergan Inc .................. 655,380 731,094
7,000 Alpharma Inc., Cl. A+ ......... 182,379 157,710
52,000 Amgen Inc.+ ................... 3,039,863 2,452,320
19,146 AstraZeneca plc ............... 949,527 813,851
17,000 Baxter International Inc ...... 996,870 1,086,980
2,000 Becton Dickinson & Co ......... 174,354 162,600
35,000 Biogen Idec Inc.+ ............. 806,669 1,956,150
155,000 Boston Scientific Corp.+ ...... 2,170,555 1,904,950
135,000 Bristol-Myers Squibb Co. ...... 3,485,673 2,771,550
1,000 Cephalon Inc.+ ................ 62,382 66,690
12,000 Cochlear Ltd .................. 530,192 502,142
20,000 Covidien Ltd .................. 876,365 957,800
45,036 GlaxoSmithKline plc ........... 1,292,245 998,408
4,000 GlaxoSmithKline plc, ADR ...... 216,096 176,880
5,000 Greatbatch Inc.+ .............. 94,920 86,500
30,000 Henry Schein Inc.+ ............ 764,324 1,547,100
18,000 Hospira Inc.+ ................. 635,417 721,980
80,000 Invitrogen Corp.+ ............. 2,065,234 3,140,800
120,000 Johnson & Johnson ............. 7,766,038 7,720,800
95,000 Merck & Co. Inc ............... 3,625,481 3,580,550
10,000 Nobel Biocare Holding AG ...... 286,712 326,563
39,000 Novartis AG ................... 2,076,654 2,147,472
102,000 Novartis AG, ADR .............. 4,514,518 5,614,080
470,000 Pfizer Inc .................... 12,733,287 8,210,900
16,400 Roche Holding AG .............. 2,587,332 2,953,942
See accompanying notes to financial statements.
8
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2008 (UNAUDITED)
SHARES/ MARKET
UNITS COST VALUE
------------ -------------- --------------
COMMON STOCKS (CONTINUED)
HEALTH CARE (CONTINUED)
10,000 Sanofi-Aventis ................ $ 896,390 $ 668,042
110,000 Schering-Plough Corp .......... 2,062,138 2,165,900
80,000 Smith & Nephew plc ............ 752,722 882,780
50,000 SSL International plc ......... 439,178 444,428
5,250 Straumann Holding AG .......... 1,087,318 1,258,088
12,500 Synthes Inc ................... 1,494,687 1,722,872
19,000 Takeda Pharmaceutical
Co. Ltd .................... 909,016 966,238
130,000 UnitedHealth Group Inc ........ 6,146,582 3,412,500
82,000 William Demant Holding A/S+ ... 3,730,842 5,401,343
100,000 Wyeth ......................... 4,105,470 4,796,000
3,000 Zimmer Holdings Inc.+ ......... 186,132 204,150
-------------- --------------
78,954,237 75,572,113
-------------- --------------
PUBLISHING -- 3.4%
4,000 Idearc Inc .................... 14,637 9,400
1,980,000 Il Sole 24 Ore ................ 16,608,451 11,557,845
348,266 Independent News & Media plc .. 663,968 855,394
9,000 McClatchy Co., Cl. A .......... 139,243 61,020
320,000 Media General Inc., Cl. A ..... 19,151,873 3,824,000
122,000 Meredith Corp ................. 5,066,964 3,451,380
1,525,000 News Corp., Cl. A ............. 19,970,954 22,936,000
20,000 News Corp., Cl. B ............. 186,274 307,000
60,000 PRIMEDIA Inc .................. 1,496,475 279,600
66,585 Seat Pagine Gialle SpA+ ....... 177,139 6,951
130,000 The E.W. Scripps Co., Cl. A ... 4,530,747 5,400,200
182,000 The McGraw-Hill
Companies Inc .............. 7,122,447 7,301,840
55,000 The New York Times Co.,
Cl. A ...................... 2,056,884 846,450
-------------- --------------
77,186,056 56,837,080
-------------- --------------
BUSINESS SERVICES -- 2.7%
7,050 ACCO Brands Corp.+ ............ 126,069 79,172
14,000 Avis Budget Group Inc.+ ....... 265,087 117,180
310,000 BPW Acquisition Corp.+ ........ 3,097,250 3,053,500
30,500 Canon Inc ..................... 1,330,244 1,568,301
235,000 ChoicePoint Inc.+ ............. 11,040,474 11,327,000
110,000 Clear Channel Outdoor
Holdings Inc., Cl. A+ ...... 2,226,712 1,961,300
186,554 Contax Participacoes SA, ADR .. 76,632 268,600
110,000 Diebold Inc ................... 4,234,878 3,913,800
200,000 G4S plc ....................... 0 806,692
MARKET
SHARES COST VALUE
------------ -------------- --------------
57,000 Jardine Matheson
Holdings Ltd ............... $ 1,401,441 $ 1,767,000
94,000 Landauer Inc .................. 2,511,653 5,286,560
40,000 MasterCard Inc., Cl. A ........ 1,614,000 10,620,800
50,000 Monster Worldwide Inc.+ ....... 1,246,430 1,030,500
72,500 Nashua Corp.+ ................. 656,627 725,000
25,000 Secom Co. Ltd ................. 1,095,891 1,214,861
235,000 The Interpublic Group of
Companies Inc.+ ............ 2,262,652 2,021,000
8,000 Visa Inc., Cl. A+ ............. 352,000 650,480
-------------- --------------
33,538,040 46,411,746
-------------- --------------
AUTOMOTIVE: PARTS AND
ACCESSORIES -- 2.4%
2,000 BERU AG ....................... 210,290 235,539
86,000 BorgWarner Inc ................ 1,126,424 3,816,680
181,000 CLARCOR Inc ................... 1,482,324 6,353,100
82,500 Earl Scheib Inc.+ ............. 644,854 245,437
340,000 Genuine Parts Co .............. 12,607,736 13,491,200
200,000 Johnson Controls Inc .......... 4,137,496 5,736,000
130,000 Midas Inc.+ ................... 1,805,604 1,755,000
330,000 Modine Manufacturing Co. ...... 8,213,644 4,082,100
155,000 O'Reilly Automotive Inc.+ ..... 4,528,336 3,464,250
160,000 Proliance
International Inc.+ ........ 1,186,898 152,000
175,000 Standard Motor Products Inc ... 1,873,526 1,428,000
35,000 Superior Industries
International Inc .......... 822,800 590,800
-------------- --------------
38,639,932 41,350,106
-------------- --------------
MACHINERY -- 2.0%
20,000 Caterpillar Inc ............... 136,559 1,476,400
17,000 CNH Global NV ................. 897,929 577,490
425,000 Deere & Co .................... 12,378,317 30,655,250
8,000 SMC Corp ...................... 1,033,311 876,207
-------------- --------------
14,446,116 33,585,347
-------------- --------------
SPECIALTY CHEMICALS -- 1.8%
41,000 Ashland Inc ................... 2,587,129 1,976,200
5,400 Ciba Holding AG, ADR .......... 4,285 78,249
30,000 E.I. du Pont de
Nemours and Co ............. 1,263,365 1,286,700
350,000 Ferro Corp .................... 7,353,490 6,566,000
4,000 FMC Corp ...................... 136,430 309,760
45,000 H.B. Fuller Co ................ 620,163 1,009,800
175,000 Hercules Inc .................. 2,087,983 2,962,750
70,000 International Flavors &
Fragrances Inc ............. 3,296,486 2,734,200
230,000 Omnova Solutions Inc.+ ........ 1,861,571 639,400
40,000 Rohm & Haas Co ................ 1,950,695 1,857,600
See accompanying notes to financial statements.
