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
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(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
--------------------------------------------------------
(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
--------------
Date of fiscal year end: December 31
-----------
Date of reporting period: December 31, 2007
-----------------
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.
[LOGO]
THE GABELLI
EQUITY TRUST INC.
THE GABELLI EQUITY TRUST INC.
Annual Report
December 31, 2007
TO OUR SHAREHOLDERS,
The Sarbanes-Oxley Act requires a fund's principal executive and financial
officers to certify the entire contents of the semi-annual and annual
shareholder reports in a filing with the Securities and Exchange Commission on
Form N-CSR. This certification would cover the portfolio manager's commentary
and subjective opinions if they are attached to or a part of the financial
statements. Many of these comments and opinions would be difficult or impossible
to certify.
Because we do not want our portfolio managers to eliminate their opinions
and/or restrict their commentary to historical facts, we have separated their
commentary from the financial statements and investment portfolio and have sent
it to you separately. Both the commentary and the financial statements,
including the portfolio of investments, will be available on our website at
www.gabelli.com.
Enclosed are the audited financial statements and the investment portfolio
as of December 31, 2007.
COMPARATIVE RESULTS
--------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 2007 (a)
----------------------------------------------------
Since
Inception
Quarter 1 Year 3 Year 5 Year 10 Year 15 Year 20 Year (08/21/86)
------- ------ ------ ------ ------- ------- ------- ----------
GABELLI EQUITY TRUST
NAV TOTAL RETURN (b) .............. (1.54)% 12.10% 14.86% 20.82% 10.53% 12.30% 12.53% 12.46%
INVESTMENT TOTAL RETURN (c) ....... 0.63 12.75 13.67 18.52 10.08 12.34 13.85 12.08
S&P 500 Index ........................ (3.33) 5.49 8.61 12.82 5.91 10.49 11.80 11.18(d)
Dow Jones Industrial Average ......... (3.99) 8.81 9.65 12.25 7.46 12.12 12.91 12.42(d)
Nasdaq Composite Index ............... (1.82) 9.81 6.83 14.71 5.38 9.53 10.97 9.51
(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. PERFORMANCE RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT
ANNUALIZED. 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. 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 STANDARD & POOR'S ("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 THE NET ASSET
VALUE ("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 DATE FOR
WHICH DATA IS AVAILABLE.
--------------------------------------------------------------------------------
Sincerely yours,
/s/ Bruce N. Alpert
Bruce N. Alpert
February 22, 2008 President
THE GABELLI EQUITY TRUST INC.
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total
investments as of December 31, 2007:
LONG POSITIONS
Food and Beverage .................................................... 12.4%
Financial Services ................................................... 8.8%
Energy and Utilities ................................................. 7.4%
Diversified Industrial ............................................... 6.3%
U.S. Government Obligations .......................................... 6.1%
Telecommunications ................................................... 6.0%
Consumer Products .................................................... 5.0%
Cable and Satellite .................................................. 4.7%
Entertainment ........................................................ 4.3%
Health Care .......................................................... 4.0%
Publishing ........................................................... 4.0%
Equipment and Supplies ............................................... 3.5%
Automotive: Parts and Accessories .................................... 2.2%
Machinery ............................................................ 2.1%
Hotels and Gaming .................................................... 2.0%
Broadcasting ......................................................... 2.0%
Aviation: Parts and Services ......................................... 1.7%
Aerospace ............................................................ 1.6%
Specialty Chemicals .................................................. 1.5%
Consumer Services .................................................... 1.5%
Business Services .................................................... 1.5%
Agriculture .......................................................... 1.4%
Communications Equipment ............................................. 1.4%
Retail ............................................................... 1.3%
Metals and Mining .................................................... 1.2%
Wireless Communications .............................................. 1.2%
Electronics .......................................................... 1.1%
Environmental Services ............................................... 1.0%
Automotive ........................................................... 0.7%
Computer Software and Services ....................................... 0.6%
Real Estate .......................................................... 0.5%
Transportation ....................................................... 0.4%
Closed-End Funds ..................................................... 0.4%
Manufactured Housing and Recreational Vehicles ....................... 0.1%
Real Estate Investment Trusts ........................................ 0.1%
-----
100.0%
=====
SHORT POSITIONS
Call Options Written ................................................. 0.0%
THE GABELLI EQUITY TRUST INC. (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 SEPTEMBER 30, 2007. 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.
2
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
QUARTER ENDED DECEMBER 31, 2007
(UNAUDITED)
OWNERSHIP AT
DECEMBER 31,
SHARES 2007
----------- ------------
NET PURCHASES
COMMON STOCKS
Advanced Medical Optics Inc. ..................... 30,000 130,000
Alibaba.com Ltd. ................................. 8,000 8,000
American International Group Inc. ................ 5,000 55,000
Ashland Inc. ..................................... 1,000 41,000
Bel Fuse Inc., Cl. A ............................. 12,800 12,800
Bell Aliant Regional Communications
Income Fund ................................... 1,000 1,000
BERU AG .......................................... 1,000 2,000
Biogen Idec Inc. ................................. 9,000 35,000
BorgWarner Inc. (a) .............................. 43,000 86,000
Boston Scientific Corp. .......................... 10,000 160,000
Campbell Soup Co. ................................ 8,000 80,000
CBS Corp., Cl. A ................................. 18,000 433,000
ChoicePoint Inc. ................................. 10,000 30,000
Cincinnati Bell Inc. ............................. 50,000 900,000
Citadel Broadcasting Corp. ....................... 4,000 10,143
Clearwire Corp., Cl. A ........................... 6,000 14,000
Coca-Cola Hellenic Bottling Co. SA (b) ........... 19,000 57,000
Cognos Inc. ...................................... 100,000 100,000
Coldwater Creek Inc. ............................. 13,000 40,000
Constellation Brands Inc., Cl. A ................. 75,600 90,000
Crown Ltd. (c) ................................... 100,000 100,000
CVS Caremark Corp. ............................... 45,000 70,000
Dean Foods Co. ................................... 40,000 40,000
Deere & Co. (a) .................................. 205,000 425,000
E.I. du Pont de Nemours and Co. .................. 5,000 25,000
EchoStar Communications Corp., Cl. A ............. 78,700 133,700
Fortress Investment Group LLC, Cl. A ............. 7,000 12,000
FPL Group Inc. ................................... 4,600 24,600
General Motors Corp. ............................. 50,000 100,000
Greatbatch Inc. .................................. 5,000 5,000
Grupo Televisa SA, ADR ........................... 85,000 700,000
Hercules Inc. .................................... 10,000 175,000
Il Sole 24 Ore ................................... 1,967,000 1,967,000
Interpublic Group of Companies Inc. .............. 40,000 40,000
Japan Tobacco Inc. ............................... 175 175
Johnson & Johnson ................................ 20,000 40,000
Johnson Controls Inc. (d) ........................ 135,000 205,000
Kaman Corp. ...................................... 25,899 25,899
Legg Mason Inc. .................................. 8,000 50,000
Lighthouse Caledonia ASA (e) ..................... 8,075 8,075
Macy's Inc. ...................................... 20,000 40,000
MGM Mirage ....................................... 16,000 30,000
Och-Ziff Capital Management Group LLC,
Cl. A ......................................... 2,000 2,000
Orascom Telecom Holding SAE ...................... 15,000 15,000
PACCAR Inc. (f) .................................. 32,250 96,750
Pernod-Ricard SA ................................. 13,000 21,100
Reckitt Benckiser Group plc (g) .................. 60,000 60,000
Rollins Inc. (f) ................................. 350,000 1,110,000
Rolls-Royce Group plc, Cl. B (h) ................. 48,480,000 48,480,000
Rowan Companies Inc. ............................. 205,000 205,000
Spectra Energy Corp. ............................. 5,000 120,000
The Bear Stearns Companies Inc. .................. 18,000 18,000
The Blackstone Group LP .......................... 3,000 5,000
The DIRECTV Group Inc. ........................... 150,000 300,000
The Great Atlantic & Pacific Tea Co. Inc. ........ 85,000 115,000
The Hershey Co. .................................. 25,000 70,000
Tokyo Broadcasting System Inc. ................... 10,000 100,000
OWNERSHIP AT
DECEMBER 31,
SHARES 2007
----------- ------------
Tyco International Ltd. .......................... 40,000 200,000
UnitedHealth Group Inc. .......................... 50,000 90,000
Viacom Inc., Cl. A ............................... 5,000 370,000
Vivendi .......................................... 50,000 383,900
Walgreen Co. ..................................... 50,000 50,000
Wal-Mart Stores Inc. ............................. 15,000 15,000
Zep Inc. (i) ..................................... 100,000 100,000
PRINCIPAL
AMOUNT
-----------
CONVERTIBLE CORPORATE BOND
The Great Atlantic & Pacific Tea Co. Inc.,
Cv., 5.125%, 06/15/11 ......................... $ 3,000,000 $ 3,000,000
SHARES
-----------
NET SALES
COMMON STOCKS
Acuity Brands Inc. (i) ........................... (11,000) 9,000
Alcan Inc. (j) ................................... (70,000) --
Allegheny Energy Inc. ............................ (2,000) 68,000
ALLIANZ SE ....................................... (4,200) 2,800
Alltel Corp. (k) ................................. (10,000) --
America Movil SAB de CV, Cl. L, ADR .............. (2,000) 96,000
Ameriprise Financial Inc. ........................ (2,000) 8,000
Ampco-Pittsburgh Corp. ........................... (1,000) 163,000
Andrew Corp. (l) ................................. (10,000) --
Asciano Group .................................... (70,000) --
Avis Budget Group Inc. ........................... (4,000) 14,000
Aviva plc ........................................ (15,000) 80,000
BCE Inc. ......................................... (170,000) 85,000
Berkshire Hathaway Inc., Cl. A ................... (103) 143
Cadbury Schweppes plc, ADR ....................... (3,400) 180,000
CheckFree Corp. (m) .............................. (1,000) --
Clorox Co. ....................................... (2,000) 30,000
Cooper Industries Ltd., Cl. A .................... (2,000) 245,000
Corus Entertainment Inc., Cl. B, New York ........ (666) 12,667
Covidien Ltd. .................................... (25,000) 20,000
Curtiss-Wright Corp. ............................. (20,000) 350,000
Dade Behring Holdings Inc. (n) ................... (200,000) --
Dana Corp. ....................................... (230,000) --
Dow Jones & Co. Inc. (o) ......................... (100,000) --
Energizer Holdings Inc. .......................... (2,000) 112,000
Enodis plc ....................................... (100,000) 300,000
Fedders Corp. .................................... (10,000) 50,000
Flowers Foods Inc. ............................... (15,000) 90,000
Flowserve Corp. .................................. (2,000) 108,000
Greif Inc., Cl. A ................................ (5,000) 210,000
Groupe Danone .................................... (12,000) 368,000
H.B. Fuller Co. .................................. (5,000) 45,000
Hospira Inc. ..................................... (12,000) 18,000
Idearc Inc. ...................................... (5,000) 4,000
Interactive Brokers Group Inc., Cl. A ............ (5,000) 20,000
Kellogg Co. ...................................... (12,000) 90,000
Kraft Foods Inc., Cl. A .......................... (15,000) 200,000
Ladbrokes plc .................................... (47,000) 1,247,116
Laidlaw International Inc. (p) ................... (50,000) --
Landesbank Berlin Holding AG ..................... (260,000) --
Lenox Group Inc. ................................. (10,000) 35,000
Liberty Media Corp. - Interactive, Cl. A ......... (55,131) 210,000
Lufkin Industries Inc. ........................... (1,000) 102,000
MasterCard Inc., Cl. A ........................... (47,500) 62,500
See accompanying notes to financial statements.
3
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES (CONTINUED)
QUARTER ENDED DECEMBER 31, 2007
(UNAUDITED)
OWNERSHIP AT
DECEMBER 31,
SHARES 2007
----------- ------------
NET SALES (CONTINUED)
COMMON STOCKS (CONTINUED)
McClatchy Co., Cl. A ............................. (11,000) 9,000
News Corp., Cl. A ................................ (30,000) 1,540,000
Nintendo Co. Ltd. ................................ (500) 2,000
Nortel Networks Corp. ............................ (15,000) 180,000
Novartis AG, ADR ................................. (3,000) 102,000
Nuveen Investments Inc., Cl. A (q) ............... (30,000) --
Oceaneering International Inc. ................... (1,000) 19,000
Park-Ohio Holdings Corp. ......................... (1,000) 100,000
PepsiAmericas Inc. ............................... (5,000) 535,000
PepsiCo Inc. ..................................... (35,000) 315,000
PetroChina Co. Ltd., ADR ......................... (700) 1,300
Precision Castparts Corp. ........................ (3,500) 96,500
Proliance International Inc. ..................... (20,000) 160,000
Publishing and Broadcasting Ltd. (c) ............. (100,000) --
Rank Group plc ................................... (650,000) 500,000
Reckitt Benckiser plc (g) ........................ (60,000) --
Rogers Communications Inc., Cl. B,
New York ...................................... (65,000) 500,690
Sequa Corp., Cl. A (r) ........................... (73,000) --
Sequa Corp., Cl. B (r) ........................... (84,600) --
Seven & I Holdings Co. Ltd. ...................... (39,800) --
Shizuoka Bank Ltd. ............................... (80,000) --
Telecom Italia SpA ............................... (20,000) 1,450,000
Telefonica SA, ADR ............................... (2,000) 228,000
Telefonos de Mexico SAB de CV, Cl. L, ADR ........ (2,000) 60,000
Telephone & Data Systems Inc., Special ........... (13,000) 355,000
The Fairchild Corp., Cl. A (s) ................... (60,000) 160,000
The Lamson & Sessions Co. (t) .................... (72,000) --
The Mosaic Co. ................................... (9,000) 21,000
The St. Joe Co. .................................. (5,000) 145,000
The Walt Disney Co. .............................. (10,000) 65,000
Thomas & Betts Corp. ............................. (5,000) 235,000
Tribune Co. (u) .................................. (19,030) --
TXU Corp. (v) .................................... (245,000) --
Vodafone Group plc, ADR .......................... (20,000) 50,000
Yahoo! Inc. ...................................... (20,000) 145,000
Young Broadcasting Inc., Cl. A ................... (10,000) 100,000
PRINCIPAL
AMOUNT
-----------
CONVERTIBLE CORPORATE BOND
Kaman Corp., Sub. Deb. Cv.,
6.000%, 3/15/12 ............................... $ (605,000) --
OWNERSHIP AT
NUMBER OF DECEMBER 31,
CONTRACTS 2007
----------- ------------
CALL OPTIONS WRITTEN
MasterCard Inc. 01/19/08 210.00 .................. (10) (10)
----------
(a) 2 for 1 stock split
(b) Bonus Issue - 1 Coca-Cola Hellenic Bottling Co. share for every 2 shares
held
(c) Spin-off - 3.00 AUD plus 1 share of Crown Ltd. for every 1 share of
Publishing and Broadcasting Ltd. held
(d) 3 for 1 stock split
(e) Spin-off - 0.01 share of Lighthouse Caledonia ASA for every 1 share of
Marine Harvest
(f) 3 for 2 stock split
(g) Merger - 1 new share of Reckitt Benckiser Group plc (B24CGK7) for every 1
Reckitt Benckiser plc share held (0727871)
(h) Spin-off - 40.4 new Rolls-Royce Group redeemable "B" shares for every 1
Rolls-Royce Group share held
(i) Spin-off - 1 Zep Inc. share for every 2 Acuity Brands Inc. held
(j) Tender Offer - $101.00 for every 1 share
(k) Cash Merger for $71.50 for every 1 share
(l) Cash Merger - For each share held, holders will receive $1,350 in cash
plus 0.031543 of a share of Commscope Inc.