9
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2008 (UNAUDITED)
MARKET
SHARES COST VALUE
------------ -------------- --------------
COMMON STOCKS (CONTINUED)
SPECIALTY CHEMICALS (CONTINUED)
275,000 Sensient Technologies Corp .... $ 5,034,936 $ 7,744,000
165,000 Tokai Carbon Co. Ltd .......... 677,815 1,679,757
4,032 Tronox Inc., Cl. B ............ 44,467 12,176
100,000 Zep Inc ....................... 1,293,508 1,488,000
-------------- --------------
28,212,323 30,344,592
-------------- --------------
AVIATION: PARTS AND
SERVICES -- 1.6%
350,000 Curtiss-Wright Corp ........... 4,965,900 15,659,000
200,000 GenCorp Inc.+ ................. 2,572,011 1,432,000
96,500 Precision Castparts Corp. ..... 4,962,391 9,299,705
160,000 The Fairchild Corp., Cl. A+ ... 543,870 337,600
-------------- --------------
13,044,172 26,728,305
-------------- --------------
METALS AND MINING -- 1.6%
22,000 Alcoa Inc ..................... 811,737 783,640
30,030 Anglo American plc ............ 1,187,718 2,109,068
89,148 Barrick Gold Corp ............. 2,610,253 4,056,234
20,000 BHP Billiton Ltd .............. 842,223 837,863
52,500 Harmony Gold
Mining Co. Ltd.+ ........... 256,625 636,973
35,000 Harmony Gold
Mining Co. Ltd., ADR+ ...... 460,008 428,750
75,000 Ivanhoe Mines Ltd.+ ........... 560,208 818,250
52,000 New Hope Corp. Ltd ............ 70,252 266,697
155,000 Newmont Mining Corp ........... 4,747,145 8,084,800
23,000 Rio Tinto plc ................. 1,324,709 2,752,853
69,666 Xstrata plc ................... 1,525,449 5,583,825
-------------- --------------
14,396,327 26,358,953
-------------- --------------
HOTELS AND GAMING -- 1.5%
1,200 Accor SA ...................... 103,072 80,165
190,000 Gaylord Entertainment Co.+ .... 5,061,984 4,552,400
22,000 Home Inns & Hotels
Management Inc., ADR+ ...... 633,289 418,220
46,160 InterContinental
Hotels Group plc ........... 1,184,541 618,777
1,247,116 Ladbrokes plc ................. 13,435,929 6,377,790
6,000 Las Vegas Sands Corp.+ ........ 221,279 284,640
3,811,000 Mandarin Oriental
International Ltd .......... 7,176,694 6,631,140
136,788 MGM Mirage+ ................... 10,106,751 4,635,745
16,000 Orient-Express Hotels Ltd.,
Cl. A ...................... 715,224 695,040
34,000 Starwood Hotels & Resorts
Worldwide Inc .............. 520,597 1,362,380
-------------- --------------
39,159,360 25,656,297
-------------- --------------
MARKET
SHARES COST VALUE
------------ -------------- --------------
AEROSPACE -- 1.4%
105,000 Boeing Co ..................... $ 6,475,976 $ 6,900,600
30,000 Finmeccanica SpA .............. 945,547 787,858
25,899 Kaman Corp .................... 586,549 589,461
9,000 Lockheed Martin Corp .......... 527,310 887,940
102,600 Northrop Grumman Corp. ........ 5,905,321 6,863,940
1,200,000 Rolls-Royce Group plc+ ........ 9,166,092 8,162,532
107,520,000 Rolls-Royce Group plc, Cl. B .. 213,558 214,162
-------------- --------------
23,820,353 24,406,493
-------------- --------------
RETAIL -- 1.4%
200,000 AutoNation Inc.+ .............. 2,282,834 2,004,000
4,000 AutoZone Inc.+ ................ 351,780 484,040
40,000 Coldwater Creek Inc.+ ......... 157,162 211,200
40,000 Costco Wholesale Corp ......... 1,868,913 2,805,600
75,000 CVS Caremark Corp ............. 2,887,662 2,967,750
10,108 Denny's Corp.+ ................ 14,358 28,707
21,500 Hennes & Mauritz AB, Cl. B .... 919,237 1,165,597
140,000 Macy's Inc .................... 3,579,684 2,718,800
50,000 Sally Beauty Holdings Inc.+ ... 416,928 323,000
50,000 SUPERVALU Inc ................. 1,453,171 1,544,500
115,000 The Great Atlantic &
Pacific Tea Co. Inc.+ ...... 3,570,394 2,624,300
50,000 Wal-Mart Stores Inc ........... 2,439,001 2,810,000
70,000 Walgreen Co ................... 2,660,042 2,275,700
25,000 Whole Foods Market Inc. ....... 952,518 592,250
73,000 Woolworths Ltd ................ 1,058,044 1,711,052
-------------- --------------
24,611,728 24,266,496
-------------- --------------
CONSUMER SERVICES -- 1.4%
200,000 IAC/InterActiveCorp+ .......... 5,436,750 3,856,000
210,000 Liberty Media Corp. -
Interactive, Cl. A+ ........ 4,593,199 3,099,600
1,110,000 Rollins Inc ................... 11,375,362 16,450,200
-------------- --------------
21,405,311 23,405,800
-------------- --------------
COMMUNICATIONS
EQUIPMENT -- 1.3%
480,000 Corning Inc ................... 4,124,295 11,064,000
90,000 Motorola Inc .................. 1,024,871 660,600
180,000 Nortel Networks Corp.+ ........ 4,239,217 1,479,600
235,000 Thomas & Betts Corp.+ ......... 7,911,594 8,894,750
-------------- --------------
17,299,977 22,098,950
-------------- --------------
ENVIRONMENTAL SERVICES -- 1.3%
97,500 Republic Services Inc ......... 875,761 2,895,750
500,000 Waste Management Inc .......... 12,972,510 18,855,000
-------------- --------------
13,848,271 21,750,750
-------------- --------------
See accompanying notes to financial statements.
10
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2008 (UNAUDITED)
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS (CONTINUED)
AGRICULTURE -- 1.3%
405,000 Archer-Daniels - Midland Co ... $ 9,315,328 $ 13,668,750
30,000 Monsanto Co ................... 1,342,681 3,793,200
5,000 Syngenta AG ................... 1,485,073 1,626,205
15,000 Syngenta AG, ADR .............. 189,981 970,500
10,500 The Mosaic Co.+ ............... 184,854 1,519,350
-------------- --------------
12,517,917 21,578,005
-------------- --------------
BROADCASTING -- 1.2%
95,000 British Sky Broadcasting
Group plc .................. 1,094,351 893,138
433,000 CBS Corp., Cl. A .............. 13,810,173 8,434,840
10,343 Citadel Broadcasting Corp. .... 25,591 12,618
174,000 Clear Channel Communications
Inc ........................ 6,395,741 6,124,800
2,000 Cogeco Inc .................... 39,014 60,802
25,334 Corus Entertainment Inc.,
Cl. B, New York ............ 46,981 453,479
6,666 Corus Entertainment Inc.,
Cl. B, Toronto ............. 12,406 118,912
120,000 Gray Television Inc ........... 1,060,168 344,400
27,000 Gray Television Inc., Cl. A ... 317,211 121,500
77,000 Liberty Media Corp. - Capital,
Cl. A+ ..................... 990,182 1,108,800
90,000 Lin TV Corp., Cl. A+ .......... 1,234,661 536,400
29,000 Modern Times Group MTG AB,
Cl. B ...................... 1,754,858 1,707,029
100,000 Television Broadcasts Ltd. .... 396,239 577,127
100,000 Young Broadcasting Inc.,
Cl. A+ ..................... 758,541 14,000
-------------- --------------
27,936,117 20,507,845
-------------- --------------
ELECTRONICS -- 1.1%
6,000 Advanced Micro
Devices Inc.+ .............. 57,915 34,980
14,000 Bel Fuse Inc., Cl. A .......... 465,400 392,000
14,000 Fanuc Ltd ..................... 1,430,146 1,367,236
5,000 Hitachi Ltd., ADR ............. 347,376 358,400
180,000 Intel Corp .................... 3,637,892 3,866,400
5,920 Keyence Corp .................. 1,187,370 1,409,962
80,000 LSI Corp.+ .................... 474,386 491,200
20,000 Molex Inc., Cl. A ............. 519,697 458,200
7,500 NEC Corp., ADR ................ 43,625 39,338
38,000 Royal Philips Electronics
NV ......................... 52,354 1,284,400
265,000 Texas Instruments Inc ......... 6,407,535 7,462,400
62,000 Tyco Electronics Ltd .......... 2,392,821 2,220,840
-------------- --------------
17,016,517 19,385,356
-------------- --------------
MARKET
SHARES COST VALUE
------ -------------- --------------
WIRELESS COMMUNICATIONS -- 1.1%
95,000 America Movil SAB de CV,
Cl. L, ADR ................. $ 1,335,987 $ 5,011,250
65,000 China Mobile Ltd .............. 796,681 873,641
14,000 Clearwire Corp., Cl. A+ ....... 250,896 181,440
2,000 NTT DoCoMo Inc ................ 4,368,481 2,938,268
3,340 Tele Norte Celular
Participacoes SA, ADR ...... 51,601 64,796
5,087 Telemig Celular
Participacoes SA, ADR ...... 147,017 302,676
32,165 Tim Participacoes SA, ADR ..... 390,212 914,451
115,400 United States Cellular
Corp.+ ..................... 5,343,392 6,525,870
170,010 Vivo Participacoes SA, ADR+ ... 2,238,980 1,081,264
50,000 Vodafone Group plc, ADR ....... 1,359,194 1,473,000
-------------- --------------
16,282,441 19,366,656
-------------- --------------
AUTOMOTIVE -- 0.9%
210,000 General Motors Corp ........... 5,412,011 2,415,000
125,000 Navistar International
Corp.+ ..................... 3,272,936 8,227,500
96,750 PACCAR Inc .................... 431,444 4,047,053
-------------- --------------
9,116,391 14,689,553
-------------- --------------
TRANSPORTATION -- 0.5%
100,000 AMR Corp.+ .................... 1,924,248 512,000
165,000 GATX Corp ..................... 4,548,661 7,314,450
15,000 Grupo TMM SA, Cl. A, ADR+ ..... 80,460 28,050
70,000 Toll Holdings Ltd ............. 747,842 403,976
-------------- --------------
7,301,211 8,258,476
-------------- --------------
COMPUTER SOFTWARE AND SERVICES -- 0.5%
8,000 Alibaba.com Ltd.+ ............. 13,935 11,286
10,000 Check Point Software
Technologies Ltd.+ ......... 169,874 236,700
50,000 NCR Corp.+ .................... 1,282,708 1,260,000
24,000 Rockwell Automation Inc. ...... 1,253,465 1,049,520
24,100 Square Enix Co. Ltd ........... 648,849 712,662
25,256 Telecom Italia Media SpA+ ..... 26,868 3,877
190,000 Yahoo! Inc.+ .................. 5,769,336 3,925,400
2,000 Yahoo! Japan Corp ............. 754,815 770,354
-------------- --------------
9,919,850 7,969,799
-------------- --------------
REAL ESTATE -- 0.5%
2,000 Brookfield Asset Management
Inc., Cl. A ................ 70,671 65,080
70,000 Cheung Kong (Holdings) Ltd .... 815,521 943,538
See accompanying notes to financial statements.