(m) Cash Merger - $48.00 for every 1 share
(n) Tender Offer - $77.00 for every 1 share
(o) Cash Merger - $60.00 for every 1 share
(p) Cash Merger - 35.25 for every 1 share
(q) Cash Merger - $65.00 for every 1 share
(r) Cash Merger - $175.00 for every 1 share
(s) Tender Offer - $2.50 for every 1 share
(t) Cash Merger - $27.00 for every 1 share
(u) Cash Merger - $34.00 for every 1 share
(v) Cash Merger - $69.25 for every 1 share
See accompanying notes to financial statements.
4
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
MARKET
SHARES COST VALUE
------------ -------------- --------------
COMMON STOCKS -- 93.6%
FOOD AND BEVERAGE -- 12.4%
85,000 Ajinomoto Co. Inc. ............. $ 998,444 $ 967,059
40,000 Anheuser-Busch
Companies Inc. ............... 1,816,269 2,093,600
36,000 ARIAKE JAPAN Co. Ltd. .......... 857,851 646,108
24,000 Brown-Forman Corp., Cl. A ...... 1,586,639 1,796,160
110,000 Cadbury Schweppes plc .......... 1,136,502 1,359,782
180,000 Cadbury Schweppes plc, ADR ..... 7,782,937 8,886,600
80,000 Campbell Soup Co. .............. 2,204,647 2,858,400
32,000 Cermaq ASA ..................... 497,341 444,948
40,000 China Mengniu Dairy Co. Ltd. ... 127,345 146,716
20,000 Coca-Cola Enterprises Inc. ..... 376,515 520,600
57,000 Coca-Cola Hellenic
Bottling Co. SA .............. 492,259 2,466,775
90,000 Constellation Brands Inc.,
Cl. A+ ....................... 2,243,421 2,127,600
55,000 Corn Products International
Inc. ......................... 753,028 2,021,250
300,000 Davide Campari-Milano SpA ...... 3,133,137 2,872,933
40,000 Dean Foods Co. ................. 1,060,052 1,034,400
60,000 Del Monte Foods Co. ............ 564,374 567,600
80,000 Diageo plc ..................... 1,174,064 1,719,882
224,000 Diageo plc, ADR ................ 9,660,541 19,225,920
90,000 Flowers Foods Inc. ............. 658,030 2,106,900
99,000 Fomento Economico
Mexicano SAB de CV, ADR ...... 1,356,892 3,778,830
180,000 General Mills Inc. ............. 8,693,258 10,260,000
368,000 Groupe Danone .................. 18,296,500 33,035,367
1,000,000 Grupo Bimbo SAB de CV,
Cl. A ........................ 2,705,279 5,960,987
100,000 H.J. Heinz Co. ................. 3,532,093 4,668,000
20,000 Hain Celestial Group Inc.+ ..... 267,663 640,000
10,000 Heineken NV .................... 471,537 646,520
200,000 ITO EN Ltd. .................... 4,714,194 3,804,324
60,000 ITO EN Ltd., Preference ........ 1,329,645 857,718
90,000 Kellogg Co. .................... 3,240,772 4,718,700
75,000 Kerry Group plc, Cl. A ......... 860,877 2,405,804
200,000 Kraft Foods Inc., Cl. A ........ 6,312,501 6,526,000
8,075 Lighthouse Caledonia ASA+ ...... 8,498 7,674
12,100 LVMH Moet Hennessy
Louis Vuitton SA ............. 419,053 1,462,678
950,000 Marine Harvest+ ................ 841,255 610,606
10,000 Meiji Seika Kaisha Ltd. ........ 50,608 42,519
70,000 Morinaga Milk
Industry Co. Ltd. ............ 299,202 204,896
5,000 Nestle SA ...................... 1,622,846 2,296,515
300,000 Nissin Food Products Co. Ltd. .. 10,746,621 9,694,311
535,000 PepsiAmericas Inc. ............. 9,948,636 17,826,200
315,000 PepsiCo Inc. ................... 15,971,774 23,908,500
21,100 Pernod-Ricard SA ............... 4,348,745 4,877,275
68,200 Ralcorp Holdings Inc.+ ......... 1,308,415 4,145,878
26,000 Remy Cointreau SA .............. 1,673,518 1,853,912
300,000 Sara Lee Corp. ................. 4,862,162 4,818,000
100,000 Tesco plc ...................... 873,880 950,016
200,000 The Coca-Cola Co. .............. 8,929,956 12,274,000
70,000 The Hershey Co. ................ 2,941,476 2,758,000
2,000 The J.M. Smucker Co. ........... 52,993 102,880
118,820 Tootsie Roll Industries Inc. ... 1,562,913 3,258,045
170,000 Wm. Wrigley Jr. Co. ............ 8,244,515 9,953,500
42,500 Wm. Wrigley Jr. Co., Cl. B ..... 2,191,580 2,507,500
550,000 YAKULT HONSHA Co. Ltd. ......... 15,388,597 12,726,581
-------------- --------------
181,191,850 247,444,969
-------------- --------------
FINANCIAL SERVICES -- 8.8%
62,000 ABG Sundal Collier ASA ......... 161,674 143,871
2,800 Allianz SE ..................... 552,300 605,670
MARKET
SHARES COST VALUE
------------ -------------- --------------
575,000 American Express Co. ........... $ 27,278,920 $ 29,911,500
55,000 American International
Group Inc. ................... 3,594,346 3,206,500
8,000 Ameriprise Financial Inc. ...... 232,843 440,880
19,452 Argo Group International
Holdings Ltd.+ ............... 752,879 819,513
80,000 Aviva plc ...................... 979,664 1,071,741
158,600 AXA Asia Pacific
Holdings Ltd. ................ 948,512 1,027,727
90,000 Banco Santander SA, ADR ........ 322,130 1,938,600
143 Berkshire Hathaway Inc.,
Cl. A+ ....................... 422,488 20,248,800
7,500 Calamos Asset Management
Inc., Cl. A .................. 135,000 223,350
310,000 Citigroup Inc. ................. 15,214,989 9,126,400
155,000 Commerzbank AG, ADR ............ 3,145,338 5,967,500
148,000 Deutsche Bank AG ............... 12,989,137 19,152,680
12,000 Fortress Investment Group
LLC, Cl. A ................... 209,000 186,960
20,000 H&R Block Inc. ................. 329,930 371,400
20,000 Interactive Brokers Group Inc.,
Cl. A+ ....................... 577,120 646,400
180,000 Janus Capital Group Inc. ....... 3,245,221 5,913,000
52,000 JPMorgan Chase & Co. ........... 1,327,407 2,269,800
50,000 Legg Mason Inc. ................ 4,518,064 3,657,500
133,000 Leucadia National Corp. ........ 1,662,878 6,264,300
265,000 Marsh & McLennan
Companies Inc. ............... 8,158,378 7,014,550
65,000 Moody's Corp. .................. 3,285,357 2,320,500
2,000 Och-Ziff Capital
Management Group LLC,
Cl. A+ ....................... 50,280 52,560
2,500 Prudential Financial Inc. ...... 68,750 232,600
25,000 Schroders plc .................. 685,677 647,942
55,000 Standard Chartered plc ......... 1,194,311 2,018,871
80,000 State Street Corp. ............. 4,001,480 6,496,000
20,000 SunTrust Banks Inc. ............ 419,333 1,249,800
150,000 T. Rowe Price Group Inc. ....... 4,610,820 9,132,000
5,000 The Allstate Corp. ............. 209,064 261,150
146,038 The Bank of New York
Mellon Corp. ................. 5,010,363 7,120,813
18,000 The Bear Stearns
Companies Inc. ............... 1,733,676 1,588,500
5,000 The Blackstone Group LP ........ 111,313 110,650
44,500 The Charles Schwab Corp. ....... 650,256 1,136,975
18,000 The Dun & Bradstreet Corp. ..... 395,898 1,595,340
188,000 The Midland Co. ................ 1,382,000 12,161,720
135,000 The Phoenix Companies Inc. ..... 1,924,073 1,602,450
3,000 The Travelers Companies Inc. ... 113,277 161,400
25,000 UBS AG ......................... 1,221,606 1,157,090
150,000 UniCredito Italiano SpA ........ 1,168,460 1,245,669
100,000 Waddell & Reed
Financial Inc., Cl. A ........ 2,058,579 3,609,000
50,000 Westpac Banking Corp. .......... 831,415 1,225,755
-------------- --------------
117,884,206 175,335,427
-------------- --------------
ENERGY AND UTILITIES -- 7.4%
5,000 AGL Resources Inc. ............. 88,898 188,200
68,000 Allegheny Energy Inc. .......... 1,081,525 4,325,480
70,000 Apache Corp. ................... 2,728,670 7,527,800
800,000 Aquila Inc.+ ................... 3,203,330 2,984,000
90,000 BP plc ......................... 1,111,926 1,101,799
247,000 BP plc, ADR .................... 15,155,797 18,072,990
105,000 CH Energy Group Inc. ........... 4,342,243 4,676,700
770,000 China Petroleum &
Chemical Corp., Cl. H ........ 798,444 1,163,285
See accompanying notes to financial statements.
5
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2007
SHARES/ MARKET
UNITS COST VALUE
------------ -------------- --------------
COMMON STOCKS (CONTINUED)
ENERGY AND UTILITIES (CONTINUED)
70,000 CMS Energy Corp. ............... $ 448,516 $ 1,216,600
315,000 ConocoPhillips ................. 19,291,860 27,814,500
8,000 Constellation Energy Group
Inc. ......................... 449,608 820,240
60,000 DPL Inc. ....................... 1,411,620 1,779,000
14,000 DTE Energy Co. ................. 619,460 615,440
230,000 Duke Energy Corp. .............. 4,162,775 4,639,100
270,000 El Paso Corp. .................. 3,253,601 4,654,800
280,000 El Paso Electric Co.+ .......... 4,523,624 7,159,600
50,000 Energy East Corp. .............. 1,065,733 1,360,500
80,000 Exxon Mobil Corp. .............. 2,750,108 7,495,200
24,600 FPL Group Inc. ................. 927,050 1,667,388
210,000 Halliburton Co. ................ 3,809,429 7,961,100
32,000 Imperial Oil Ltd. .............. 1,248,749 1,770,951
20,000 Marathon Oil Corp. ............. 242,414 1,217,200
10,000 Mirant Corp.+ .................. 192,014 389,800
140,000 Mirant Corp., Escrow+ (a) ...... 0 0
2,000 Niko Resources Ltd., New York .. 110,842 173,058
1,000 Niko Resources Ltd., Toronto ... 55,421 90,430
10,000 NiSource Inc. .................. 215,500 188,900
240,000 Northeast Utilities ............ 4,631,542 7,514,400
19,000 Oceaneering International
Inc.+ ........................ 512,207 1,279,650
1,300 PetroChina Co. Ltd., ADR ....... 94,298 228,111
27,000 Petroleo Brasileiro SA, ADR .... 949,398 3,111,480
100,000 Progress Energy Inc., CVO+
(a) .......................... 52,000 33,000
205,000 Rowan Companies Inc. ........... 7,715,498 8,089,300
65,000 Saipem SpA ..................... 1,284,362 2,606,766
5,000 SJW Corp. ...................... 68,704 173,350
20,000 Southwest Gas Corp. ............ 451,132 595,400
120,000 Spectra Energy Corp. ........... 3,113,666 3,098,400
60,000 The AES Corp.+ ................. 342,618 1,283,400
24,128 Total SA ....................... 1,468,664 2,004,758
270,000 Westar Energy Inc. ............. 4,552,840 7,003,800
-------------- --------------
98,526,086 148,075,876
-------------- --------------
DIVERSIFIED INDUSTRIAL -- 6.3%
9,000 Acuity Brands Inc. ............. 229,522 405,000
163,000 Ampco-Pittsburgh Corp. ......... 2,139,891 6,215,190
155,000 Baldor Electric Co. ............ 5,270,000 5,217,300
24,000 Bayer AG ....................... 1,009,688 2,194,131
25,000 Bouygues SA .................... 1,244,323 2,083,425
245,000 Cooper Industries Ltd., Cl. A .. 6,743,377 12,955,600
260,000 Crane Co. ...................... 5,942,015 11,154,000
77,500 CRH plc ........................ 1,027,655 2,702,421
300,000 Enodis plc ..................... 1,055,127 955,490
150,000 General Electric Co. ........... 5,455,245 5,560,500
210,000 Greif Inc., Cl. A .............. 2,495,862 13,727,700
18,000 Greif Inc., Cl. B .............. 559,808 1,101,420
450,000 Honeywell International Inc. ... 15,285,048 27,706,500
253,000 ITT Corp. ...................... 6,660,852 16,708,120
100,000 Park-Ohio Holdings Corp.+ ...... 1,062,045 2,510,000
1,000 Pentair Inc. ................... 31,908 34,810
2,000 Sulzer AG ...................... 425,026 2,941,306
30,000 Technip SA ..................... 2,101,417 2,390,456
75,000 Trinity Industries Inc. ........ 945,000 2,082,000
200,000 Tyco International Ltd. ........ 9,828,342 7,930,000
-------------- --------------
69,512,151 126,575,369
-------------- --------------
TELECOMMUNICATIONS -- 6.0%
85,000 BCE Inc. ....................... 3,175,379 3,377,900
1,000 Bell Aliant Regional
Communications
Income Fund .................. 28,950 29,819
16,000 Bell Aliant Regional
Communications
Income Fund (a)(b) ........... 510,683 470,880
MARKET
SHARES COST VALUE
------------ -------------- --------------
30,000 Brasil Telecom
Participacoes SA, ADR ........ $ 1,743,257 $ 2,237,400
1,700,000 BT Group plc ................... 7,029,679 9,229,933
4,440,836 Cable & Wireless
Jamaica Ltd.+ (c) ............ 101,639 41,862
900,000 Cincinnati Bell Inc.+ .......... 6,181,154 4,275,000
90,000 Citizens Communications Co. .... 1,320,038 1,145,700
110,000 Compania de
Telecomunicaciones de
Chile SA, ADR ................ 1,634,847 820,600
168,000 Deutsche Telekom AG, ADR ....... 2,793,519 3,640,560
5,000 France Telecom SA, ADR ......... 146,305 178,150
100,000 Koninklijke KPN NV ............. 232,728 1,818,793
15,000 Orascom Telecom
Holding SAE .................. 1,052,562 1,242,149
540,000 Qwest Communications
International Inc.+ .......... 1,920,386 3,785,400
550,000 Sprint Nextel Corp. ............ 15,436,707 7,221,500
186,554 Tele Norte Leste Participacoes
SA, ADR ...................... 2,477,755 3,596,761
60,000 Tele2 AB, Cl. B ................ 1,005,048 1,202,191
48,000 Telecom Argentina SA, ADR+ ..... 369,540 1,068,000
1,450,000 Telecom Italia SpA ............. 5,931,589 4,504,949
228,000 Telefonica SA, ADR ............. 11,421,179 22,250,520
60,000 Telefonos de Mexico SAB de
CV, Cl. L, ADR ............... 456,800 2,210,400
254,000 Telephone & Data Systems Inc. .. 11,795,137 15,900,400
355,000 Telephone & Data Systems Inc.,
Special ...................... 15,604,660 20,448,000
15,000 TELUS Corp. .................... 280,203 751,406
180,000 Verizon Communications Inc. .... 6,606,128 7,864,200
5,169 Windstream Corp. ............... 19,996 67,300
-------------- --------------
99,275,868 119,379,773
-------------- --------------
CONSUMER PRODUCTS -- 5.0%
20,000 Altadis SA ..................... 1,319,142 1,453,573
84,000 Avon Products Inc. ............. 2,420,145 3,320,520
42,000 Christian Dior SA .............. 3,082,702 5,520,418
15,000 Church & Dwight Co. Inc. ....... 99,536 811,050
30,000 Clorox Co. ..................... 1,664,986 1,955,100
69,000 Compagnie Financiere
Richemont SA, Cl. A .......... 2,879,288 4,735,503
112,000 Energizer Holdings Inc.+ ....... 4,856,276 12,558,560
60,000 Fortune Brands Inc. ............ 4,147,453 4,341,600
2,000 Givaudan SA .................... 550,742 1,927,306
60,000 Hanesbrands Inc.+ .............. 1,376,148 1,630,200
32,000 Harley-Davidson Inc. ........... 1,486,605 1,494,720
175 Japan Tobacco Inc. ............. 1,011,474 1,046,413
2,000 Jarden Corp.+ .................. 65,069 47,220
35,000 Lenox Group Inc.+ .............. 276,594 92,400
15,000 Matsushita Electric
Industrial Co. Ltd., ADR ..... 178,325 306,600
15,000 Mattel Inc. .................... 270,000 285,600
21,000 National Presto Industries
Inc. ......................... 711,533 1,105,860
2,000 Nintendo Co. Ltd. .............. 620,613 1,197,691
10,000 Oil-Dri Corp. of America ....... 171,255 219,400
112,000 Pactiv Corp.+ .................. 1,176,060 2,982,560
300,000 Procter & Gamble Co. ........... 15,983,165 22,026,000
60,000 Reckitt Benckiser Group plc .... 1,849,650 3,480,372
30,000 Svenska Cellulosa
Aktiebolaget, Cl. B .......... 423,932 531,470
1,000,000 Swedish Match AB ............... 11,131,012 23,904,567
37,500 The Swatch Group AG ............ 2,105,126 2,214,260
-------------- --------------
59,856,831 99,188,963
-------------- --------------
See accompanying notes to financial statements.
6
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2007
MARKET
SHARES COST VALUE
------------ ----------- -------------
COMMON STOCKS (CONTINUED)
CABLE AND SATELLITE -- 4.7%
1,550,000 Cablevision Systems Corp.,
Cl. A+ ........................ $33,168,055 $ 37,975,000
65,000 Comcast Corp., Cl. A+ ............ 1,351,448 1,186,900
127,500 Comcast Corp., Cl. A, Special+ ... 756,584 2,310,300
133,700 EchoStar Communications
Corp., Cl. A+ ................. 4,674,679 5,043,164
156,770 Liberty Global Inc., Cl. A+ ...... 2,194,421 6,143,816
139,001 Liberty Global Inc., Cl. C+ ...... 2,941,276 5,086,047
500,690 Rogers Communications Inc.,
Cl. B, New York ............... 4,303,427 22,656,223
19,310 Rogers Communications Inc.,
Cl. B, Toronto ................ 137,424 880,244
160,000 Shaw Communications Inc.,
Cl. B, New York ............... 329,198 3,788,800
40,000 Shaw Communications Inc.,
Cl. B, Toronto ................ 52,983 958,103
300,000 The DIRECTV Group Inc.+ .......... 7,432,828 6,936,000
----------- -------------
57,342,323 92,964,597
----------- -------------
ENTERTAINMENT -- 4.3%
100,000 Aruze Corp. ...................... 3,267,519 3,795,372
32,000 Canal+ Groupe .................... 34,011 385,514
2,002 Chestnut Hill Ventures+ (a) ...... 54,500 56,356
269,000 Discovery Holding Co., Cl. A+ .... 4,351,029 6,762,660
3,000 DreamWorks Animation
SKG Inc., Cl. A+ .............. 68,959 76,620
79,500 EMI Group plc, ADR ............... 941,481 802,950
600,603 Gemstar-TV Guide
International Inc.+ ........... 2,825,471 2,858,870
700,000 Grupo Televisa SA, ADR ........... 8,108,414 16,639,000
125 Live Nation Inc.+ ................ 1,296 1,815
43,000 Pinnacle Entertainment Inc.+ ..... 1,292,282 1,013,080
500,000 Rank Group plc ................... 3,522,717 908,213
12,000 Regal Entertainment Group,
Cl. A ......................... 165,788 216,840
75,000 Six Flags Inc.+ .................. 360,725 152,250
65,000 The Walt Disney Co. .............. 1,213,881 2,098,200
810,000 Time Warner Inc. ................. 17,932,501 13,373,100
100,000 Tokyo Broadcasting
System Inc. ................... 3,186,796 2,148,324
20,200 Triple Crown Media Inc.+ ......... 217,899 95,546
370,000 Viacom Inc., Cl. A+ .............. 17,788,126 16,272,600
383,900 Vivendi .......................... 11,406,999 17,613,027
----------- -------------
76,740,394 85,270,337
----------- -------------
HEALTH CARE -- 4.0%
8,000 Abbott Laboratories .............. 313,458 449,200
130,000 Advanced Medical Optics Inc.+ .... 4,241,837 3,188,900
14,046 Allergan Inc. .................... 655,380 902,315
7,000 Alpharma Inc., Cl. A+ ............ 182,379 141,050
52,000 Amgen Inc.+ ...................... 3,039,863 2,414,880
19,146 AstraZeneca plc .................. 949,527 820,560
35,000 Biogen Idec Inc.+ ................ 806,669 1,992,200
160,000 Boston Scientific Corp.+ ......... 2,248,654 1,860,800
135,000 Bristol-Myers Squibb Co. ......... 3,485,673 3,580,200
12,000 Cochlear Ltd. .................... 530,192 789,190
20,000 Covidien Ltd. .................... 876,365 885,800
45,036 GlaxoSmithKline plc .............. 1,292,245 1,146,609
4,000 GlaxoSmithKline plc, ADR ......... 216,096 201,560
5,000 Greatbatch Inc.+ ................. 94,920 99,950
30,000 Henry Schein Inc.+ ............... 764,324 1,842,000
18,000 Hospira Inc.+ .................... 635,417 767,520
40,000 Invitrogen Corp.+ ................ 2,065,234 3,736,400
40,000 Johnson & Johnson ................ 2,574,978 2,668,000
MARKET
SHARES COST VALUE
------------ ----------- -------------
95,000 Merck & Co. Inc. ................. $ 3,625,481 $ 5,520,450
2,000 Nobel Biocare Holding AG ......... 286,712 535,265
39,000 Novartis AG ...................... 2,076,654 2,139,204
102,000 Novartis AG, ADR ................. 4,514,518 5,539,620
430,000 Pfizer Inc. ...................... 11,887,587 9,773,900
16,400 Roche Holding AG ................. 2,587,332 2,833,405
10,000 Sanofi-Aventis ................... 896,390 920,801
100,000 Schering-Plough Corp. ............ 1,917,839 2,664,000
80,000 Smith & Nephew plc ............... 752,722 923,640
50,000 SSL International plc ............ 439,178 532,487
5,250 Straumann Holding AG ............. 1,087,318 1,447,964
12,500 Synthes Inc. ..................... 1,494,687 1,552,356
19,000 Takeda Pharmaceutical Co. Ltd. ... 909,016 1,117,397
90,000 UnitedHealth Group Inc. .......... 4,714,036 5,238,000
82,000 William Demant Holding A/S+ ...... 3,730,842 7,605,023
100,000 Wyeth ............................ 4,105,470 4,419,000
3,500 Zimmer Holdings Inc.+ ............ 217,154 231,525
----------- -------------
70,216,147 80,481,171
----------- -------------
PUBLISHING -- 4.0%
4,000 Idearc Inc. ...................... 127,171 70,240
1,967,000 Il Sole 24 Ore+ .................. 16,579,082 16,378,006
348,266 Independent News & Media plc ..... 663,968 1,206,255
9,000 McClatchy Co., Cl. A ............. 139,243 112,680
320,000 Media General Inc., Cl. A ........ 19,151,873 6,800,000
122,000 Meredith Corp. ................... 5,066,964 6,707,560
1,540,000 News Corp., Cl. A ................ 20,271,595 31,554,600
20,000 News Corp., Cl. B ................ 186,274 425,000
63,666 PRIMEDIA Inc. .................... 1,665,443 541,161
261,319 SCMP Group Ltd. .................. 191,790 91,157
66,585 Seat Pagine Gialle SpA ........... 177,139 26,333
160,000 The E.W. Scripps Co., Cl. A ...... 5,529,357 7,201,600
182,000 The McGraw-Hill
Companies Inc. ................ 7,122,447 7,973,420
55,000 The New York Times Co.,
Cl. A ......................... 2,056,884 964,150
----------- -------------
78,929,230 80,052,162
----------- -------------
EQUIPMENT AND SUPPLIES -- 3.5%
265,000 AMETEK Inc. ...................... 4,455,847 12,412,600
4,000 Amphenol Corp., Cl. A ............ 14,775 185,480
50,000 Assa Abloy AB, Cl. B ............. 948,665 1,003,760
94,000 CIRCOR International Inc. ........ 974,241 4,357,840
194,900 Donaldson Co. Inc. ............... 2,987,955 9,039,462
50,000 Fedders Corp.+ ................... 71,252 100
108,000 Flowserve Corp. .................. 2,038,980 10,389,600
23,000 Franklin Electric Co. Inc. ....... 250,434 880,210
90,000 Gerber Scientific Inc.+ .......... 988,544 972,000
75,000 GrafTech International Ltd.+ ..... 785,966 1,331,250
315,000 IDEX Corp. ....................... 7,537,793 11,380,950
40,000 Ingersoll-Rand Co. Ltd., Cl. A ... 855,378 1,858,800
102,000 Lufkin Industries Inc. ........... 990,973 5,843,580
11,000 Mueller Industries Inc. .......... 485,034 318,890
2,000 Sealed Air Corp. ................. 17,404 46,280
70,000 Tenaris SA, ADR .................. 3,280,656 3,131,100
4,000 The Manitowoc Co. Inc. ........... 25,450 195,320
100,000 The Weir Group plc ............... 420,789 1,611,394
190,000 Watts Water Technologies Inc.,
Cl. A ......................... 2,957,983 5,662,000
----------- -------------
30,088,119 70,620,616
----------- -------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.2%
2,000 BERU AG .......................... 210,290 219,600
86,000 BorgWarner Inc. .................. 1,126,424 4,163,260
182,000 CLARCOR Inc. ..................... 1,488,463 6,910,540
82,500 Earl Scheib Inc.+ ................ 644,854 288,750
See accompanying notes to financial statements.