11
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2008 (UNAUDITED)
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS (CONTINUED)
REAL ESTATE (CONTINUED)
55,500 Griffin Land & Nurseries Inc .. $ 529,368 $ 1,703,850
145,000 The St. Joe Co ................ 8,275,384 4,976,400
-------------- --------------
9,690,944 7,688,868
-------------- --------------
CLOSED-END FUNDS -- 0.4%
31,500 Royce Value Trust Inc ......... 388,298 493,920
104,000 The Central Europe and Russia
Fund Inc ................... 2,391,965 5,484,960
70,000 The New Germany Fund Inc ...... 754,518 1,142,400
-------------- --------------
3,534,781 7,121,280
-------------- --------------
MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 0.1%
70,000 Champion Enterprises Inc.+ .... 659,503 409,500
50,000 Fleetwood Enterprises Inc.+ ... 535,045 131,000
31,000 Huttig Building Products
Inc.+ ...................... 78,168 56,110
7,000 Martin Marietta Materials
Inc ........................ 144,225 725,130
10,000 Nobility Homes Inc ............ 195,123 159,500
20,000 Skyline Corp .................. 794,437 470,000
-------------- --------------
2,406,501 1,951,240
-------------- --------------
REAL ESTATE INVESTMENT TRUSTS -- 0.1%
2,000 Camden Property Trust ......... 37,490 88,520
2,187 Prosperity REIT ............... 616 421
24,984 Rayonier Inc .................. 798,811 1,060,820
-------------- --------------
836,917 1,149,761
-------------- --------------
TOTAL COMMON STOCKS ........... 1,374,194,085 1,668,599,690
-------------- --------------
CONVERTIBLE PREFERRED STOCKS -- 0.1%
TELECOMMUNICATIONS -- 0.1%
25,000 Cincinnati Bell Inc.,
6.750% Cv. Pfd., Ser. B .... 787,113 1,005,000
-------------- --------------
PRINCIPAL
AMOUNT
---------
CONVERTIBLE CORPORATE BONDS -- 0.2%
RETAIL -- 0.2%
$ 3,000,000 The Great Atlantic & Pacific
Tea Co. Inc., Cv.,
5.125%, 06/15/11 ........... 3,000,000 2,816,250
-------------- --------------
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- -------------- --------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.0%
$ 1,000,000 Standard Motor Products Inc.,
Sub. Deb. Cv.,
6.750%, 07/15/09 ........... $ 985,974 $ 957,500
-------------- --------------
CONSUMER PRODUCTS -- 0.0%
1,000,000 Pillowtex Corp., Sub. Deb. Cv.,
9.000%, 12/15/17+ (a) ...... 0 0
-------------- --------------
TOTAL CONVERTIBLE CORPORATE
BONDS ...................... 3,985,974 3,773,750
-------------- --------------
SHARES
------
WARRANTS -- 0.0%
ENERGY AND UTILITIES -- 0.0%
12,183 Mirant Corp., Ser. A, expire
01/03/11+ .................. 36,354 218,441
-------------- --------------
PRINCIPAL
AMOUNT
---------
U.S. GOVERNMENT OBLIGATIONS -- 1.1%
$18,309,000 U.S. Treasury Bills,
1.132% to 1.874%++,
07/31/08 to 10/02/08 (d) ... 18,269,182 18,262,154
-------------- --------------
TOTAL INVESTMENTS -- 100.0% .................. $1,397,272,708 1,691,859,035
==============
FUTURES CONTRACTS
(Unrealized appreciation) ................. 3,637,784
OTHER ASSETS AND LIABILITIES (NET) ........... 3,013,177
PREFERRED STOCK
(8,956,900 preferred shares outstanding) .. (403,742,500)
--------------
NET ASSETS -- COMMON STOCK
(173,862,271 common shares outstanding) ... $1,294,767,496
==============
NET ASSET VALUE PER COMMON SHARE
($1,294,767,496 / 173,862,271 shares
outstanding) .............................. $ 7.45
==============
See accompanying notes to financial statements.
12
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2008 (UNAUDITED)
NUMBER OF EXPIRATION UNREALIZED
CONTRACTS DATE APPRECIATION
--------- ---------- ------------
FUTURES CONTRACTS -- SHORT POSITION
128 S & P 500 Index
Futures ............. 09/18/08 $ 3,637,784
============
----------
(a) Security fair valued under procedures established by the Board of
Directors. The procedures may include reviewing available financial
information about the company and reviewing the valuation of comparable
securities and other factors on a regular basis. At June 30, 2008, the
market value of fair valued securities amounted to $554,636 or 0.03% of
total investments.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 2008,
the market value of the Rule 144A security amounted to $465,280 or 0.03% of
total investments.
(c) At June 30, 2008, the Fund held an investment in a restricted security
amounting to $48,210 or 0.00% of total investments, which was valued under
methods approved by the Board of Directors as follows:
06/30/08
ACQUISITION ACQUISITION ACQUISITION CARRYING VALUE
SHARES ISSUER DATE COST PER UNIT
----------- ---------------------- ----------- ----------- --------------
4,440,836 Cable & Wireless
Jamaica Ltd. ...... 03/29/01 $101,639 $0.0109
(d) At June 30, 2008, $4,200,000 of the principal amount was pledged as
collateral for futures contracts.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR American Depositary Receipt
CVO Contingent Value Obligation
GDR Global Depositary Receipt
% OF
MARKET
GEOGRAPHIC DIVERSIFICATION VALUE MARKET VALUE
-------------------------- ------ --------------
LONG POSITIONS
North America ............ 73.9% $1,250,047,173
Europe ................... 17.6 297,233,213
Latin America ............ 4.8 81,678,195
Japan .................... 3.1 53,055,379
Asia/Pacific ............. 0.5 7,814,216
South Africa ............. 0.1 2,030,859
----- --------------
Total Investments ........ 100.0% $1,691,859,035
===== ==============
See accompanying notes to financial statements.
13
THE GABELLI EQUITY TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2008 (UNAUDITED)
ASSETS:
Investments, at value (cost $1,397,272,708) ............ $ 1,691,859,035
Foreign currency, at value (cost $6,872,302) ........... 7,139,632
Cash ................................................... 153,115
Receivable for investments sold ........................ 804,480
Dividends and interest receivable ...................... 2,275,454
Deferred offering expense .............................. 98,869
Prepaid expense ........................................ 24,844
---------------
TOTAL ASSETS ........................................... 1,702,355,429
---------------
LIABILITIES:
Payable to brokers ..................................... 171
Payable for investments purchased ...................... 1,467,553
Unrealized depreciation on swap contracts .............. 112,425
Distributions payable .................................. 277,166
Payable for investment advisory fees ................... 1,140,682
Payable for payroll expenses ........................... 105,697
Payable for accounting fees ............................ 3,731
Payable for shareholder communications expenses ........ 267,142
Payable for auction agent fees ......................... 157,920
Variation margin payable ............................... 34,432
Other accrued expenses ................................. 278,514
---------------
TOTAL LIABILITIES ...................................... 3,845,433
---------------
PREFERRED STOCK:
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
Series F Cumulative Preferred Stock (6.200%, $25
liquidation value, $0.001 par value, 6,000,000 shares
authorized with 6,000,000 shares issued
and outstanding) .................................... 150,000,000
---------------
TOTAL PREFERRED STOCK .................................. 403,742,500
---------------
NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS ......... $ 1,294,767,496
===============
NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS CONSIST OF:
Paid-in capital, at $0.001 par value ................... $ 1,003,533,083
Accumulated distributions in excess of net investment
income .............................................. (771,203)
Accumulated distributions in excess of net realized gain
on investments, written options, futures contracts,
swap contracts, and foreign currency transactions ... (6,359,945)
Net unrealized appreciation on investments ............. 294,586,327
Net unrealized depreciation on swap contracts .......... (112,425)
Net unrealized appreciation on futures ................. 3,637,784
Net unrealized appreciation on foreign currency
translations ........................................ 253,875
---------------
NET ASSETS ............................................. $ 1,294,767,496
===============
NET ASSET VALUE PER COMMON SHARE
($1,294,767,496 / 173,862,271 shares outstanding;
246,000,000 shares authorized) ......................... $ 7.45
===============
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of foreign taxes of $1,126,765) ......... $ 18,690,364
Interest ............................................... 911,021
---------------
TOTAL INVESTMENT INCOME ................................ 19,601,385
---------------
EXPENSES:
Investment advisory fees ............................... 9,079,580
Shareholder communications expenses .................... 381,464
Auction agent fees ..................................... 224,620
Custodian fees ......................................... 162,416
Payroll expenses ....................................... 100,083
Shareholder services fees .............................. 54,566
Directors' fees ........................................ 71,091
Legal and audit fees ................................... 65,931
Accounting fees ........................................ 22,500
Interest expense ....................................... 1,682
Miscellaneous expenses ................................. 175,222
---------------
TOTAL EXPENSES ......................................... 10,339,155
LESS:
Advisory fee reduction .............................. (2,007,681)
Custodian fee credits ............................... (3,178)
---------------
NET EXPENSES ........................................... 8,328,296
---------------
NET INVESTMENT INCOME .................................. 11,273,089
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
WRITTEN OPTIONS, SWAP CONTRACTS, FUTURES CONTRACTS,
AND FOREIGN CURRENCY:
Net realized gain on investments ....................... 20,245,320
Net realized gain on written options ................... 11,985
Net realized loss on swap contracts .................... (723,443)
Net realized gain on futures contracts ................. 683,158
Net realized gain on foreign currency transactions ..... 31,111
---------------
Net realized gain on investments, written options,
swap contracts, futures contracts, and foreign
currency transactions ............................... 20,248,131
---------------
Net change in unrealized appreciation/depreciation:
on investments ...................................... (260,649,115)
on written options .................................. 15
on swap contracts ................................... (119,590)
on futures contracts ................................ 2,549,498
on foreign currency translations .................... 168,928
---------------
Net change in unrealized appreciation/depreciation
on investments, written options, swap contracts,
futures contracts, and foreign currency
translations ........................................ (258,050,264)
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, WRITTEN OPTIONS, SWAP CONTRACTS,
FUTURES CONTRACTS, AND FOREIGN CURRENCY ............. (237,802,133)
---------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ..................................... (226,529,044)
Total Distributions to Preferred Shareholders .......... (10,307,389)
---------------
NET DECREASE IN NET ASSETS ATTRIBUTABLE TO COMMON
SHAREHOLDERS RESULTING FROM OPERATIONS .............. $ (236,836,433)
===============
See accompanying notes to financial statements.
14
THE GABELLI EQUITY TRUST INC.