7
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2007
MARKET
SHARES COST VALUE
------------ ----------- -------------
COMMON STOCKS (CONTINUED)
AUTOMOTIVE: PARTS AND ACCESSORIES (CONTINUED)
340,000 Genuine Parts Co. ................ $12,607,736 $ 15,742,000
205,000 Johnson Controls Inc. ............ 4,204,912 7,388,200
130,000 Midas Inc.+ ...................... 1,805,604 1,905,800
317,500 Modine Manufacturing Co. ......... 8,027,340 5,241,925
160,000 Proliance International Inc.+ .... 1,186,898 288,000
175,000 Standard Motor Products Inc. ..... 1,873,526 1,428,000
35,000 Superior Industries
International Inc. ............ 822,800 635,950
----------- -------------
33,998,847 44,212,025
----------- -------------
MACHINERY -- 2.1%
20,000 Caterpillar Inc. ................. 136,559 1,451,200
425,000 Deere & Co. ...................... 12,378,317 39,576,000
8,000 SMC Corp. ........................ 1,033,311 953,856
----------- -------------
13,548,187 41,981,056
----------- -------------
HOTELS AND GAMING -- 2.0%
1,200 Accor SA ......................... 103,072 95,969
100,000 Crown Ltd.+ ...................... 1,315,021 1,180,975
190,000 Gaylord Entertainment Co.+ ....... 5,061,983 7,689,300
70,000 Harrah's Entertainment Inc. ...... 5,476,681 6,212,500
20,000 Home Inns & Hotels
Management Inc., ADR+ ......... 583,434 712,800
46,160 InterContinental Hotels
Group plc ..................... 1,184,541 812,275
1,247,116 Ladbrokes plc .................... 13,435,929 8,024,727
6,000 Las Vegas Sands Corp.+ ........... 221,279 618,300
3,761,000 Mandarin Oriental
International Ltd. ............ 7,080,930 8,875,960
30,000 MGM Mirage+ ...................... 2,101,995 2,520,600
16,000 Orient-Express Hotels Ltd.,
Cl. A ......................... 715,224 920,320
34,000 Starwood Hotels & Resorts
Worldwide Inc. ................ 520,597 1,497,020
----------- -------------
37,800,686 39,160,746
----------- -------------
BROADCASTING -- 2.0%
95,000 British Sky Broadcasting
Group plc ..................... 1,094,350 1,170,575
433,000 CBS Corp., Cl. A ................. 13,810,173 11,582,750
10,143 Citadel Broadcasting Corp. ....... 25,305 20,895
300,000 Clear Channel
Communications Inc. ........... 10,866,062 10,356,000
2,000 Cogeco Inc. ...................... 39,014 80,045
12,667 Corus Entertainment Inc.,
Cl. B, New York ............... 46,981 621,823
3,333 Corus Entertainment Inc.,
Cl. B, Toronto ................ 12,406 163,180
120,000 Gray Television Inc. ............. 1,060,168 962,400
27,000 Gray Television Inc., Cl. A ...... 317,211 229,500
77,000 Liberty Media Corp. - Capital,
Cl. A+ ........................ 6,188,638 8,969,730
85,000 Lin TV Corp., Cl. A+ ............. 1,185,597 1,034,450
120,000 Mediaset SpA ..................... 1,288,354 1,211,457
29,000 Modern Times Group MTG
AB, Cl. B ..................... 1,754,858 2,041,558
100,000 Television Broadcasts Ltd. ....... 396,239 600,841
100,000 Young Broadcasting Inc.,
Cl. A+ ........................ 758,541 105,000
----------- -------------
38,843,897 39,150,204
----------- -------------
AVIATION: PARTS AND SERVICES -- 1.7%
350,000 Curtiss-Wright Corp. ............. 4,965,900 17,570,000
200,000 GenCorp Inc.+ .................... 2,572,011 2,332,000
MARKET
SHARES COST VALUE
------------ ----------- -------------
96,500 Precision Castparts Corp. ........ $ 4,962,391 $ 13,384,550
160,000 The Fairchild Corp., Cl. A+ ...... 543,870 416,000
----------- -------------
13,044,172 33,702,550
----------- -------------
SPECIALTY CHEMICALS -- 1.5%
41,000 Ashland Inc. ..................... 2,587,129 1,944,630
5,400 Ciba Specialty Chemicals AG,
ADR ........................... 4,285 123,930
25,000 E.I. du Pont de
Nemours and Co. ............... 1,023,604 1,102,250
350,000 Ferro Corp. ...................... 7,353,490 7,255,500
4,000 FMC Corp. ........................ 136,430 218,200
45,000 H.B. Fuller Co. .................. 620,163 1,010,250
175,000 Hercules Inc. .................... 2,087,983 3,386,250
70,000 International Flavors &
Fragrances Inc. ............... 3,296,486 3,369,100
230,000 Omnova Solutions Inc.+ ........... 1,861,571 1,014,300
275,000 Sensient Technologies Corp. ...... 5,034,936 7,777,000
15,000 Syngenta AG, ADR ................. 189,981 759,900
165,000 Tokai Carbon Co. Ltd. ............ 677,815 1,484,358
4,032 Tronox Inc., Cl. B ............... 44,467 34,877
100,000 Zep Inc.+ ........................ 1,293,508 1,387,000
----------- -------------
26,211,848 30,867,545
----------- -------------
CONSUMER SERVICES -- 1.5%
200,000 IAC/InterActiveCorp+ ............. 5,436,750 5,384,000
210,000 Liberty Media Corp. -
Interactive, Cl. A+ ........... 4,593,199 4,006,800
1,110,000 Rollins Inc. ..................... 11,375,362 21,312,000
----------- -------------
21,405,311 30,702,800
----------- -------------
AEROSPACE -- 1.5%
105,000 Boeing Co. ....................... 6,475,976 9,183,300
25,899 Kaman Corp. ...................... 586,549 953,342
10,000 Lockheed Martin Corp. ............ 585,900 1,052,600
80,000 Northrop Grumman Corp. ........... 4,444,416 6,291,200
1,200,000 Rolls-Royce Group plc+ ........... 9,166,092 13,042,437
48,480,000 Rolls-Royce Group plc, Cl. B ..... 99,080 106,155
----------- -------------
21,358,013 30,629,034
----------- -------------
BUSINESS SERVICES -- 1.5%
7,050 ACCO Brands Corp.+ ............... 126,069 113,082
14,000 Avis Budget Group Inc.+ .......... 265,087 182,000
30,500 Canon Inc. ....................... 1,330,244 1,419,684
30,000 ChoicePoint Inc.+ ................ 1,172,411 1,092,600
101,300 Clear Channel Outdoor
Holdings Inc., Cl. A+ ......... 2,060,686 2,801,958
186,554 Contax Participacoes SA, ADR ..... 76,632 242,520
200,000 G4S plc .......................... 0 974,401
40,000 Interpublic Group of
Companies Inc.+ ............... 398,247 324,400
57,000 Jardine Matheson
Holdings Ltd. ................. 1,401,441 1,578,900
94,000 Landauer Inc. .................... 2,511,653 4,873,900
62,500 MasterCard Inc., Cl. A ........... 2,521,875 13,450,000
72,500 Nashua Corp.+ .................... 656,628 842,450
25,000 Secom Co. Ltd. ................... 1,095,891 1,367,319
----------- -------------
13,616,864 29,263,214
----------- -------------
AGRICULTURE -- 1.4%
490,000 Archer-Daniels-Midland Co. ....... 10,962,208 22,750,700
30,000 Monsanto Co. ..................... 1,342,682 3,350,700
21,000 The Mosaic Co.+ .................. 365,902 1,981,140
----------- -------------
12,670,792 28,082,540
----------- -------------
See accompanying notes to financial statements.
8
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2007
MARKET
SHARES COST VALUE
------------ ------------ --------------
COMMON STOCKS (CONTINUED)
COMMUNICATIONS EQUIPMENT -- 1.4%
1 CommScope Inc.+ ................ $ 21 $ 21
480,000 Corning Inc. ................... 4,124,295 11,515,200
90,000 Motorola Inc. .................. 1,024,871 1,443,600
180,000 Nortel Networks Corp.+ ......... 4,620,539 2,716,200
235,000 Thomas & Betts Corp.+ .......... 7,911,594 11,524,400
------------ --------------
17,681,320 27,199,421
------------ --------------
METALS AND MINING -- 1.2%
22,000 Alcoa Inc. ..................... 811,737 804,100
30,030 Anglo American plc ............. 1,187,718 1,841,157
89,148 Barrick Gold Corp. ............. 2,610,253 3,748,673
280,000 Consolidated Minerals Ltd. (c).. 498,024 1,229,267
52,500 Harmony Gold
Mining Co. Ltd.+ ............ 256,625 541,258
35,000 Harmony Gold
Mining Co. Ltd., ADR+ ....... 460,008 360,850
75,000 Ivanhoe Mines Ltd.+ ............ 560,208 804,750
52,000 New Hope Corp. Ltd. ............ 70,252 105,015
155,000 Newmont Mining Corp. ........... 4,747,145 7,568,650
23,000 Rio Tinto plc .................. 1,324,709 2,434,330
69,666 Xstrata plc .................... 1,525,449 4,923,048
------------ --------------
14,052,128 24,361,098
------------ --------------
WIRELESS COMMUNICATIONS -- 1.2%
96,000 America Movil SAB de CV,
Cl. L, ADR .................. 1,344,667 5,893,440
65,000 China Mobile Ltd. .............. 796,681 1,149,550
14,000 Clearwire Corp., Cl. A+ ........ 250,896 191,940
2,000 NTT DoCoMo Inc. ................ 4,368,481 3,329,902
3,340 Tele Norte Celular
Participacoes SA, ADR+ ...... 51,601 48,430
8,350 Telemig Celular
Participacoes SA, ADR ....... 241,320 468,853
32,165 Tim Participacoes SA, ADR ...... 390,212 1,124,167
100,000 United States Cellular Corp.+ .. 4,333,517 8,410,000
270 Vivo Participacoes SA+ ......... 941 2,055
174,122 Vivo Participacoes SA, ADR ..... 2,370,462 952,447
5,845 Vivo Participacoes SA,
Preference .................. 89,788 30,900
50,000 Vodafone Group plc, ADR ........ 1,359,194 1,866,000
------------ --------------
15,597,760 23,467,684
------------ --------------
ELECTRONICS -- 1.1%
5,000 Advanced Micro Devices Inc.+ ... 52,100 37,500
12,800 Bel Fuse Inc., Cl. A ........... 432,124 441,472
13,000 Fanuc Ltd. ..................... 1,320,883 1,266,079
5,000 Hitachi Ltd., ADR .............. 347,376 365,700
180,000 Intel Corp. .................... 3,637,892 4,798,800
4,920 Keyence Corp. .................. 941,170 1,214,200
80,000 LSI Corp.+ ..................... 474,386 424,800
20,000 Molex Inc., Cl. A .............. 519,697 525,400
7,500 NEC Corp., ADR ................. 43,625 33,750
38,000 Royal Philips Electronics NV ... 52,354 1,624,500
265,000 Texas Instruments Inc. ......... 6,407,535 8,851,000
62,000 Tyco Electronics Ltd. .......... 2,392,821 2,302,060
------------ --------------
16,621,963 21,885,261
------------ --------------
RETAIL -- 1.1%
100,000 AutoNation Inc.+ ............... 1,156,202 1,566,000
4,000 AutoZone Inc.+ ................. 351,780 479,640
40,000 Coldwater Creek Inc.+ .......... 157,162 267,600
40,000 Costco Wholesale Corp. ......... 1,868,913 2,790,400
70,000 CVS Caremark Corp. ............. 2,688,863 2,782,500
10,108 Denny's Corp.+ ................. 14,358 37,905
MARKET
SHARES COST VALUE
------------ ------------ --------------
21,500 Hennes & Mauritz AB, Cl. B ..... $ 919,237 $ 1,308,988
40,000 Macy's Inc. .................... 1,158,410 1,034,800
27,000 Next plc ....................... 730,115 872,840
50,000 Sally Beauty Holdings Inc.+ .... 416,928 452,500
20,000 SUPERVALU Inc. ................. 595,000 750,400
115,000 The Great Atlantic &
Pacific Tea Co. Inc.+ ....... 3,570,394 3,602,950
15,000 Wal-Mart Stores Inc. ........... 672,473 712,950
50,000 Walgreen Co. ................... 1,956,458 1,904,000
10,000 Whole Foods Market Inc. ........ 447,694 408,000
73,000 Woolworths Ltd. ................ 1,058,044 2,178,674
------------ --------------
17,762,031 21,150,147
------------ --------------
ENVIRONMENTAL SERVICES -- 1.0%
97,500 Republic Services Inc. ......... 875,761 3,056,625
500,000 Waste Management Inc. .......... 12,972,509 16,335,000
------------ --------------
13,848,270 19,391,625
------------ --------------
AUTOMOTIVE -- 0.7%
100,000 General Motors Corp. ........... 3,447,486 2,489,000
125,000 Navistar International Corp.+ .. 3,272,936 6,775,000
96,750 PACCAR Inc. .................... 431,444 5,270,940
------------ --------------
7,151,866 14,534,940
------------ --------------
COMPUTER SOFTWARE AND SERVICES -- 0.6%
8,000 Alibaba.com Ltd.+ .............. 13,935 28,368
10,000 Check Point Software
Technologies Ltd.+ .......... 169,874 219,600
100,000 Cognos Inc.+ ................... 5,722,580 5,757,000
24,100 Square Enix Co. Ltd. ........... 648,849 737,788
25,256 Telecom Italia Media SpA+ ...... 26,868 8,770
145,000 Yahoo! Inc.+ ................... 4,494,108 3,372,700
2,000 Yahoo! Japan Corp. ............. 754,815 895,135
------------ --------------
11,831,029 11,019,361
------------ --------------
REAL ESTATE -- 0.5%
70,000 Cheung Kong (Holdings) Ltd. .... 815,521 1,294,534
55,500 Griffin Land & Nurseries Inc.... 529,368 2,025,750
140,000 Guangzhou R&F Properties
Co. Ltd., Cl. H ............. 646,007 499,141
145,000 The St. Joe Co. ................ 8,275,384 5,148,950
------------ --------------
10,266,280 8,968,375
------------ --------------
TRANSPORTATION -- 0.4%
100,000 AMR Corp.+ ..................... 1,924,248 1,403,000
165,000 GATX Corp. ..................... 4,548,661 6,052,200
15,000 Grupo TMM SA, Cl. A, ADR+ ...... 80,459 33,750
70,000 Toll Holdings Ltd. ............. 747,841 703,755
------------ --------------
7,301,209 8,192,705
------------ --------------
CLOSED-END FUNDS -- 0.4%
31,500 Royce Value Trust Inc. ......... 388,297 585,270
104,000 The Central Europe and
Russia Fund Inc. ............ 2,391,965 6,034,080
70,000 The New Germany Fund Inc. ...... 754,518 1,223,600
------------ --------------
3,534,780 7,842,950
------------ --------------
MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 0.1%
70,000 Champion Enterprises Inc.+ ..... 659,503 659,400
50,000 Fleetwood Enterprises Inc.+ .... 535,046 299,000
31,000 Huttig Building Products
Inc.+ ....................... 78,168 108,190
7,000 Martin Marietta
Materials Inc. .............. 144,225 928,200
10,000 Nobility Homes Inc. ............ 195,123 182,500
20,000 Skyline Corp. .................. 794,437 587,000
------------ --------------
2,406,502 2,764,290
------------ --------------
See accompanying notes to financial statements.
9
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2007
MARKET
SHARES COST VALUE
------------ -------------- --------------
COMMON STOCKS (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS -- 0.1%
2,000 Camden Property Trust ........ $ 37,490 $ 96,300
2,187 Prosperity REIT .............. 616 432
24,984 Rayonier Inc. ................ 798,811 1,180,244
-------------- --------------
836,917 1,276,976
-------------- --------------
TOTAL COMMON
STOCKS .................... 1,310,953,871 1,865,195,807
-------------- --------------
CONVERTIBLE PREFERRED STOCKS -- 0.1%
AEROSPACE -- 0.1%
13,500 Northrop Grumman Corp.,
7.000% Cv. Pfd., Ser. B ... 1,573,020 1,966,275
-------------- --------------
TELECOMMUNICATIONS -- 0.0%
25,000 Cincinnati Bell Inc.,
6.750% Cv. Pfd., Ser. B ... 787,113 1,042,500
-------------- --------------
TOTAL CONVERTIBLE
PREFERRED STOCKS .......... 2,360,133 3,008,775
-------------- --------------
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 3,210,000
-------------- --------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.0%
1,000,000 Standard Motor Products Inc.,
Sub. Deb. Cv.,
6.750%, 07/15/09 .......... 979,877 957,500
-------------- --------------
CONSUMER PRODUCTS -- 0.0%
1,000,000 Pillowtex Corp., Sub. Deb. Cv.,
9.000%, 12/15/17 (a) ...... 0 0
-------------- --------------
TOTAL CONVERTIBLE
CORPORATE BONDS ........... 3,979,877 4,167,500
-------------- --------------
SHARES
------------
WARRANTS -- 0.0%
ENERGY AND UTILITIES -- 0.0%
12,183 Mirant Corp., Ser. A,
expire 01/03/11+ .......... 36,353 224,411
-------------- --------------
PRINCIPAL
AMOUNT
------------
U.S. GOVERNMENT OBLIGATIONS -- 6.1%
$121,660,000 U.S. Treasury Bills,
2.487% to 3.186%++,
01/10/08 to 06/05/08 (d) .. 120,667,780 120,636,963
-------------- --------------
TOTAL INVESTMENTS -- 100.0% ................. $1,437,998,014 1,993,233,456
==============
MARKET
VALUE
CALL OPTIONS WRITTEN
(Premiums received $11,985) ............................... $ (12,000)
--------------
FUTURES CONTRACTS
(Unrealized appreciation) ................................. 1,088,286
--------------
OTHER ASSETS AND LIABILITIES (NET) ........................... (4,186,279)
PREFERRED STOCK
(8,956,900 preferred shares outstanding) .................. (403,742,500)
--------------
NET ASSETS -- COMMON STOCK
(172,104,290 common shares outstanding) ................... $1,586,380,963
==============
NET ASSET VALUE PER COMMON SHARE
($1,586,380,963 / 172,104,290 shares outstanding) ......... $ 9.22
==============
NUMBER OF EXPIRATION DATE/ MARKET
CONTRACTS EXERCISE PRICE VALUE
------------ ---------------- --------------
CALL OPTIONS WRITTEN -- 0.0%
10 MasterCard Inc., Cl.A ...... Jan. 08/210 $ 12,000
==============
EXPIRATION UNREALIZED
DATE APPRECIATION
---------------- --------------
FUTURES CONTRACTS -- SHORT POSITION
163 S & P 500 Index Futures .... 03/19/2008 $ 1,088,286
==============
----------
(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 December 31, 2007, the
market value of fair valued securities amounted to $560,236 or 0.03% of
total investments.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At December
31, 2007, the market value of Rule 144A securities amounted to $470,880 or
0.02% of total investments.
(c) At December 31, 2007, the Fund held investments in restricted securities
amounting to $1,271,129 or 0.06% of total investments, which were valued
under methods approved by the Board of Directors as follows:
12/31/2007
ACQUISITION ACQUISITION ACQUISITION CARRYING VALUE
SHARES ISSUER DATE COST PER UNIT
----------- -------------------------------- ----------- ----------- ---------------
4,440,836 Cable & Wireless Jamaica Ltd. .. 03/29/01 $101,639 $0.0094
280,000 Consolidated Minerals Ltd. ..... 01/31/07 498,024 4.3902
(d) At December 31, 2007, $8,000,000 of the principal amount was pledged as
collateral for option written and futures contracts.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR American Depository Receipt
CVO Contingent Value Obligation
% OF
MARKET MARKET
VALUE VALUE
------ ---------------
GEOGRAPHIC DIVERSIFICATION
LONG POSITIONS
North America .................................... 74.9% $ 1,491,906,096
Europe ........................................... 17.8 355,666,212
Latin America .................................... 3.4 67,887,612
Japan ............................................ 2.6 51,623,515
Asia/Pacific ..................................... 1.2 24,005,764
South Africa ..................................... 0.1 2,144,257
------ ---------------
100.0% $ 1,993,233,456
====== ===============
SHORT POSITIONS
North America .................................... (0.0)% $ (12,000)
See accompanying notes to financial statements.
10
THE GABELLI EQUITY TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2007
ASSETS:
Investments, at value (cost $1,437,998,014) ...................................... $ 1,993,233,456
Foreign currency, at value (cost $3,861,542) ..................................... 3,939,477
Deposit at broker ................................................................ 52,382
Receivable for investments sold .................................................. 1,412,940
Dividends and interest receivable ................................................ 2,370,536
Variation margin ................................................................. 339,855
Deferred offering expense ........................................................ 69,680
Unrealized appreciation on swap contracts ........................................ 7,165
Prepaid expense .................................................................. 54,397
---------------
TOTAL ASSETS ..................................................................... 2,001,479,888
---------------
LIABILITIES:
Call options written (premium received $11,985) .................................. 12,000
Payable to custodian ............................................................. 1,827,811
Payable for investments purchased ................................................ 3,116,557
Distributions payable ............................................................ 390,039
Payable for investment advisory fees ............................................. 5,403,721
Payable for payroll expenses ..................................................... 82,571
Payable for accounting fees ...................................................... 11,231
Other accrued expenses ........................................................... 512,495
---------------
TOTAL LIABILITIES ................................................................ 11,356,425
---------------
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 STOCK SHAREHOLDERS ............................. $ 1,586,380,963
===============
NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS CONSIST OF:
Paid-in capital, at $0.001 par value ............................................. $ 1,037,096,286
Accumulated distributions in excess of net investment income ..................... (771,203)
Accumulated distributions in excess of net realized gain on investments, futures
contracts, swap contracts, and foreign currency transactions .................. (6,359,945)
Net unrealized appreciation on investments ....................................... 555,235,442
Net unrealized appreciation on swap contracts .................................... 7,165
Net unrealized depreciation on written options ................................... (15)
Net unrealized appreciation on futures ........................................... 1,088,286
Net unrealized appreciation on foreign currency translations ..................... 84,947
---------------
NET ASSETS ....................................................................... $ 1,586,380,963
===============
NET ASSET VALUE PER COMMON SHARE
($1,586,380,963 / 172,104,290 shares outstanding;
246,000,000 shares authorized) ................................................... $ 9.22
===============
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
INVESTMENT INCOME:
Dividends (net of foreign taxes of $858,042) ..................................... $ 36,488,197
Interest ......................................................................... 6,429,350
---------------
TOTAL INVESTMENT INCOME .......................................................... 42,917,547
---------------
EXPENSES:
Investment advisory fees ......................................................... 20,516,905
Shareholder communications expenses .............................................. 809,852
Healthcare & Wellness(Rx) Trust spin-off expenses ................................ 700,000
Auction agent fees ............................................................... 449,260
Custodian fees ................................................................... 278,163
Payroll expenses ................................................................. 263,973
Shareholder services fees ........................................................ 254,805
Directors' fees .................................................................. 146,365
Legal and audit fees ............................................................. 121,025
Accounting fees .................................................................. 45,000
Interest expense ................................................................. 3,187
Miscellaneous expenses ........................................................... 353,275
---------------
TOTAL EXPENSES ................................................................... 23,941,810
Advisory Fee Reduction ........................................................... (23,733)
Less: Custodian fee credits ...................................................... (69,076)
---------------
NET EXPENSES ..................................................................... 23,849,001
---------------
NET INVESTMENT INCOME ............................................................ 19,068,546
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, WRITTEN OPTIONS,
SWAP CONTRACTS, FUTURES CONTRACTS, AND FOREIGN CURRENCY:
Net realized gain on investments ................................................. 109,035,522
Capital gain distributions from investment company ............................... 919,797
Net realized gain on swap contracts .............................................. 526,602
Net realized gain on futures contracts ........................................... 7,602,242
Net realized loss on foreign currency transactions ............................... (63,116)
---------------
Net realized gain on investments, swap contracts,
futures contracts, and foreign currency transactions .......................... 118,021,047
---------------
Net change in unrealized appreciation/depreciation:
on investments ................................................................ 74,505,595
on written options ............................................................ (15)
on swap contracts ............................................................. (618,665)
on futures contracts .......................................................... 1,175,706
on foreign currency translations .............................................. 80,518
---------------
Net change in unrealized appreciation/depreciation on investments, written
options, swap contracts, futures contracts, and foreign currency translations.. 75,143,139
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
WRITTEN OPTIONS, SWAP CONTRACTS, FUTURES CONTRACTS, AND FOREIGN CURRENCY ......... 193,164,186
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ 212,232,732
Total Distributions to Preferred Stock Shareholders ................................. (23,365,745)
---------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS
RESULTING FROM OPERATIONS ........................................................ $ 188,866,987
===============
See accompanying notes to financial statements.
11
THE GABELLI EQUITY TRUST INC.
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO COMMON SHARES
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
----------------- -----------------
OPERATIONS:
Net investment income ............................................................. $ 19,068,546 $ 30,936,093
Net realized gain on investments, securities sold short, swap contracts, futures
contracts, and foreign currency transactions ................................... 118,021,047 143,621,025
Net change in unrealized appreciation/depreciation on investments, securities
sold short, swap contracts, futures contracts, and foreign currency
translations ................................................................... 75,143,139 219,969,621
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................. 212,232,732 394,526,739
--------------- ---------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS:
Net investment income ............................................................. (3,515,786) (4,468,454)
Net realized short-term gains on investments, written options, swap contracts,
futures contracts, and foreign currency transactions ........................... (1,824,834) (1,813,678)
Net realized long-term gains on investments, written options, swap contracts,
futures contracts, and foreign currency transactions ........................... (18,025,125) (18,665,359)
--------------- ---------------
TOTAL DISTRIBUTIONS TO PREFERRED SHAREHOLDERS ..................................... (23,365,745) (24,947,491)
--------------- ---------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS RESULTING
FROM OPERATIONS ................................................................. 188,866,987 369,579,248
--------------- ---------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Net investment income ............................................................. (20,158,265) (26,337,625)
Net realized short-term gains on investments, written options, swap contracts,
futures contracts, and foreign currency transactions ........................... (8,897,143) (10,620,934)
Net realized long-term gains on investments, written options, swap contracts,
futures contracts, and foreign currency transactions ........................... (88,050,995) (109,810,607)
Return of capital ................................................................. (103,665,340) --
--------------- ---------------
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS ........................................ (220,771,743) (146,769,166)
--------------- ---------------
FUND SHARE TRANSACTIONS:
Net increase in net assets from common shares issued upon reinvestment of
distributions .................................................................. 31,379,440 23,591,621
Offering costs for preferred shares charged to paid-in capital .................... -- (5,235,000)
Offering costs for issuance of rights charged to paid-in capital .................. -- (151,821)
--------------- ---------------
NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS ........................... 31,379,440 18,204,800
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS ......... (525,316) 241,014,882
NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS:
Beginning of period ............................................................... 1,586,906,279 1,345,891,397
--------------- ---------------
End of period (including undistributed net investment income of $0 and
$693,273, respectively) ........................................................ $ 1,586,380,963 $ 1,586,906,279
=============== ===============
See accompanying notes to financial statements.
12
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS
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 Gabelli Funds, LLC (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.
In September 2006, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value
Measurements, which clarifies the definition of fair value and requires
companies to expand their disclosure about the use of fair value to measure
assets and liabilities in interim and annual periods subsequent to initial
recognition. Adoption of SFAS 157 requires the use of the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. At this time,
management is in the process of reviewing the requirements of SFAS 157 against
its current valuation policies to determine future applicability.
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. 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 December
31, 2007, there were no open repurchase agreements.
13
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 fiscal year ended December 31, 2007, 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 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 swap 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 transactions. Swap agreements 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 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 an
equity 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.
At December 31, 2007, there were no open interest rate swap agreements.
14
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Fund has entered into an equity swap agreement with Bear, Stearns
International Limited. Details of the swap at December 31, 2007 are as follows:
NOTIONAL EQUITY SECURITY INTEREST RATE/ TERMINATION NET UNREALIZED
AMOUNT RECEIVED EQUITY SECURITY PAID DATE APPRECIATION
--------------------------- --------------------- -------------------------------- ----------- --------------
Market Value Overnight LIBOR plus 40 bps plus
Appreciation on: Market Value Depreciation on:
$2,161,916 (200,000 Shares) Rolls-Royce Group plc Rolls-Royce Group plc 09/15/08 $7,165
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 an equity swap or an interest rate 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. If this occurs, it
could have a negative impact on the Fund's ability to make dividend payments.