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS
SIX MONTHS ENDED
JUNE 30, 2008 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2007
---------------- -----------------
OPERATIONS:
Net investment income ..................................... $ 11,273,089 $ 19,068,546
Net realized gain on investments, written options, swap
contracts, futures contracts, and foreign currency
transactions ........................................... 20,248,131 118,021,047
Net change in unrealized appreciation/depreciation on
investments, written options, swap contracts, futures
contracts, and foreign currency translations ........... (258,050,264) 75,143,139
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS ............................................. (226,529,044) 212,232,732
---------------- -----------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS:
Net investment income ..................................... (3,686,282)* (3,515,786)
Net realized short-term gains on investments, written
options, swap contracts, futures contracts, and
foreign currency transactions .......................... -- (1,824,834)
Net realized long-term gains on investments, written
options, swap contracts, futures contracts, and
foreign currency transactions .......................... (6,621,107)* (18,025,125)
---------------- -----------------
TOTAL DISTRIBUTIONS TO PREFERRED SHAREHOLDERS ............. (10,307,389) (23,365,745)
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO
COMMON SHAREHOLDERS RESULTING FROM OPERATIONS .......... (236,836,433) 188,866,987
---------------- -----------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Net investment income ..................................... (7,586,807)* (20,158,265)
Net realized short-term gains on investments, written
options, swap contracts, futures contracts, and
foreign currency transactions .......................... -- (8,897,143)
Net realized long-term gains on investments, written
options, swap contracts, futures contracts, and
foreign currency transactions .......................... (13,627,024)* (88,050,995)
Return of capital ......................................... (47,798,045)* (103,665,340)
---------------- -----------------
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS ................ (69,011,876) (220,771,743)
---------------- -----------------
FUND SHARE TRANSACTIONS:
Net increase in net assets from common shares issued
upon reinvestment of distributions ..................... 14,234,192 31,379,440
Adjustment to offering costs for preferred shares
charged to paid-in capital ............................. 650 --
---------------- -----------------
NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS ... 14,234,842 31,379,440
---------------- -----------------
NET DECREASE IN NET ASSETS ATTRIBUTABLE TO COMMON
SHAREHOLDERS ........................................... (291,613,467) (525,316)
NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS:
Beginning of period ....................................... 1,586,380,963 1,586,906,279
---------------- -----------------
End of period (including undistributed net investment
income of $0 and $0, respectively) ..................... $ 1,294,767,496 $ 1,586,380,963
================ =================
----------
* Based on fiscal year to date book income. Amounts are subject to change and
recharacterization at fiscal year end.
See accompanying notes to financial statements.
15
THE GABELLI EQUITY TRUST INC.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
SELECTED DATA FOR A COMMON SHARE JUNE 30, 2008 -------------------------------------------------------------------
OUTSTANDING THROUGHOUT EACH PERIOD: (UNAUDITED) 2007 2006 2005 2004 2003
---------------- ----------- ---------- ---------- ---------- ----------
OPERATING PERFORMANCE:
Net asset value, beginning of
period ............................ $ 9.22 $ 9.40 $ 8.10 $ 8.69 $ 7.98 $ 6.28
--------- ----------- ---------- ---------- ---------- ------
Net investment income ................ 0.07 0.14 0.18 0.09 0.02 0.04
Net realized and unrealized gain
on investments .................... (1.38) 1.12 2.18 0.47 1.63 2.50
--------- ----------- ---------- ---------- ---------- ------
Total from investment operations ..... (1.31) 1.26 2.36 0.56 1.65 2.54
--------- ----------- ---------- ---------- ---------- ------
DISTRIBUTIONS TO PREFERRED
SHAREHOLDERS:(A)
Net investment income ................ (0.02)* (0.02) (0.03) (0.01) (0.00)(e) (0.00)(e)
Net realized gain on investments ..... (0.04)* (0.12) (0.12) (0.14) (0.14) (0.14)
--------- ----------- ---------- ---------- ---------- ------
Total distributions to preferred
shareholders ...................... (0.06) (0.14) (0.15) (0.15) (0.14) (0.14)
--------- ----------- ---------- ---------- ---------- ------
NET INCREASE IN NET ASSETS ATTRIBUTABLE
TO COMMON SHAREHOLDERS RESULTING FROM
OPERATIONS ........................... (1.37) 1.12 2.21 0.41 1.51 2.40
--------- ----------- ---------- ---------- ---------- ------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Net investment income ................ (0.04)* (0.12) (0.16) (0.08) (0.01) (0.01)
Net realized gain on investments ..... (0.08)* (0.57) (0.72) (0.77) (0.79) (0.68)
Return of capital .................... (0.28)* (0.61) -- -- -- (0.00)(e)
--------- ----------- ---------- ---------- ---------- ------
Total distributions to common
shareholders ...................... (0.40) (1.30) (0.88) (0.85) (0.80) (0.69)
--------- ----------- ---------- ---------- ---------- ------
FUND SHARE TRANSACTIONS:
Increase (decrease) in net asset value
from common stock share
transactions ...................... -- -- -- (0.00)(e) 0.00(e) 0.01
Decrease in net asset value from
shares issued in rights
offering .......................... -- -- -- (0.15) -- --
Increase in net asset value from
repurchase of preferred shares .... -- -- -- -- 0.00(e) --
Offering costs for preferred shares
charged to paid-in capital ........ 0.00(e) -- (0.03) (0.00)(e) 0.00(e) (0.02)
Offering costs for issuance of rights
charged to paid-in capital ........ -- -- (0.00)(e) (0.00)(e) -- --
--------- ----------- ---------- ---------- ---------- ------
Total fund share transactions ........ 0.00 -- (0.03) (0.15) 0.00(e) (0.01)
--------- ----------- ---------- ---------- ---------- ------
NET ASSET VALUE ATTRIBUTABLE TO COMMON
SHAREHOLDERS, END OF PERIOD ....... $ 7.45 $ 9.22 $ 9.40 $ 8.10 $ 8.69 $ 7.98
========= =========== ========== ========== ========== ======
Net Asset Value Total Return + ....... (15.16)% 12.14% 28.17% 5.50% 19.81% 39.90%
========= =========== ========== ========== ========== ======
Market Value, End of Period .......... $ 8.15 $ 9.28 $ 9.41 $ 8.03 $ 9.02 $ 8.00
========= =========== ========== ========== ========== ======
Total Investment Return ++ ........... (7.78)% 12.75% 29.42% 0.66% 24.04% 28.58%
========= =========== ========== ========== ========== ======
See accompanying notes to financial statements.
16
THE GABELLI EQUITY TRUST INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
SELECTED DATA FOR A COMMON SHARE JUNE 30, 2008 -------------------------------------------------------------------
OUTSTANDING THROUGHOUT EACH PERIOD: (UNAUDITED) 2007 2006 2005 2004 2003
---------------- ----------- ---------- ---------- ---------- ----------
RATIOS AND SUPPLEMENTAL DATA:
Net assets including liquidation value
of preferred shares, end of period
(in 000's) ........................ $1,698,510 $ 1,990,123 $2,114,399 $1,764,634 $1,638,225 $1,514,525
Net assets attributable to common
shares, end of period (in 000's) .. $1,294,767 $ 1,586,381 $1,586,906 $1,345,891 $1,219,483 $1,094,525
Ratio of net investment income to
average net assets attributable to
common shares before preferred
distributions ..................... 1.59%(f) 1.16% 2.12% 1.27% 0.64% 0.67%
Ratio of operating expenses to average
net assets attributable to common
shares net of fee reduction (b) ... 1.17%(f) 1.46% 1.43% 1.39% 1.57% 1.62%
Ratio of operating expenses to average
net assets including liquidation
value of preferred shares net of
fee reduction (b) ................. 0.92%(f) 1.17% 1.11% 1.04% 1.14% 1.14%
Portfolio turnover rate +++ .......... 3.2% 17.2% 29.5% 22.4% 28.6% 19.2%
PREFERRED STOCK:
7.20% SERIES B CUMULATIVE PREFERRED
STOCK
Liquidation value, end of period
(in 000's) ........................ -- -- $ 123,750 $ 165,000 $ 165,000 $ 165,000
Total shares outstanding (in 000's) .. -- -- 4,950 6,600 6,600 6,600
Liquidation preference per share ..... -- -- $ 25.00 $ 25.00 $ 25.00 $ 25.00
Average market value (c) ............. -- -- $ 25.27 $ 25.92 $ 26.57 $ 27.06
Asset coverage per share ............. -- -- $ 100.21 $ 105.35 $ 97.81 $ 90.15
AUCTION RATE SERIES C CUMULATIVE
PREFERRED STOCK
Liquidation value, end of period
(in 000's) ........................ $ 130,000 $ 130,000 $ 130,000 $ 130,000 $ 130,000 $ 130,000
Total shares outstanding (in 000's) .. 5 5 5 5 5 5
Liquidation preference per share ..... $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
Average market value (c) ............. $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
Asset coverage per share ............. $ 105,173 $ 123,230 $ 100,211 $ 105,353 $ 97,806 $ 90,150
5.875% SERIES D CUMULATIVE PREFERRED
STOCK
Liquidation value, end of period
(in 000's) ........................ $ 73,743 $ 73,743 $ 73,743 $ 73,743 $ 73,743 $ 75,000
Total shares outstanding (in 000's) .. 2,950 2,950 2,950 2,950 2,950 3,000
Liquidation preference per share ..... $ 25.00 $ 25.00 $ 25.00 $ 25.00 $ 25.00 $ 25.00
Average market value (c) ............. $ 23.65 $ 23.86 $ 23.98 $ 24.82 $ 24.81 $ 25.10
Asset coverage per share ............. $ 105.16 $ 123.23 $ 100.21 $ 105.35 $ 97.81 $ 90.15
AUCTION RATE SERIES E CUMULATIVE
PREFERRED STOCK
Liquidation value, end of period
(in 000's) ........................ $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
Total shares outstanding (in 000's) .. 2 2 2 2 2 2
Liquidation preference per share ..... $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
Average market value (c) ............. $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
Asset coverage per share ............. $ 105,173 $ 123,230 $ 100,211 $ 105,353 $ 97,806 $ 90,150
6.200% SERIES F CUMULATIVE PREFERRED
STOCK
Liquidation value, end of period
(in 000's) ........................ $ 150,000 $ 150,000 $ 150,000 -- -- --
Total shares outstanding (in 000's) .. 6,000 6,000 6,000 -- -- --
Liquidation preference per share ..... $ 25.00 $ 25.00 $ 25.00 -- -- --
Average market value (c) ............. $ 24.70 $ 24.69 $ 25.12 -- -- --
Asset coverage per share ............. $ 105.17 $ 123.23 $ 100.21 -- -- --
ASSET COVERAGE (D) ................... 421% 493% 401% 421% 391% 361%
----------
+ Based on net asset value per share, adjusted for reinvestment of
distributions, at prices dependent upon the relationship of the net asset
value per share and the market value per share on the ex-dividend dates,
including the effect of shares issued pursuant to the 2005 rights offering,
assuming full subscription by shareholders. Total return for a period of
less than one year is not annualized.