The use of derivative instruments involves, to varying degrees, elements
of market and counterparty risk in excess of the amount recognized in the
Statement of Assets and Liabilities.
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.
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.
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 December 31,
2007 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 December 31, 2007, 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
15
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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. For the fiscal year ended December 31,
2007, reclassifications were made to decrease accumulated distributions in
excess of net investment income by $3,141,029 and increase accumulated
distributions in excess of net realized gain on investments, options, futures
contracts, swap contracts, and foreign currency transactions by $2,441,029, with
an offsetting adjustment to paid-in capital.
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.
16
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The tax character of distributions paid during the fiscal years ended
December 31, 2007 and December 31, 2006 for the Fund was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
------------------------------- -------------------------------
COMMON PREFERRED COMMON PREFERRED
-------------- -------------- -------------- --------------
DISTRIBUTIONS PAID FROM:
Ordinary income
(inclusive of short-term capital gains) .......... $ 27,039,757 $ 5,395,128 $ 36,958,559 $ 6,282,132
Net long-term capital gains ........................ 90,066,646 17,970,617 109,810,607 18,665,359
Return of capital .................................. 103,665,340 -- -- --
-------------- -------------- -------------- --------------
Total distributions paid ........................... $ 220,771,743 $ 23,365,745 $ 146,769,166 $ 24,947,491
============== ============== ============== ==============
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.
At December 31, 2007, the difference between book basis and tax basis
unrealized appreciation was primarily due to deferral of losses from wash sales
for tax purposes, basis adjustments in real estate investment trusts,
mark-to-market adjustments on passive foreign investment companies, and basis
adjustments in partnerships.
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 December 31, 2007:
GROSS GROSS NET UNREALIZED
COST/ UNREALIZED UNREALIZED APPRECIATION
PREMIUMS APPRECIATION DEPRECIATION (DEPRECIATION)
--------------- ------------- ------------ ---------------
Investments ........................... $ 1,443,460,961 $ 647,052,677 $(97,280,182) $ 549,772,495
Written options ....................... 11,985 -- (15) (15)
Swap contracts ........................ -- 7,165 -- 7,165
Futures contracts ..................... -- 1,088,286 -- 1,088,286
--------------- ------------- ------------ ---------------
$ 1,443,472,946 $ 648,148,128 $(97,280,197) $ 550,867,931
=============== ============= ============ ===============.
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. The
Fund has adopted the Interpretation for all open tax years and it had no impact
on the amounts reported in the financial statements.
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.
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 fiscal
year ended December 31, 2007, the Fund's total return on the NAV of the common
shares exceeded the stated dividend rate or the corresponding swap rate of
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. Thus, management fees were accrued on these
assets. The Fund's total return on the net asset value of the common shares did
not exceed the stated dividend rate of corresponding swap rate of 7.20% Series B
Cumulative Preferred Stock. Thus, management fees with respect to the
liquidation of the preferred stock assets were reduced by $23,733.
17
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During the fiscal ended December 31, 2007, the Fund paid brokerage
commissions on security trades of $387,398 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
fiscal year ended December 31, 2007, the Fund paid or accrued $45,000 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 fiscal year ended December 31, 2007, the Fund paid
$263,973, 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, and the Nominating Committee Chairman receives an
annual fee of $2,000. 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 fiscal year ended December 31, 2007, other than short-term securities,
aggregated $517,316,467 and $327,979,044, respectively.
Written options activity for the Fund for the fiscal year ended December
31, 2007 was as follows:
NUMBER OF
CONTRACTS PREMIUMS
----------- ---------
Written options outstanding at December 31, 2006 .... -- --
Options written ..................................... 10 $ 11,985
----------- ---------
Written options outstanding at December 31, 2007 .... 10 $ 11,985
=========== =========
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 fiscal years
ended December 31, 2007 and December 31, 2006, the Fund did not repurchase any
shares of its common stock in the open market.
Transactions in common shares were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2007 DECEMBER 31, 2006
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- -----------
Shares issued upon reinvestment of distributions ... 3,348,018 $ 31,379,440 2,677,002 $23,591,621
--------- ------------ --------- -----------
Net increase ....................................... 3,348,018 $ 31,379,440 2,677,002 $23,591,621
========= ============ ========= ===========
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 which will give the Fund the ability to
offer additional fixed rate preferred shares.
18
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 4.80% to 6.30% for the year ended
December 31, 2007. 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 fiscal
year ended December 31, 2007, the Fund did not redeem any shares of Series C
Auction Rate Cumulative Preferred Stock. At December 31, 2007, 5,200 shares of
Series C Auction Rate Cumulative Preferred Stock were outstanding with an
annualized dividend rate of 6.00% and accrued dividends amounted to $130,000.
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. During the fiscal year ended December 31, 2007,
the Fund did not repurchase any shares of 5.875% Series D Cumulative Preferred
Stock. At December 31, 2007, 2,949,700 shares of 5.875% Series D Cumulative
Preferred Stock were outstanding and accrued dividends amounted to $72,206.
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 4.50% to 6.15% for the year ended
December 31, 2007. 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 fiscal
year ended December 31, 2007, the Fund did not redeem any shares of Series E
Auction Rate Cumulative Preferred Stock. At December 31, 2007, 2,000 shares of
Series E Auction Rate Cumulative Preferred Stock were outstanding with an
annualized dividend rate of 5.91% and accrued dividends amounted to $32,833.
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. During the fiscal year
ended December 31, 2007, the Fund did not repurchase any shares of 6.20% Series
F Cumulative Preferred Stock. At December 31, 2007, 6,000,000 shares of 6.20%
Series F Cumulative Preferred Stock were outstanding and accrued dividends
amounted to $155,000.
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
19
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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. The Adviser and/or affiliates received subpoenas from the
Attorney General of the State of New York and the SEC requesting information on
mutual fund share trading practices involving certain funds managed by the
Adviser. GAMCO Investors, Inc. ("GAMCO"), the Adviser's parent company,
responded to these requests for documents and testimony. In June 2006, GAMCO
began discussions with the SEC regarding a possible resolution of their inquiry.
In February 2007, the Adviser made an offer of settlement to the staff of the
SEC for communication to the Commission for its consideration to resolve this
matter. This offer of settlement is subject to agreement regarding the specific
language of the SEC's administrative order and other settlement documents. On a
separate matter, in September 2005, the Adviser was informed by the staff of the
SEC that the staff may recommend to the Commission that an administrative remedy
and a monetary penalty be sought from the Adviser in connection with the actions
of two of nine closed-end funds managed by the Adviser relating to Section 19(a)
and Rule 19a-1 of the 1940 Act. These provisions require registered investment
companies to provide written statements to shareholders when a dividend is made
from a source other than net investment income. While the two closed-end funds
sent annual statements and provided other materials containing this information,
the funds did not send written statements to shareholders with each distribution
in 2002 and 2003. The Adviser believes that all of the funds are now in
compliance. The Adviser believes that these matters would have no effect on the
Fund or any material adverse effect on the Adviser or its ability to manage the
Fund. The staff's notice to the Adviser did not relate to the Fund.
20
THE GABELLI EQUITY TRUST INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
2007 2006 2005 2004 2003
------- ------- ------- ------- -------
OPERATING PERFORMANCE:
Net asset value, beginning of period ................................. $ 9.40 $ 8.10 $ 8.69 $ 7.98 $ 6.28
------- ------- ------- ------- -------
Net investment income ................................................ 0.14 0.18 0.09 0.02 0.04
Net realized and unrealized gain on investments ...................... 1.12 2.18 0.47 1.63 2.50
------- ------- ------- ------- -------
Total from investment operations ..................................... 1.26 2.36 0.56 1.65 2.54
------- ------- ------- ------- -------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS:(a)
Net investment income ................................................ (0.02) (0.03) (0.01) (0.00)(e) (0.00)(e)
Net realized gain on investments ..................................... (0.12) (0.12) (0.14) (0.14) (0.14)
------- ------- ------- ------- -------
Total distributions to preferred shareholders ........................ (0.14) (0.15) (0.15) (0.14) (0.14)
------- ------- ------- ------- -------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO COMMON
SHAREHOLDERS RESULTING FROM OPERATIONS ............................... 1.14 2.21 0.41 1.51 2.40
------- ------- ------- ------- -------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Net investment income ................................................ (0.12) (0.16) (0.08) (0.01) (0.01)
Net realized gain on investments ..................................... (0.57) (0.72) (0.77) (0.79) (0.68)
Return of capital .................................................... (0.61) -- -- -- (0.00)(e)
------- ------- ------- ------- -------
Total distributions to common shareholders ........................... (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 ....... -- (0.03) (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 ........................................ -- (0.03) (0.15) 0.00(e) (0.01)
------- ------- ------- ------- -------
NET ASSET VALUE ATTRIBUTABLE TO COMMON SHAREHOLDERS, END OF PERIOD ... $ 9.22 $ 9.40 $ 8.10 $ 8.69 $ 7.98
======= ======= ======= ======= =======
Net Asset Value Total Return + ....................................... 12.14% 28.17% 5.50% 19.81% 39.90%
======= ======= ======= ======= =======
Market Value, End of Period .......................................... $ 9.28 $ 9.41 $ 8.03 $ 9.02 $ 8.00
======= ======= ======= ======= =======
Total Investment Return ++ ........................................... 12.75% 29.42% 0.66% 24.04% 28.58%
======= ======= ======= ======= =======
See accompanying notes to financial statements.
21
THE GABELLI EQUITY TRUST INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
2007 2006 2005 2004 2003
----------- ----------- ----------- ----------- -----------
RATIOS AND SUPPLEMENTAL DATA:
Net assets including liquidation value of preferred
shares, end of period (in 000's) ...................... $ 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) ..................................... $ 1,586,381 $ 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 ......................................... 1.16% 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) ......................................... 1.46% 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) .............................. 1.17% 1.11% 1.04% 1.14% 1.14%
Portfolio turnover rate .................................. 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
Total shares outstanding (in 000's) ...................... 5 5 5 5 5
Liquidation preference per share ......................... $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
Average market value (c) ................................. $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
Asset coverage per share ................................. $ 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 $ 75,000
Total shares outstanding (in 000's) ...................... 2,950 2,950 2,950 2,950 3,000
Liquidation preference per share ......................... $ 25.00 $ 25.00 $ 25.00 $ 25.00 $ 25.00
Average market value (c) ................................. $ 23.86 $ 23.98 $ 24.82 $ 24.81 $ 25.10
Asset coverage per share ................................. $ 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
Total shares outstanding (in 000's) ...................... 2 2 2 2 2
Liquidation preference per share ......................... $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
Average market value (c) ................................. $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000
Asset coverage per share ................................. $ 123,230 $ 100,211 $ 105,353 $ 97,806 $ 90,150
6.20% SERIES F CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) .............. $ 150,000 $ 150,000 -- -- --
Total shares outstanding (in 000's) ...................... 6,000 6,000 -- -- --
Liquidation preference per share ......................... $ 25.00 $ 25.00 -- -- --
Average market value (c) ................................. $ 24.69 $ 25.12 -- -- --
Asset coverage per share ................................. $ 123.23 $ 100.21 -- -- --
ASSET COVERAGE (d) ....................................... 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 shareholder.
++ 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 shareholder.
(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 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.
See accompanying notes to financial statements.
22
THE GABELLI EQUITY TRUST INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
The Gabelli Equity Trust Inc.:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Gabelli Equity Trust Inc.
(hereafter referred to as the "Trust") at December 31, 2007, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2007 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 29, 2008
23
THE GABELLI EQUITY TRUST INC.
ADDITIONAL FUND INFORMATION (UNAUDITED)
The business and affairs of the Fund are managed under the direction of
the Fund's Board of Directors. Information pertaining to the Directors and
officers of the Fund is set forth below. The Fund's Statement of Additional
Information includes additional information about the Fund's Directors and
officers and is available, without charge, upon request, by calling 800-GABELLI
(800-422-3554) or by writing to The Gabelli Equity Trust Inc. at One Corporate
Center, Rye, NY 10580-1422.
NUMBER OF
TERM OF FUNDS IN FUND
NAME, POSITION(S) OFFICE AND COMPLEX
ADDRESS(1) LENGTH OF OVERSEEN BY PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE TIME SERVED(2) DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR(5)
------------------------- -------------- ------------- ----------------------------------- -------------------------------
INTERESTED DIRECTORS(3):
MARIO J. GABELLI Since 1986** 26 Chairman and Chief Executive Director of Morgan Group
Director and Officer of GAMCO Investors, Inc. Holdings, Inc. (holding
Chief Investment Officer and Chief Investment Officer - company); Chairman of the Board
Age: 65 Value Portfolios of Gabelli Funds, of LICT Corp. (multimedia and
LLC and GAMCO Asset Management communication services company)
Inc.; Director/Trustee or Chief
Investment Officer of other
registered investment companies in
the Gabelli/GAMCO Funds complex;
Chairman and Chief Executive
Officer of GGCP, Inc.
INDEPENDENT DIRECTORS(6):
THOMAS E. BRATTER Since 1986** 4 Director, President, and Founder --
Director of The John Dewey Academy
Age: 68 (residential college preparatory
therapeutic high school)
ANTHONY J. COLAVITA(4) Since 1999*** 35 Partner in the law firm of Anthony --
Director J. Colavita, P.C.
Age: 72
JAMES P. CONN(4) Since 1989* 16 Former Managing Director and Chief --
Director Investment Officer of Financial
Age: 69 Security Assurance Holdings Ltd.
(insurance holding company)
(1992-1998)
FRANK J. FAHRENKOPF JR. Since 1998*** 5 President and Chief Executive --
Director Officer of the American Gaming
Age: 68 Association; Co-Chairman of the
Commission on Presidential
Debates; Former Chairman of the
Republican National Committee
(1983-1989)
ARTHUR V. FERRARA Since 2001** 7 Former Chairman of the Board and --
Director Chief Executive Officer of The
Age: 77 Guardian Life Insurance Company of
America (1993-1995)
ANTHONY R. PUSTORINO Since 1986* 14 Certified Public Accountant; Director of The LGL Group, Inc.