++ Based on market value per share, adjusted for reinvestment of
distributions, including the effect of shares issued pursuant to the 2005
rights offering, assuming full subscription by shareholders. Total return
for a period of less than one year is not annualized.
+++ Effective in 2008, a change in accounting policy was adopted with regard to
the calculation of the portfolio turnover rate. Had this policy been
adopted retroactively, the portfolio turnover rate for the fiscal years
ended December 31, 2007, 2006, 2005, and 2004 would have been 27.3%, 33.1%,
27.0%, and 29.9%, respectively. The portfolio turnover rate for the fiscal
year ended 2003 would have been as shown.
* Based on fiscal year to date book income. Amounts are subject to change and
recharacterization at fiscal year end.
(a) Calculated based upon average common shares outstanding on the record dates
throughout the periods.
(b) The ratios do not include a reduction of expenses for custodian fee credits
on cash balances maintained with the custodian. For the six months ended
June 30, 2008 and the fiscal years ended December 31, 2007, 2006, 2005,
2004, and 2003, the effect of the custodian fee credits was minimal.
(c) Based on weekly prices.
(d) Asset coverage is calculated by combining all series of preferred stock.
(e) Amount represents less than $0.005 per share.
(f) Annualized.
See accompanying notes to financial statements.
17
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION. The Gabelli Equity Trust Inc. (the "Equity Trust") is a
non-diversified closed-end 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. Investment operations commenced on August 21, 1986.
The Equity Trust will invest at least 80% of its assets in equity
securities under normal market conditions (the "80% Policy"). The 80% Policy may
be changed without shareholder approval. The Equity Trust will provide
shareholders with notice at least 60 days prior to the implementation of any
changes in the 80% Policy.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with United States ("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 a foreign market are generally
valued at the preceding closing values of such securities on the relevant
market, but may be fair valued pursuant to procedures established by the Board
if market conditions change significantly after the close of the foreign market
but prior to the close of business on the day the securities are being valued.
Debt instruments with remaining maturities of 60 days or less that are not
credit impaired are valued at amortized cost, unless the Board determines such
amount does not reflect the securities' fair value, in which case these
securities will be fair valued 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 average of the latest 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 fair valued as determined by 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.
On January 1, 2008, the Fund adopted Statement of Financial Accounting
Standard No. 157, "Fair Value Measurements" ("SFAS 157") that clarifies the
definition of fair value for financial reporting, establishes a framework for
measuring fair value, and requires additional disclosures about the use of fair
value measurements. The three levels of the fair value hierarchy under SFAS 157
are described below:
- Level 1 - quoted prices in active markets for identical securities;
18
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds, credit
risk, etc.); and
- Level 3 - significant unobservable inputs (including the Fund's
determinations as to the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities. The
summary of inputs used to value the Fund's net assets as of June 30, 2008 is as
follows:
INVESTMENTS IN OTHER FINANCIAL
SECURITIES INSTRUMENTS (UNREALIZED
VALUATION INPUTS (MARKET VALUE) APPRECIATION/DEPRECIATION)*
---------------- -------------- ---------------------------
Level 1 - Quoted Prices ......................... $1,670,691,275 $3,637,784
Level 2 - Other Significant Observable Inputs ... 21,078,404 (112,425)
Level 3 - Significant Unobservable Inputs ....... 89,356 --
-------------- ----------
TOTAL ........................................... $1,691,859,035 $3,525,359
============== ==========
----------
* Other financial instruments are derivative instruments not reflected in the
Schedule of Investments, such as futures, forwards, and swaps which are
valued at the unrealized appreciation/depreciation on the investment.
The following is a reconciliation of Level 3 investments for which
significant unobservable inputs were used to determine fair value:
INVESTMENTS
IN SECURITIES
(MARKET VALUE)
--------------
BALANCE AS OF 12/31/07 ........................... $89,356
Accrued discounts/premiums ....................... --
Realized gain (loss) ............................. --
Change in unrealized appreciation/depreciation ... --
Net purchases (sales) ............................ --
Transfers in and/or out of Level 3 ............... --
-------
BALANCE AS OF 06/30/08 ........................... $89,356
=======
In March 2008, The Financial Accounting Standards Board (The "FASB") issued
Statement of Financial Accounting Standard No. 161, "Disclosures about
Derivative Instruments and Hedging Activities" ("SFAS 161") that is effective
for fiscal years beginning after November 15, 2008. SFAS 161 is intended to
improve financial reporting for derivative instruments by requiring enhanced
disclosure that enables investors to understand how and why an entity uses
derivatives, how derivatives are accounted for, and how derivative instruments
affect an entity's results of operations and financial position. Management is
currently evaluating the implications of SFAS 161 on the Fund's financial
statement disclosures.
REPURCHASE AGREEMENTS. The Fund 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 Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
The Fund will always receive and maintain securities as collateral whose market
value, including accrued interest, will be at least equal to 102% of the dollar
amount invested by the Fund in each agreement.
19
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
The Fund 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 Fund may be
delayed or limited. At June 30, 2008, there were no open repurchase agreements.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Fund may invest, from time
to time, in shares of other investment companies (or entities that would be
considered investment companies but are excluded from the definition pursuant to
certain exceptions under the 1940 Act) (the "Acquired Funds") in accordance with
the 1940 Act and related rules. As a shareholder in the Fund, you would bear the
pro rata portion of the periodic expenses of the Acquired Funds in addition to
the Fund's expenses. For the six months ended June 30, 2008, the Fund's pro rata
portion of the periodic expenses charged by the Acquired Funds was less than one
basis point.
OPTIONS. The Fund may purchase or write call or put options on securities
or indices. As a writer of put options, the Fund receives a premium at the
outset and then bears the risk of unfavorable changes in the price of the
financial instrument underlying the option. The Fund would incur a loss if the
price of the underlying financial instrument decreases between the date the
option is written and the date on which the option is terminated. The Fund would
realize a gain, to the extent of the premium, if the price of the financial
instrument increases between those dates. If a call option is exercised, the
premium is added to the proceeds from the sale of underlying security in
determining whether there has been a realized gain or loss. If a put option is
exercised, the premium reduces the cost basis of the security.
As a purchaser of put options, the Fund pays a premium for the right to
sell to the seller of the put option the underlying security at a specified
price. The seller of the put has the obligation to purchase the underlying
security upon exercise at the exercise price. If the price of the underlying
security declines, the Fund would realize a gain upon sale or exercise. If the
price of the underlying security increases or stays the same, the Fund would
realize a loss upon sale or at the expiration date, but only to the extent of
the premium paid.
In the case of call options, these exercise prices are referred to as
"in-the-money", "at-the-money", and "out-of-the-money", respectively. The Fund
may write (a) in-the-money call options when the Adviser expects that the price
of the underlying security will remain stable or decline during the option
period, (b) at-the-money call options when the Adviser expects that the price of
the underlying security will remain stable, decline or advance moderately during
the option period, and (c) out-of-the-money call options when the Adviser
expects that the premiums received from writing the call option will be greater
than the appreciation in the price of the underlying security above the exercise
price. By writing a call option, the Fund limits its opportunity to profit from
any increase in the market value of the underlying security above the exercise
price of the option. Out-of-the-money, at-the-money, and in-the-money put
options (the reverse of call options as to the relation of exercise price to
market price) may be utilized in the same market environments that such call
options are used in equivalent transactions.
SWAP AGREEMENTS. The Fund may enter into equity, contract for difference,
and interest rate swap or cap transactions. The use of swaps and caps is a
highly specialized activity that involves investment techniques and risks
different from those associated with ordinary portfolio security transactions. A
swap agreement may involve, to varying degrees, elements of market and
counterparty risk and exposure to loss in excess of the related amounts
reflected in the Statement of Assets and Liabilities. In an interest rate swap,
the Fund 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
20
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
to the Fund periodically a variable rate payment that is intended to approximate
the Fund's variable rate payment obligation on Series C Preferred Stock and
Series E Preferred Stock. In an interest rate cap, the Fund would pay a premium
to the counterparty and, to the extent that a specified variable rate index
exceeds a predetermined fixed rate, would receive from that counterparty
payments of the difference based on the notional amount of such cap. In a swap,
a set of future cash flows are exchanged between two counterparties. One of
these cash flow streams will typically be based on a reference interest rate
combined with the performance of a notional value of shares of a stock. The
other will be based on the performance of the shares of a stock. Swap and cap
transactions introduce additional risk because the Fund would remain obligated
to pay preferred stock dividends when due in accordance with the Articles
Supplementary even if the counterparty defaulted. If there is a default by the
counterparty to a swap contract, the Fund will be limited to contractual
remedies pursuant to the agreements related to the transaction. There is no
assurance that the swap contract counterparties will be able to meet their
obligations pursuant to a swap contract or that, in the event of default, the
Fund will succeed in pursuing contractual remedies. The Fund thus assumes the
risk that it may be delayed in or prevented from obtaining payments owed to it
pursuant to a swap contract. The creditworthiness of the swap contract
counterparties is closely monitored in order to minimize this risk. Depending on
the general state of short-term interest rates and the returns on the Fund's
portfolio securities at that point in time, such a default could negatively
affect the Fund's ability to make dividend payments. In addition, at the time a
swap or cap transaction reaches its scheduled termination date, there is a risk
that the Fund 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.
The use of derivative instruments involves, to varying degrees, elements of
market and counterparty risk in excess of the amount recognized below.
Unrealized gains related to swaps are reported as an asset and unrealized
losses are reported as a liability in the Statement of Assets and Liabilities.
The change in value of swaps, including the accrual of periodic amounts of
interest to be paid or received on swaps, is reported as unrealized gains or
losses in the Statement of Operations. A realized gain or loss is recorded upon
payment or receipt of a periodic payment or termination of swap agreements.
At June 30, 2008, there were no open interest rate swap agreements.