Director Professor Emeritus, Pace University (diversified manufacturing)
Age: 82
SALVATORE J. ZIZZA Since 1986*** 26 Chairman of Zizza & Co., Ltd. Director of Hollis-Eden
Director (consulting) Pharmaceuticals (biotechnology)
Age: 62 and Earl Scheib, Inc.
(automotive services)
24
THE GABELLI EQUITY TRUST INC.
ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED)
TERM OF
NAME, POSITION(S) OFFICE AND
ADDRESS(1) LENGTH OF PRINCIPAL OCCUPATION(S)
AND AGE TIME SERVED(2) DURING PAST FIVE YEARS
---------------------------- -------------- ----------------------------------------------------------------------
OFFICERS:
BRUCE N. ALPERT Since 2003 Executive Vice President and Chief Operating Officer of Gabelli Funds,
President LLC since 1988 and an officer of most of the registered investment
Age: 56 companies in the Gabelli/GAMCO Funds complex. Director and President
of Gabelli Advisers, Inc. since 1998
CARTER W. AUSTIN Since 2000 Vice President of the Fund since 2000, Vice President of The Gabelli
Vice President Dividend & Income Trust since 2003, and The Gabelli Global Gold,
Age: 41 Natural Resources & Income Trust since 2005, The Gabelli Global Deal
Fund since 2006, and The Gabelli Healthcare & Wellness(Rx) Trust since
2007; Vice President of Gabelli Funds, LLC since 1996
LOAN P. NGUYEN Since 2006 Vice President of The Gabelli Global Multimedia Trust Inc. since 2004;
Vice President and Ombudsman Assistant Vice President of GAMCO Investors, Inc. since 2006;
Age: 25 Portfolio Administrator for Gabelli Funds, LLC during 2004; Student at
Boston College prior to 2004
JAMES E. MCKEE Since 1995 Vice President, General Counsel, and Secretary of GAMCO Investors,
Secretary Inc. since 1999 and GAMCO Asset Management Inc. since 1993; Secretary
Age: 44 of all of the registered investment companies in the Gabelli/GAMCO
Funds complex
AGNES MULLADY Since 2006 Vice President of Gabelli Funds, LLC since 2007; Officer of all of the
Treasurer registered investment companies in the Gabelli/GAMCO Funds complex;
Age: 49 Senior Vice President of U.S. Trust Company, N.A. and Treasurer and
Chief Financial Officer of Excelsior Funds from 2004 through 2005;
Chief Financial Officer of AMIC Distribution Partners from 2002
through 2004; Controller of Reserve Management Corporation and Reserve
Partners, Inc. and Treasurer of Reserve Funds from 2000 through 2002
PETER D. GOLDSTEIN Since 2004 Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004;
Chief Compliance Officer Chief Compliance Officer of all of the registered investment companies
Age: 54 in the Gabelli/GAMCO Funds complex; Vice President of Goldman Sachs
Asset Management from 2000 through 2004
----------
(1) Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted.
(2) The Fund's Board of Directors is divided into three classes, each class
having a term of three years. Each year the term of office of one class
expires and the successor or successors elected to such class serve for a
three year term. The three year term for each class expires as follows:
* - Term expires at the Fund's 2009 Annual Meeting of Shareholders or
until their successors are duly elected and qualified.
** - Term expires at the Fund's 2010 Annual Meeting of Shareholders or
until their successors are duly elected and qualified.
*** - Term expires at the Fund's 2008 Annual Meeting of Shareholders or
until their successors are duly elected and qualified.
Each officer will hold office for an indefinite term until the date he or
she resigns or retires or until his or her successor is elected and
qualified.
(3) "Interested person" of the Fund as defined in the 1940 Act. Mr. Gabelli is
considered an "interested person" of the Fund because of his affiliation
with Gabelli Funds, LLC which acts as the Fund's investment adviser.
(4) Represents holders of the Fund's Preferred Stock.
(5) This column includes only directorships of companies required to report to
the SEC under the Securities Exchange Act of 1934, as amended (i.e. public
companies) or other investment companies registered under the 1940 Act.
(6) Directors who are not interested persons are considered "Independent"
Directors.
CERTIFICATIONS
The Fund's Chief Executive Officer has certified to the New York Stock
Exchange ("NYSE") that, as of June 13, 2007, he was not aware of any violation
by the Fund of applicable NYSE corporate governance listing standards. The Fund
reports to the SEC on Form N-CSR which contains certifications by the Fund's
principal executive officer and principal financial officer that relate to the
Fund's disclosure in such reports and that are required by Rule 30a-2(a) under
the 1940 Act.
25
THE GABELLI EQUITY TRUST INC.
INCOME TAX INFORMATION (UNAUDITED)
DECEMBER 31, 2007
CASH DIVIDENDS AND DISTRIBUTIONS
TOTAL AMOUNT ORDINARY LONG-TERM DIVIDEND
PAYABLE RECORD PAID INVESTMENT CAPITAL RETURN OF REINVESTMENT
DATE DATE PER SHARE (a) INCOME (a) GAINS (a) CAPITAL (c) PRICE
---------- -------- ------------- ---------- --------- ----------- ------------
COMMON SHARES
03/26/07 03/16/07 $ 0.20000 $ 0.02681 $ 0.07968 $ 0.09351 $ 9.5600
06/28/07 06/15/07 0.20000 0.02339 0.07984 0.09677 9.6500
06/28/07 06/21/07 0.42000 0.04911 0.16767 0.20322 --
09/24/07 09/14/07 0.20000 0.02339 0.07984 0.09677 9.5300
12/17/07 12/12/07 0.30000 0.03508 0.11976 0.14516 8.9800
--------- --------- --------- ---------
$ 1.32000 $ 0.15778 $ 0.52679 $ 0.63543
7.20% PREFERRED SHARES
01/08/07 -- $ 0.06000 $ 0.01370 $ 0.4630
--------- --------- ---------
$ 0.06000 $ 0.01370 $ 0.4630
5.875% PREFERRED SHARES
03/26/07 03/19/07 $ 0.36719 $ 0.08615 $ 0.28104
06/26/07 06/19/07 0.36719 0.08318 0.28400
09/26/07 09/19/07 0.36719 0.08318 0.28400
12/26/07 12/18/07 0.36719 0.08318 0.28400
--------- --------- ---------
$ 1.46875 $ 0.33570 $ 1.13305
6.20% PREFERRED SHARES
03/26/07 03/19/07 $ 0.38750 $ 0.09090 $ 0.29660
06/26/07 06/19/07 0.38750 0.08780 0.29970
09/26/07 09/19/07 0.38750 0.08780 0.29970
12/26/07 12/18/07 0.38750 0.08780 0.29970
--------- --------- ---------
$ 1.55000 $ 0.35430 $ 1.19570
SERIES C AND E AUCTION RATE PREFERRED SHARES
Auction Rate Preferred Shares pay dividends weekly based on a rate set at
auction, usually held every seven days. The percentage of 2007 distributions
derived from long-term capital gains for the Series C and Series E Auction Rate
Preferred Shares was 77.14%.
A Form 1099-DIV has been mailed to all shareholders of record which sets
forth specific amounts to be included in the 2007 tax returns. Ordinary income
distributions include net investment income and realized net short-term capital
gains. Ordinary income is reported in box 1a of Form 1099-DIV. Capital gain
distributions are reported in box 2a of Form 1099-DIV. The long-term gain
distributions for the fiscal year ended December 31, 2007 were $108,037,263, or
the maximum allowable.
CORPORATE DIVIDENDS RECEIVED DEDUCTION, QUALIFIED DIVIDEND INCOME, AND U.S.
GOVERNMENT SECURITIES INCOME
In 2007, the Fund paid to common, 7.20% Series B, 5.875% Series D, and
6.20% Series F preferred shareholders ordinary income totaling $0.15778,
$0.01370, $0.33570, and $0.35430 per share, respectively. The Fund paid weekly
distributions to Series C and Series E preferred shareholders at varying rates
throughout the year, including an ordinary income dividend totaling $309.8118
and $302.5962 per share, respectively, in 2007. For the fiscal year ended
December 31, 2007, 75.79% of the ordinary income dividend qualified for the
dividend received deduction available to corporations, and 100% of the ordinary
income distribution was deemed qualified dividend income and is reported in box
1b on Form 1099-DIV. The percentage of the ordinary income dividends paid by the
Fund during 2007 derived from U.S. Government Securities was 0.12%. Such income
is exempt from state and local tax in all states. However, many states,
including New York and California, allow a tax exemption for a portion of the
income earned only if a mutual fund has invested at least 50% of its assets at
the end of each quarter of the Fund's fiscal year in U.S. Government Securities.
The Fund did not meet this strict requirement in 2007. The percentage of net
assets of U.S. Government Securities held as of December 31, 2007 was 6.06%.
26
THE GABELLI EQUITY TRUST INC.
INCOME TAX INFORMATION (CONTINUED) (UNAUDITED)
DECEMBER 31, 2007
HISTORICAL DISTRIBUTION SUMMARY
SHORT- LONG- UNDISTRIBUTED TAXES PAID ON
TERM TERM NON-TAXABLE LONG-TERM UNDISTRIBUTED ADJUSTMENT
INVESTMENT CAPITAL CAPITAL RETURN OF CAPITAL CAPITAL TOTAL TO
INCOME GAINS (b) GAINS CAPITAL GAINS GAINS (c) DISTRIBUTIONS (a) COST BASIS
----------- ----------- ------------ ----------- ------------- ------------- ----------------- ------------
COMMON STOCK
2007 (d) ...... $ 0.10455 $ 0.05323 $ 0.52679 $ 0.63543 -- -- $ 1.32000 $ 0.63543 -
2006 .......... 0.15690 0.06400 0.65910 -- -- -- 0.88000 --
2005 (e) ...... 0.08756 0.00672 0.75572 -- -- -- 0.85000 --
2004 .......... 0.01930 0.04990 0.73080 -- -- -- 0.80000 --
2003 .......... 0.01140 0.04480 0.63380 -- -- -- 0.69000 --
2002 .......... 0.05180 0.01550 0.88270 -- -- -- 0.95000 --
2001 (f) ...... 0.06700 0.06400 0.94900 -- -- -- 1.08000 --
2000 .......... 0.04070 0.15500 1.11430 -- -- -- 1.31000 --
1999 (g) ...... 0.03010 0.21378 0.99561 0.91176 -- -- 2.15125 0.91176 -
1998 .......... 0.06420 -- 1.10080 -- -- -- 1.16500 --
1997 .......... 0.07610 0.00210 0.93670 0.02510 -- -- 1.04000 0.02500 -
1996 .......... 0.10480 -- 0.78120 0.11400 -- -- 1.00000 0.11400 -
1995 (h) ...... 0.12890 -- 0.49310 0.37800 -- -- 1.00000 0.37800 -
1994 (i) ...... 0.13536 0.06527 0.30300 1.38262 -- -- 1.88625 1.38262 -
1993 (j) ...... 0.13050 0.02030 0.72930 0.22990 -- -- 1.11000 0.22990 -
1992 (k) ...... 0.20530 0.04050 0.29660 0.51760 -- -- 1.06000 0.51760 -
1991 (l) ...... 0.22590 0.03990 0.14420 0.68000 -- -- 1.09000 0.68000 -
1990 .......... 0.50470 -- 0.22950 0.44580 -- -- 1.18000 0.44580 -
1989 .......... 0.29100 0.35650 0.66250 -- $ 0.62880 $ 0.21380 1.31000 0.41500 +
1988 .......... 0.14500 0.20900 0.19600 -- 0.25130 0.08540 0.55000 0.16590 +
1987 .......... 0.25600 0.49100 0.33500 -- -- -- 1.08200 --
7.20% PREFERRED STOCK
2007 .......... $ 0.00900 $ 0.00470 $ 0.04630 -- -- -- $ 0.06000 --
2006 .......... 0.32000 0.13100 1.34900 -- -- -- 1.80000 --
2005 .......... 0.17650 0.01430 1.60920 -- -- -- 1.80000 --
2004 .......... 0.04340 0.11224 1.64436 -- -- -- 1.80000 --
2003 .......... 0.03000 0.11640 1.65360 -- -- -- 1.80000 --
2002 .......... 0.09800 0.02960 1.67240 -- -- -- 1.80000 --
2001 .......... 0.05870 0.05440 0.81690 -- -- -- 0.93000 --
5.875% PREFERRED STOCK
2007 .......... $ 0.22096 $ 0.11474 $ 1.13305 -- -- -- $ 1.46875 --
2006 .......... 0.26193 0.10688 1.09994 -- -- -- 1.46875 --
2005 .......... 0.14405 0.01170 1.31300 -- -- -- 1.46875 --
2004 .......... 0.03542 0.09159 1.34174 -- -- -- 1.46875 --
2003 .......... 0.00535 0.02086 0.29610 -- -- -- 0.32231 --
6.20% PREFERRED STOCK
2007 .......... $ 0.23330 $ 0.12100 $ 1.19570 -- -- -- $ 1.55000 --
2006 .......... 0.03527 0.01480 0.15229 -- -- -- 0.20236 --
AUCTION RATE PREFERRED C STOCK
2007 .......... $ 203.92150 $ 105.89030 $1,045.68820 -- -- -- $ 1,355.50000 --
2006 .......... 219.92983 89.73249 923.57769 -- -- -- 1,233.24000 --
2005 .......... 83.01020 6.73650 756.60330 -- -- -- 846.35000 --
2004 .......... 9.15570 23.67550 346.83810 -- -- -- 379.66930 --
2003 .......... 5.42000 21.05000 298.41000 -- -- -- 324.88000 --
2002 .......... 12.28350 3.71450 209.89200 -- -- -- 225.89000 --
AUCTION RATE PREFERRED E STOCK
2007 .......... $ 199.17211 $ 103.42412 $1,021.33377 -- -- -- $ 1,323.93000 --
2006 .......... 218.22316 89.03616 916.41068 -- -- -- 1,223.67000 --
2005 .......... 82.44330 6.69050 751.43620 -- -- -- 840.57000 --
2004 .......... 9.30280 24.05620 352.41090 -- -- -- 385.76000 --
2003 .......... 1.07000 4.18000 59.32000 -- -- -- 64.57000 --
----------
(a) Total amounts may differ due to rounding.