The Fund has entered into a contract for difference swap agreement with
Bear, Stearns International Limited. Details of the swap at June 30, 2008 are as
follows:
NOTIONAL EQUITY SECURITY INTEREST RATE/ TERMINATION NET UNREALIZED
AMOUNT RECEIVED EQUITY SECURITY PAID DATE DEPRECIATION
--------------------------- --------------------- -------------------------------- ----------- --------------
Market Value Overnight LIBOR plus 40 bps plus
Appreciation on: Market Value Depreciation on:
$1,471,231 (200,000 Shares) Rolls-Royce Group plc Rolls-Royce Group plc 09/15/08 $(112,425)
FUTURES CONTRACTS. The Fund 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. Upon entering into a futures
contract, the Fund 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 Fund each day, depending on the daily fluctuations in the
value of the contract, which are included in unrealized
appreciation/depreciation on investments and futures contracts. The Fund
recognizes a realized gain or loss when the contract is closed.
21
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
There are several risks in connection with the use of futures contracts as
a hedging instrument. 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 that the Fund may not be able to enter into a closing transaction
because of an illiquid secondary market. Open futures contracts at June 30, 2008
are reflected within the Schedule of Investments.
FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
included in unrealized appreciation/depreciation on investments and foreign
currency translations. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate
fluctuations in the underlying prices of the Fund's portfolio securities, but it
does establish a rate of exchange that can be achieved in the future. Although
forward foreign exchange contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, the Fund could be
exposed to risks if the counterparties to the contracts are unable to meet the
terms of their contracts. At June 30, 2008, there were no open forward foreign
exchange contracts.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are
maintained in U.S. dollars. Foreign currencies, investments, and other assets
and liabilities are translated into U.S. dollars at the current exchange rates.
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 that 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 Fund 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.
FOREIGN SECURITIES. The Fund 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.
FOREIGN TAXES. The Fund may be subject to foreign taxes on income, gains on
investments, or currency repatriation, a portion of which may be recoverable.
The Fund will accrue such taxes and recoveries as applicable, based upon its
current interpretation of tax rules and regulations that exist in the markets in
which it invests.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% of its
net assets in securities for which the markets are illiquid. Illiquid securities
include securities the disposition of which is subject to substantial legal or
contractual restrictions. The sale of illiquid securities often requires more
time and results in higher brokerage charges or dealer discounts and other
selling expenses than does the sale of securities eligible for trading on
national securities exchanges or
22
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
in the over-the-counter markets. Restricted securities may sell at a price lower
than similar securities that are not subject to restrictions on resale.
Securities freely saleable among qualified institutional investors under special
rules adopted by the SEC may be treated as liquid if they satisfy liquidity
standards established by the Board. The continued liquidity of such securities
is not as well assured as that of publicly traded securities, and accordingly
the Board will monitor their liquidity.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on 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 on the accrual
basis. Premiums and discounts on debt securities are amortized using the
effective yield to maturity method. Dividend income is recorded on the
ex-dividend date except for certain dividends which are recorded as soon as the
Fund is informed of the dividend.
CUSTODIAN FEE CREDITS AND INTEREST EXPENSE. When cash balances are
maintained in the custody account, the Fund receives credits which are used to
offset custodian fees. The gross expenses paid under the custody arrangement are
included in custodian fees in the Statement of Operations with the corresponding
expense offset, if any, shown as "custodian fee credits." When cash balances are
overdrawn, the Fund is charged an overdraft fee equal to 110% of the 90 day
Treasury Bill rate on outstanding balances. This amount, if any, would be shown
as "interest expense" in the Statement of Operations.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions to common shareholders are
recorded on the ex-dividend date. Distributions to shareholders are based on
income and capital gains as determined in accordance with federal income tax
regulations, which may differ from income and capital gains as determined under
U.S. generally accepted accounting principles. These differences are primarily
due to differing treatments of income and gains on various investment securities
and foreign currency transactions held by the Fund, timing differences, and
differing characterizations of distributions made by the Fund. Distributions
from net investment income include net realized gains on foreign currency
transactions. These book/tax differences are either temporary or permanent in
nature. To the extent these differences are permanent, adjustments are made to
the appropriate capital accounts in the period when the differences arise.
Permanent differences were primarily due to reclassifications of distributions,
swap investments and non-deductible spin off expenses. These reclassifications
have no impact on the NAV of the Fund.
On June 28, 2007, the Fund contributed $67,695,672 in cash in exchange for
shares of the Gabelli Healthcare & Wellness(Rx) Trust, and on the same date
distributed such shares to holders of the Fund on record as of June 21, 2007 at
the rate of one share of the Gabelli Healthcare & Wellness(Rx) Trust for every
twenty shares of the Fund's common stock.
Distributions to shareholders of the Fund's 7.20% Series B Cumulative
Preferred Stock, Series C Auction Rate Cumulative Preferred Stock, 5.875% Series
D Cumulative Preferred Stock, Series E Auction Rate Cumulative Preferred Stock,
and 6.20% Series F Cumulative Preferred Stock ("Cumulative Preferred Stock") are
recorded on a daily basis and are determined as described in Note 5.
The tax character of distributions paid during the fiscal year ended
December 31, 2007 was as follows:
COMMON PREFERRED
------------ -----------
DISTRIBUTIONS PAID FROM:
Ordinary income
(inclusive of short-term capital gains) ... $ 27,039,757 $ 5,395,128
Net long-term capital gains .................. 90,066,646 17,970,617
Return of capital ............................ 103,665,340 --
------------ -----------
Total distributions paid ..................... $220,771,743 $23,365,745
============ ===========
23
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
PROVISION FOR INCOME TAXES. The Fund 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 policy of the Fund 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, 2007, the components of accumulated earnings/(losses) on
a tax basis were as follows:
Net unrealized appreciation on investments ........ $549,772,485
Net unrealized appreciation on foreign currency
translations, futures, and swap contracts ...... 1,180,383
Other temporary differences* ...................... (1,668,191)
------------
TOTAL ............................................. $549,284,677
============
----------
* Other temporary differences are primarily due to mark-to-market adjustments
on capital gains (losses).
The following summarizes the tax cost of investments, swap contracts, and the
related unrealized appreciation/(depreciation) at June 30, 2008:
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ ------------- --------------
Investments ......... $140,745,461 $471,455,992 $(182,342,418) $289,113,574
Swap contracts ...... -- -- (112,425) (112,425)
Futures contracts ... -- 3,637,784 -- 3,637,784
------------ ------------ ------------- ------------
$140,745,461 $475,093,776 $(182,454,843) $292,638,933
============ ============ ============= ============
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109" (the "Interpretation") established a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether the Fund is taxable in
a particular jurisdiction) and required certain expanded tax disclosures.
For the six months ended June 30, 2008, the Fund did not have any liability
for any unrecognized tax benefits. The Fund recognizes interest and penalties,
if any, related to unrecognized tax benefits as income tax expenses in the
Statement of Operations. The Fund is not subject to examination by U.S. federal
tax authorities for tax years before 2004 and by state tax authorities for tax
years before 2003.
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES. The Fund has entered into an
investment advisory agreement (the "Advisory Agreement") with the Adviser which
provides that the Fund will pay the Adviser a fee, computed weekly and paid
monthly, equal on an annual basis to 1.00% of the value of the Fund's average
weekly net assets including the liquidation value of preferred stock. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio and oversees the administration of
all aspects of the Fund'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 NAV of the common shares of the Fund,
including distributions and advisory fee subject to reduction, does not exceed
the stated dividend rate or corresponding swap rate of each particular series of
the Cumulative Preferred Stock for the fiscal year.
24
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
The Fund's total return on the NAV of the common shares is monitored on a
monthly basis to assess whether the total return on the NAV of the common shares
exceeds the stated dividend rate or the corresponding swap rate of each
particular series of Cumulative Preferred Stock for the period. For the six
months ended June 30, 2008, the Fund's total return on the NAV of the common
shares did not exceed the stated dividend rate or the corresponding swap rate on
any of the series of Preferred Stock. Thus, management fees with respect to the
liquidation value of the preferred stock assets were reduced by $2,007,681.
During the six months ended June 30, 2008, the Fund paid brokerage
commissions on security trades of $100,760 to Gabelli & Company, Inc. ("Gabelli
& Company"), an affiliate of the Adviser.
The cost of calculating the Fund's NAV per share is a Fund expense pursuant
to the Advisory Agreement between the Fund and the Adviser. During the six
months ended June 30, 2008, the Fund paid or accrued $22,500 to the Adviser in
connection with the cost of computing the Fund's NAV.
As per the approval of the Board, the Fund compensates officers who are
employed by the Fund, and are not employed by the Adviser (although the officers
may receive incentive based variable compensation from affiliates of the
Adviser) and pays its allocated portion of the cost of the Fund's Chief
Compliance Officer. For the six months ended June 30, 2008, the Fund paid
$100,083, which is included in payroll expenses in the Statement of Operations.
The Fund pays each Director who is not considered to be an affiliated
person an annual retainer of $12,000 plus $1,500 for each Board meeting attended
in person and $500 per telephonic meeting, and they are reimbursed for any out
of pocket expenses incurred in attending meetings. All Board committee members
receive $1,000 per meeting attended. In addition, the Audit Committee Chairman
receives an annual fee of $3,000, the Proxy Voting Committee Chairman receives
an annual fee of $1,500, the Nominating Committee Chairman receives an annual
fee of $2,000, and the Lead Director receives an annual fee of $1,000. Directors
who are directors or employees of the Adviser or an affiliated company receive
no compensation or expense reimbursement from the Fund.
4. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for
the six months ended June 30, 2008, other than short-term securities and U.S.
Government obligations, aggregated $131,715,651 and $56,744,942, respectively.
Written options activity for the Fund for the six months ended June 30,
2008 was as follows:
NUMBER OF
CONTRACTS PREMIUMS
--------- --------
Options outstanding at December 31, 2007 ... 10 $ 11,985
Options expired ............................ (10) (11,985)
--- --------
Options outstanding at June 30, 2008 ....... -- --
=== ========
5. CAPITAL. The charter permits the Fund to issue 246,000,000 shares of common
stock (par value $0.001) and authorizes the Board to increase its authorized
shares from time to time. The Board has authorized the repurchase of its shares
on the open market when the shares are trading on the New York Stock Exchange
("NYSE") at a discount of 10% or more (or such other percentage as the Board may
determine from time to time) from the NAV of the shares. During the six months
ended June 30, 2008, the Fund did not repurchase any shares of its common stock
in the open market.
25
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
Transactions in common shares were as follows:
SIX MONTHS ENDED
JUNE 30, 2008 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2007
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
Net increase from shares issued upon
reinvestment of distributions....... 1,757,981 $14,234,192 3,348,018 $31,379,440
The Fund's Articles of Incorporation, as amended, authorizes the issuance
of up to 18,000,000 shares of $0.001 par value Cumulative Preferred Stock. The
Cumulative Preferred Stock is senior to the common stock and results in the
financial leveraging of the common stock. Such leveraging tends to magnify both
the risks and opportunities to common shareholders. Dividends on shares of the
Cumulative Preferred Stock are cumulative. The Fund is required by the 1940 Act
and by the Articles Supplementary to meet certain asset coverage tests with
respect to the Cumulative Preferred Stock. If the Fund fails to meet these
requirements and does not correct such failure, the Fund may be required to
redeem, in part or in full, the Series C Auction Rate, 5.875% Series D, Series E
Auction Rate, and 6.20% Series F Cumulative Preferred Stock at redemption prices
of $25,000, $25, $25,000, and $25, 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 coverage requirements could restrict the Fund's ability to pay dividends
to common shareholders and could lead to sales of portfolio securities at
inopportune times. The income received on the Fund'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.
At the Fund's August 15, 2007 Board meeting, the Board approved the filing
of a shelf registration with the SEC, to give the Fund the ability to offer
additional preferred shares. The shelf registration was declared effective by
the SEC on March 20, 2008.
On June 20, 2001, the Fund 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. The Series B Preferred Shares were callable at any time at the
liquidation value plus accrued dividends following the expiration of the five
year call protection on June 20, 2006. On June 26, 2006, the Fund, as authorized
by the Board, redeemed 25% (1,650,000 shares) of its outstanding 7.20% Stock B
Cumulative Preferred Stock at the redemption price of $25.00 per share (the
liquidation value). On January 8, 2007, the Fund, as authorized by the Board,
redeemed the balance (4,950,000 shares) of its outstanding 7.20% Series B
Cumulative Preferred Stock at the redemption price of $25.00 per share, plus
accumulated and unpaid dividends through the redemption date of $0.06 per share.
On June 27, 2002, the Fund 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 seven days, is expected to vary with short-term interest rates. If the
number of Series C Auction Rate Cumulative Preferred Stock subject to bid orders
by potential holders is less than the number of Series C Auction Rate Cumulative
Preferred Stock subject to sell orders, then the auction is considered to be a
failed auction, and the dividend rate will be the maximum rate. In that event,
holders that have submitted sell orders may not be able to sell any or all of
the Series C Auction Rate Cumulative Preferred Stock for which they have
submitted sell orders. The current maximum rate is 150% of the "AA" Financial
Composite Commercial Paper Rate. The dividend rates of Series C Auction Rate
Cumulative Preferred Stock ranged from 2.926% to 5.350% for
26
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
the six months ended June 30, 2008. 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 Fund, at its option, may redeem the Series C Auction Rate Cumulative
Preferred Stock in whole or in part at the redemption price at any time. During
the six months ended June 30, 2008, the Fund did not redeem any shares of Series
C Auction Rate Cumulative Preferred Stock. At June 30, 2008, 5,200 shares of
Series C Auction Rate Cumulative Preferred Stock were outstanding with an
annualized dividend rate of 3.211% and accrued dividends amounted to $69,572.
On October 7, 2003, the Fund received net proceeds of $72,375,842 (after
underwriting discounts of $2,362,500 and offering expenses of $261,658) from the
public offering of 3,000,000 shares of 5.875% Series D Cumulative Preferred
Stock. Commencing October 7, 2008 and thereafter, the Fund, at its option, may
redeem the 5.875% Series D Cumulative Preferred Stock in whole or in part at the
redemption price at any time. At June 30, 2008, 2,949,700 shares of 5.875%
Series D Cumulative Preferred Stock were outstanding and accrued dividends
amounted to $60,172.
On October 7, 2003, the Fund received net proceeds of $49,350,009 (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 seven days, is expected to vary with short-term interest rates. If the
number of Series E Auction Rate Cumulative Preferred Stock subject to bid orders
by potential holders is less than the number of Series E Auction Rate Cumulative
Preferred Stock subject to sell orders, then the auction is considered to be a
failed auction, and the dividend rate will be the maximum rate. In that event,
holders that have submitted sell orders may not be able to sell any or all of
the Series E Auction Rate Cumulative Preferred Stock for which they have
submitted sell orders. The current maximum rate is 150% of the "AA" Financial
Composite Commercial Paper Rate. The dividend rates of Series E Auction Rate
Cumulative Preferred Stock ranged from 2.956% to 5.510% for the six months ended
June 30, 2008. 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 Fund, at
its option, may redeem the Series E Auction Rate Cumulative Preferred Stock in
whole or in part at the redemption price at any time. During the six months
ended June 30, 2008, the Fund did not redeem any shares of Series E Auction Rate
Cumulative Preferred Stock. At June 30, 2008, 2,000 shares of Series E Auction
Rate Cumulative Preferred Stock were outstanding with an annualized dividend
rate of 3.286% and accrued dividends amounted to $18,255.
On November 10, 2006, the Fund received net proceeds of $144,765,000 (after
underwriting discounts of $4,725,000 and estimated offering expenses of
$510,000) from the public offering of 6,000,000 shares of 6.20% Series F
Cumulative Preferred Stock. Commencing November 10, 2011 and thereafter, the
Fund, at its option, may redeem the 6.20% Series F Cumulative Preferred Stock in
whole or in part at the redemption price at any time. At June 30, 2008,
6,000,000 shares of 6.20% Series F Cumulative Preferred Stock were outstanding
and accrued dividends amounted to $129,167.
The holders of Cumulative Preferred Stock generally are entitled to one
vote per share held on each matter submitted to a vote of shareholders of the
Fund and will vote together with holders of common stock as a single class. The
holders of Cumulative Preferred Stock voting together as a single class also
have the right currently to elect two Directors and under certain circumstances
are entitled to elect a majority of the Board of Directors. In addition, the
affirmative vote of a majority of the votes entitled to be cast by holders of
all outstanding shares of the preferred stock, voting as a single class, will be
required to approve any plan of reorganization adversely affecting the preferred
stock, and the approval of two-thirds of each class, voting separately, of the
Fund's outstanding voting stock must approve the conversion of the Fund from a
closed-end
27
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
to an open-end investment company. The approval of a majority (as defined in the
1940 Act) of the outstanding preferred stock and a majority (as defined in the
1940 Act) of the Fund's outstanding voting securities are required to approve
certain other actions, including changes in the Fund's investment objectives or
fundamental investment policies.
6. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
7. OTHER MATTERS. On April 24, 2008, the Adviser entered into an administrative
settlement with the SEC to resolve the SEC's inquiry regarding prior frequent
trading activity in shares of the GAMCO Global Growth Fund (the "Global Growth
Fund") by one investor who was banned from the Global Growth Fund in August
2002. In the settlement, the SEC found that the Adviser had violated Section
206(2) of the Investment Advisers Act, Section 17(d) of the 1940 Act and Rule
17d-1 thereunder, and had aided and abetted and caused violations of Section
12(d)(1)(B)(i) of the 1940 Act. Under the terms of the settlement, the Adviser,
while neither admitting nor denying the SEC's findings and allegations, agreed,
among other things, to pay the previously reserved total of $16 million
(including a $5 million penalty), of which at least $11 million will be
distributed to shareholders of the Global Growth Fund in accordance with a plan
to be developed by an independent distribution consultant and approved by the
independent directors of the Global Growth Fund and the staff of the SEC, and to
cease and desist from future violations of the above referenced federal
securities laws. The settlement will not have a material adverse impact on the
Adviser or its ability to fulfill its obligations under the Advisory Agreement.
On the same day, the SEC filed a civil action against the Executive Vice
President and Chief Operating Officer of the Adviser, alleging violations of
certain federal securities laws arising from the same matter. The officer is
also an officer of the Global Growth Fund and other funds in the Gabelli/GAMCO
fund complex. The officer denies the allegations and is continuing in his
positions with the Adviser and the funds. The Adviser currently expects that any
resolution of the action against the officer will not have a material adverse
impact on the Adviser or its ability to fulfill its obligations under the
Advisory Agreement.
On a separate matter, in August 2008, the Adviser made an offer to the
staff of the SEC to settle a previously disclosed matter concerning compliance
with Section 19(a) and Rule 19a-1 of the 1940 Act by two closed-end funds
managed by the Adviser. These provisions require registered investment companies
to provide written statements to shareholders when a distribution is made in the
nature of a dividend from a source other than net investment income. While the
two funds sent annual statements and provided other materials containing this
information, the funds did not send the notices required by Rule 19a-1 to
shareholders with each distribution in 2002 and 2003. The Adviser believes that
the funds have been in compliance with Rule 19a-1 since that time. The Adviser
believes that the settlement would have no effect on the funds or any material
adverse effect on the Adviser or its ability to manage the funds. This offer of
settlement is subject to final agreement regarding the specific language of the
SEC's administrative order and other settlement documents and approval by the
SEC.
28
THE GABELLI EQUITY TRUST INC.
BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED)
Section 15(c) of the Investment Company Act of 1940, as amended (the "1940
Act"), contemplates that the Board of Directors (the "Board") of The Gabelli
Equity Trust Inc. (the "Fund"), including a majority of the Directors who have
no direct or indirect interest in the investment advisory agreement and are not
"interested persons" of the Fund, as defined in the 1940 Act (the "Independent
Board Members"), are required to annually review and re-approve the terms of the
Fund's existing investment advisory agreement and approve any newly proposed
terms therein. In this regard, the Board reviewed and re-approved, during the
most recent six month period covered by this report, the Investment Advisory
Agreement (the "Advisory Agreement") with Gabelli Funds, LLC (the "Adviser") for
the Fund.
More specifically, at a meeting held on May 22, 2008, the Board, including the
Independent Board Members, considered the factors and reached the conclusions
described below relating to the selection of the Adviser and the re-approval of
the Advisory Agreement.
NATURE, EXTENT, AND QUALITY OF SERVICES. The Independent Board Members
considered the nature, quality, and extent of administrative and shareholder
services performed by the Adviser, including portfolio management, supervision
of Fund operations and compliance and regulatory filings and disclosures to
shareholders, general oversight of other service providers, review of Fund legal
issues, assisting the Independent Board Members in their capacity as directors,
and other services. The Independent Board Members concluded that the services
are extensive in nature and that the Adviser consistently delivered a high level
of service.
INVESTMENT PERFORMANCE OF THE FUND AND ADVISER. The Independent Board Members
considered short-term and long-term investment performance for the Fund over
various periods of time as compared to relevant equity indices and the
performance, and concluded that the Adviser was delivering good performance
results consistent with the investment strategies being pursued by the Fund.
COSTS OF SERVICES AND PROFITS REALIZED BY THE ADVISER.
(A) COSTS OF SERVICES TO FUND: FEES AND EXPENSES. The Independent Board Members
considered the Fund's management fee rate and expense ratio relative to industry
averages for the Fund's peer group category and the advisory fees charged by the
Adviser and its affiliates to other fund and non-fund clients. The Independent
Board Members noted that the mix of services under the Advisory Agreement are
much more extensive than those under the advisory agreements for non-fund
clients. The Independent Board Members recognized that the investment advisory
fee paid by the Fund and the Fund's overall expense ratio is higher than average
for its peer group, but concluded that the fee is acceptable based upon the
qualifications, experience, reputation, and performance of the Adviser.
(B) PROFITABILITY AND COSTS OF SERVICES TO ADVISER. The Independent Board
Members considered the Adviser's overall profitability and costs, and proforma
estimates of the Adviser's profitability and costs attributable to the Fund: (i)
as part of the Fund complex; and (ii) assuming the Fund constituted the
Adviser's only investment company under its management. The Independent Board
Members also considered whether the amount of profit is a fair entrepreneurial
profit for the management of the Fund and noted that the Adviser has
substantially increased its resources devoted to Fund matters in response to
recently enacted regulatory requirements and new or enhanced Fund policies and
procedures. The Independent Board Members concluded that the Adviser's
profitability was at an acceptable level. The Independent Board Members also
noted that a substantial portion of the Fund's portfolio transactions were
executed by an affiliated broker, and that the affiliated broker
received commissions from the Fund. The Adviser received a moderate amount of
soft dollar benefits (but no third party research services) from unaffiliated
brokers through the Fund's portfolio brokerage.
29
THE GABELLI EQUITY TRUST INC.
BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (CONTINUED)
(UNAUDITED)
EXTENT OF ECONOMIES OF SCALE AS FUND GROWS. The Independent Board Members
considered whether there have been economies of scale with respect to the
management of the Fund and whether the Fund has appropriately benefited from any
economies of scale. The Independent Board Members noted that economies of scale
may develop for certain funds as their assets increase and their fund level
expenses decline as a percentage of assets, but that fund level economies of
scale may not necessarily result in Adviser-level economies of scale. They also
recognized that the Adviser has agreed to reduce the management fee on
incremental assets attributable to the preferred shares if the total return of
the common shares does not exceed a specified amount (e.g., the dividend rate
paid on preferred shares). The Independent Board Members concluded that there
was an appropriate sharing of economies of scale.
WHETHER FEE LEVELS REFLECT ECONOMIES OF SCALE. The Independent Board Members
also considered whether the management fee rate is reasonable in relation to the
asset size of the Fund and any economies of scale that may exist and concluded
that the Fund's current fee schedule (without breakpoint) was considered
reasonable.
OTHER RELEVANT CONSIDERATIONS.
(A) ADVISER PERSONNEL AND METHODS. The Independent Board Members considered the
size, education, and experience of the Adviser's staff, the Adviser's
fundamental research capabilities, and the Adviser's approach to recruiting,
training, and retaining portfolio managers and other research and management
personnel, and concluded that in each of these areas the Adviser was structured
in such a way to support the high level of services being provided to the Fund.
(B) OTHER BENEFITS TO THE ADVISER. The Independent Board Members also considered
the character and amount of other incidental benefits received by the Adviser
and its affiliates from its association with the Fund. The Independent Board
Members considered the brokerage commissions paid to an affiliate of the
Adviser. The Independent Board Members concluded that potential "fall-out"
benefits that the Adviser and its affiliates may receive, such as affiliated
brokerage commissions, greater name recognition, or increased ability to obtain
research services, appear to be reasonable.
CONCLUSIONS. In considering the Advisory Agreement, the Independent Board
Members did not identify any factor as all important or all controlling, and
instead considered these factors collectively in light of the Fund's surrounding
circumstances. Based on this review, it was the judgment of the Independent
Board Members that shareholders had received, over the long term, good absolute
and relative performance at reasonable fees and, therefore, re-approval of the
Advisory Agreement was in the best interests of the Fund and its shareholders.
As a part of its decision making process, the Independent Board Members noted
that the Adviser has managed the Fund since its inception, and the Independent
Board Members believe that a long term relationship with a capable,
conscientious adviser is in the best interests of the Fund. The Independent
Board Members considered, generally, that shareholders invested in the Fund
knowing that the Adviser managed the Fund and knowing its investment management
fee schedule. As such, the Independent Board Members considered, in particular,
whether the Adviser managed the Fund in accordance with its investment
objectives and policies as disclosed to shareholders. The Independent Board
Members concluded that the Fund was managed by the Adviser consistent with its
investment objectives and policies.
30
DIRECTORS AND OFFICERS
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER, RYE, NY 10580-1422
DIRECTORS
Mario J. Gabelli, CFA
CHAIRMAN & CHIEF EXECUTIVE OFFICER,
GAMCO INVESTORS, INC.
Dr. Thomas E. Bratter
PRESIDENT & FOUNDER,
JOHN DEWEY ACADEMY
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
James P. Conn
FORMER MANAGING DIRECTOR & 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
Anthony R. Pustorino
CERTIFIED PUBLIC ACCOUNTANT,
PROFESSOR EMERITUS, PACE UNIVERSITY
Salvatore J. Zizza
CHAIRMAN, ZIZZA & CO., LTD.
OFFICERS
Bruce N. Alpert
PRESIDENT
Carter W. Austin
VICE PRESIDENT
Peter D. Goldstein
CHIEF COMPLIANCE OFFICER
Agnes Mullady
TREASURER AND SECRETARY
INVESTMENT ADVISER
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
CUSTODIAN
The Bank of New York Mellon
COUNSEL
Willkie Farr & Gallagher LLP
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company, N.A.
STOCK EXCHANGE LISTING
5.875% 6.20%
Common Preferred Preferred
----------- --------- ---------
NYSE-Symbol: GAB GAB PrD GABPrF
Shares Outstanding: 173,862,271 2,949,700 6,000,000
The Net Asset Value per share appears in the Publicly Traded Funds column, under
the heading "General Equity Funds," 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 per share may be obtained each day by calling (914) 921-5070
or visiting www.gabelli.com.
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 Fund may, from time to time, purchase
shares of its common stock in the open market when the Fund's shares are trading
at a discount of 10% or more from the net asset value of the shares. The Fund
may also, from time to time, purchase shares of its preferred stock in the open
market when the preferred shares are trading at a discount to the liquidation
value.
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER
RYE, NY 10580-1422
(914) 921-5070
WWW.GABELLI.COM
SEMI ANNUAL REPORT
JUNE 30, 2008
GAB Q2/2008
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) 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.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
There has been no change, as of the date of this filing, in any of the portfolio
managers identified in response to paragraph (a)(1) of this Item in the
registrant's most recently filed annual report on Form N-CSR.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
REGISTRANT PURCHASES OF EQUITY SECURITIES
=============================================================================================================================
(C) TOTAL NUMBER OF (D) MAXIMUM NUMBER (OR
SHARES (OR UNITS) APPROXIMATE DOLLAR VALUE) OF
(A) TOTAL NUMBER OF PURCHASED AS PART OF SHARES (OR UNITS) THAT MAY YET
SHARES (OR UNITS) (B) AVERAGE PRICE PAID PUBLICLY ANNOUNCED PLANS BE PURCHASED UNDER THE PLANS
PERIOD PURCHASED PER SHARE (OR UNIT) OR PROGRAMS OR PROGRAMS
=============================================================================================================================
=============================================================================================================================
Month #1 Common - N/A Common - N/A Common - N/A Common - 172,104,290
01/01/08
through Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
01/31/08
Preferred Series F - N/A Preferred Series F - N/A Preferred Series F - N/A Preferred Series F - 6,000,000
=============================================================================================================================
Month #2 Common - N/A Common - N/A Common - N/A Common - 172,104,290
02/01/08
through Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
02/28/08
Preferred Series F - N/A Preferred Series F - N/A Preferred Series F - N/A Preferred Series F - 6,000,000
=============================================================================================================================
Month #3 Common - N/A Common - N/A Common - N/A Common - 172,955,093
03/01/08
through Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
03/31/08
Preferred Series F - N/A Preferred Series F - N/A Preferred Series F - N/A Preferred Series F - 6,000,000
=============================================================================================================================
Month #4 Common - N/A Common - N/A Common - N/A Common - 172,955,093
04/01/08
through Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
04/30/08
Preferred Series F - N/A Preferred Series F - N/A Preferred Series F - N/A Preferred Series F - 6,000,000
=============================================================================================================================
Month #5 Common - N/A Common - N/A Common - N/A Common - 172,955,093
05/01/08
through Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
05/31/08
Preferred Series F - N/A Preferred Series F - N/A Preferred Series F - N/A Preferred Series F - 6,000,000
=============================================================================================================================
Month #6 Common - N/A Common - N/A Common - N/A Common - 173,862,271
06/01/08
through Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
06/30/08
Preferred Series F - N/A Preferred Series F - N/A Preferred Series F - N/A Preferred Series F - 6,000,000
=============================================================================================================================
Total Common - N/A Common - N/A Common - N/A N/A
=============================================================================================================================
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A
Preferred Series F - N/A Preferred Series F - N/A Preferred Series F - 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 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) 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) Not applicable.
(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
-------------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date 9/3/08
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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
Date 9/3/08
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By (Signature and Title)* /s/ Agnes Mullady
-------------------------------------------------------
Agnes Mullady,
Principal Financial Officer and Treasurer
Date 9/3/08
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* Print the name and title of each signing officer under his or her signature.