(b) Taxable as ordinary income.
(c) Net Asset Value was reduced by this amount on the last business day of the
year.
(d) On June 28, 2007, the Fund distributed shares of The Gabelli Healthcare &
Wellness(Rx) Trust valued at $8.40 per share.
(e) On September 21, 2005, the Fund also distributed Rights equivalent to
$0.21 per share based upon full subscription of all issued shares.
(f) On January 10, 2001, the Fund also distributed Rights equivalent to $0.56
per share based upon full subscription of all issued shares.
(g) On July 9, 1999, the Fund also distributed shares of The Gabelli Utility
Trust valued at $9.8125 per share.
(h) On October 19, 1995, the Fund also distributed Rights equivalent to $0.37
per share based upon full subscription of all issued shares.
(i) On November 15, 1994, the Fund also distributed shares of The Gabelli
Global Multimedia Trust Inc. valued at $8.0625 per share.
(j) On July 14, 1993, the Fund also distributed Rights equivalent to $0.50 per
share based upon full subscription of all issued shares.
(k) On September 28, 1992, the Fund also distributed Rights equivalent to
$0.36 per share based upon full subscription of all issued shares.
(l) On October 21, 1991, the Fund also distributed Rights equivalent to $0.42
per share based upon full subscription of all issued shares.
- Decrease in cost basis.
+ Increase in cost basis.
27
--------------------------------------------------------------------------------
THE GABELLI EQUITY TRUST INC.
AND YOUR PERSONAL PRIVACY
WHO ARE WE?
The Gabelli Equity Trust Inc. (the "Fund") is a closed-end management investment
company registered with the Securities and Exchange Commission under the
Investment Company Act of 1940. We are managed by Gabelli Funds, LLC, which is
affiliated with GAMCO Investors, Inc. GAMCO Investors, Inc. is a publicly held
company that has subsidiaries that provide investment advisory or brokerage
services for a variety of clients.
WHAT KIND OF NON-PUBLIC INFORMATION DO WE COLLECT ABOUT YOU IF YOU BECOME A
SHAREHOLDER?
When you purchase shares of the Fund on the New York Stock Exchange, you have
the option of registering directly with our transfer agent in order, for
example, to participate in our dividend reinvestment plan.
o INFORMATION YOU GIVE US ON YOUR APPLICATION FORM. This could include your
name, address, telephone number, social security number, bank account
number, and other information.
o INFORMATION ABOUT YOUR TRANSACTIONS WITH US. This would include
information about the shares that you buy or sell; it may also include
information about whether you sell or exercise rights that we have issued
from time to time. If we hire someone else to provide services--like a
transfer agent--we will also have information about the transactions that
you conduct through them.
WHAT INFORMATION DO WE DISCLOSE AND TO WHOM DO WE DISCLOSE IT?
We do not disclose any non-public personal information about our customers or
former customers to anyone other than our affiliates, our service providers who
need to know such information, and as otherwise permitted by law. If you want to
find out what the law permits, you can read the privacy rules adopted by the
Securities and Exchange Commission. They are in volume 17 of the Code of Federal
Regulations, Part 248. The Commission often posts information about its
regulations on its website, WWW.SEC.GOV.
WHAT DO WE DO TO PROTECT YOUR PERSONAL INFORMATION?
We restrict access to non-public personal information about you to the people
who need to know that information in order to provide services to you or the
Fund and to ensure that we are complying with the laws governing the securities
business. We maintain physical, electronic, and procedural safeguards to keep
your personal information confidential.
--------------------------------------------------------------------------------
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
ENROLLMENT IN THE PLAN
It is the policy of The Gabelli Equity Trust Inc. (the "Fund") to
automatically reinvest dividends payable to common shareholders. As a
"registered" shareholder you automatically become a participant in the Fund's
Automatic Dividend Reinvestment Plan (the "Plan"). The Plan authorizes the Fund
to credit shares of common stock to participants upon an income dividend or a
capital gains distribution regardless of whether the shares are trading at a
discount or a premium to net asset value. All distributions to shareholders
whose shares are registered in their own names will be automatically reinvested
pursuant to the Plan in additional shares of the Fund. Plan participants may
send their stock certificates to Computershare Trust Company, N.A.
("Computershare") to be held in their dividend reinvestment account. Registered
shareholders wishing to receive their distribution in cash must submit this
request in writing to:
The Gabelli Equity Trust Inc.
c/o Computershare
P.O. Box 43010
Providence, RI 02940-3010
Shareholders requesting this cash election must include the shareholder's
name and address as they appear on the share certificate. Shareholders with
additional questions regarding the Plan or requesting a copy of the terms of the
Plan may contact Computershare at (800) 336-6983.
If your shares are held in the name of a broker, bank, or nominee, you
should contact such institution. If such institution is not participating in the
Plan, your account will be credited with a cash dividend. In order to
participate in the Plan through such institution, it may be necessary for you to
have your shares taken out of "street name" and reregistered in your own name.
Once registered in your own name your dividends will be automatically
reinvested. Certain brokers participate in the Plan. Shareholders holding shares
in "street name" at participating institutions will have dividends automatically
reinvested. Shareholders wishing a cash dividend at such institution must
contact their broker to make this change.
The number of shares of common stock distributed to participants in the
Plan in lieu of cash dividends is determined in the following manner. Under the
Plan, whenever the market price of the Fund's common stock is equal to or
exceeds net asset value at the time shares are valued for purposes of
determining the number of shares equivalent to the cash dividends or capital
gains distribution, participants are issued shares of common stock valued at the
greater of (i) the net asset value as most recently determined or (ii) 95% of
the then current market price of the Fund's common stock. The valuation date is
the dividend or distribution payment date or, if that date is not a New York
Stock Exchange ("NYSE") trading day, the next trading day. If the net asset
value of the common stock at the time of valuation exceeds the market price of
the common stock, participants will receive shares from the Fund valued at
market price. If the Fund should declare a dividend or capital gains
distribution payable only in cash, Computershare will buy common stock in the
open market, or on the NYSE or elsewhere, for the participants' accounts, except
that Computershare will endeavor to terminate purchases in the open market and
cause the Fund to issue shares at net asset value if, following the commencement
of such purchases, the market value of the common stock exceeds the then current
net asset value.
The automatic reinvestment of dividends and capital gains distributions
will not relieve participants of any income tax which may be payable on such
distributions. A participant in the Plan will be treated for federal income tax
purposes as having received, on a dividend payment date, a dividend or
distribution in an amount equal to the cash the participant could have received
instead of shares.
29
VOLUNTARY CASH PURCHASE PLAN
The Voluntary Cash Purchase Plan is yet another vehicle for our
shareholders to increase their investment in the Fund. In order to participate
in the Voluntary Cash Purchase Plan, shareholders must have their shares
registered in their own name.
Participants in the Voluntary Cash Purchase Plan have the option of making
additional cash payments to Computershare for investments in the Fund's shares
at the then current market price. Shareholders may send an amount from $250 to
$10,000. Computershare will use these funds to purchase shares in the open
market on or about the 1st and 15th of each month. Computershare will charge
each shareholder who participates $0.75, plus a pro rata share of the brokerage
commissions. Brokerage charges for such purchases are expected to be less than
the usual brokerage charge for such transactions. It is suggested that any
voluntary cash payments be sent to Computershare, P.O. Box 43010, Providence, RI
02940-3010 such that Computershare receives such payments approximately 10 days
before the 1st and 15th of the month. Funds not received at least five days
before the investment date shall be held for investment until the next purchase
date. A payment may be withdrawn without charge if notice is received by
Computershare at least 48 hours before such payment is to be invested.
SHAREHOLDERS WISHING TO LIQUIDATE SHARES HELD AT COMPUTERSHARE must do so
in writing or by telephone. Please submit your request to the above mentioned
address or telephone number. Include in your request your name, address and
account number. The cost to liquidate shares is $2.50 per transaction as well as
the brokerage commission incurred. Brokerage charges are expected to be less
than the usual brokerage charge for such transactions.
For more information regarding the Dividend Reinvestment Plan and
Voluntary Cash Purchase Plan, brochures are available by calling (914) 921-5070
or by writing directly to the Fund.
The Fund reserves the right to amend or terminate the Plan as applied to
any voluntary cash payments made and any dividend or distribution paid
subsequent to written notice of the change sent to the members of the Plan at
least 90 days before the record date for such dividend or distribution. The Plan
also may be amended or terminated by Computershare on at least 90 days' written
notice to participants in the Plan.
----------------------------------------------------------------------
The Annual Meeting of The Gabelli Equity Trust's shareholders will be
held on Monday, May 19, 2008 at the Greenwich Library in Greenwich,
Connecticut.
----------------------------------------------------------------------
30
DIRECTORS AND OFFICERS
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER, RYE, NY 10580-1422
DIRECTORS OFFICERS
Mario J. Gabelli, CFA Bruce N. Alpert
CHAIRMAN & CHIEF EXECUTIVE OFFICER, PRESIDENT
GAMCO INVESTORS, INC.
Carter W. Austin
Dr. Thomas E. Bratter VICE PRESIDENT
PRESIDENT & FOUNDER, JOHN DEWEY ACADEMY
Peter D. Goldstein
Anthony J. Colavita CHIEF COMPLIANCE OFFICER
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C. James E. McKee
SECRETARY
James P. Conn
FORMER MANAGING DIRECTOR & Agnes Mullady
CHIEF INVESTMENT OFFICER, TREASURER
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
LoAn P. Nguyen
Frank J. Fahrenkopf, Jr. VICE PRESIDENT & OMBUDSMAN
PRESIDENT & CHIEF EXECUTIVE OFFICER,
AMERICAN GAMING ASSOCIATION INVESTMENT ADVISER
Gabelli Funds, LLC
Arthur V. Ferrara One Corporate Center
FORMER CHAIRMAN & CHIEF EXECUTIVE OFFICER, Rye, New York 10580-1422
GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
CUSTODIAN
Anthony R. Pustorino Mellon Trust of New England, N.A.
CERTIFIED PUBLIC ACCOUNTANT,
PROFESSOR EMERITUS, PACE UNIVERSITY COUNSEL
Willkie Farr & Gallagher LLP
Salvatore J. Zizza
CHAIRMAN, ZIZZA & CO., LTD. TRANSFER AGENT AND REGISTRAR
Computershare Trust Company, N.A.
STOCK EXCHANGE LISTING
5.875% 6.20%
Common Preferred Preferred
----------- --------- ---------
NYSE-Symbol: GAB GAB PrD GAB PrF
Shares Outstanding: 172,104,290 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 Cumulative Preferred Stock
in the open market when the shares are trading at a discount to liquidation
value.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER, RYE, NY 10580-1422
PHONE: 800-GABELLI (800-422-3554)
FAX: 914-921-5118 INTERNET: WWW.GABELLI.COM
E-MAIL: CLOSEDEND@GABELLI.COM GAB Q4/2007
--------------------------------------------------------------------------------
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's Board of
Directors has determined that Anthony R. Pustorino is qualified to serve as an
audit committee financial expert serving on its audit committee and that he is
"independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$53,500 for 2006 and $71,000 for 2007.
AUDIT-RELATED FEES
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $20,600 for 2006 and $7,900 for 2007. Audit-related fees
represent services provided in the preparation of Preferred Shares
Reports.
TAX FEES
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $3,100 for 2006 and $4,350
for 2007. Tax fees represent tax compliance services provided in
connection with the review of the Registrant's tax returns.
ALL OTHER FEES
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are $0
for 2006 and $0 for 2007.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pre-Approval Policies and Procedures. The Audit Committee ("Committee")
of the registrant is responsible for pre-approving (i) all audit and
permissible non-audit services to be provided by the independent
registered public accounting firm to the registrant and (ii) all
permissible non-audit services to be provided by the independent
registered public accounting firm to the Adviser, Gabelli Funds, LLC,
and any affiliate of Gabelli Funds, LLC ("Gabelli") that provides
services to the registrant (a "Covered Services Provider") if the
independent registered public accounting firm's engagement related
directly to the operations and financial reporting of the registrant.
The Committee may delegate its responsibility to pre-approve any such
audit and permissible non-audit services to the Chairperson of the
Committee, and the Chairperson must report to the Committee, at its
next regularly scheduled meeting after the Chairperson's pre-approval
of such services, his or her decision(s). The Committee may also
establish detailed pre-approval policies and procedures for
pre-approval of such services in accordance with applicable laws,
including the delegation of some or all of the Committee's pre-approval
responsibilities to the other persons (other than Gabelli or the
registrant's officers). Pre-approval by the Committee of any
permissible non-audit services is not required so long as: (i) the
permissible non-audit services were not recognized by the registrant at
the time of the engagement to be non-audit services; and (ii) such
services are promptly brought to the attention of the Committee and
approved by the Committee or Chairperson prior to the completion of the
audit.
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) of this Item that were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) 100%
(c) 100%
(d) Not applicable
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was zero percent (0%).
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $0 for 2006 and $0 for 2007.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately designated audit committee consisting of the
following members: Anthony J. Colavita, Anthony R Pustorino and Salvatore J.
Zizza.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Proxy Voting Policies are attached herewith.
THE VOTING OF PROXIES ON BEHALF OF CLIENTS
Rules 204(4)-2 and 204-2 under the Investment Advisers Act of 1940 and
Rule 30b1-4 under the Investment Company Act of 1940 require investment advisers
to adopt written policies and procedures governing the voting of proxies on
behalf of their clients.
These procedures will be used by GAMCO Asset Management Inc., Gabelli
Funds, LLC, Gabelli Securities, Inc., and Teton Advisors, Inc. (collectively,
the "Advisers") to determine how to vote proxies relating to portfolio
securities held by their clients, including the procedures that the Advisers use
when a vote presents a conflict between the interests of the shareholders of an
investment company managed by one of the Advisers, on the one hand, and those of
the Advisers; the principal underwriter; or any affiliated person of the
investment company, the Advisers, or the principal underwriter. These procedures
will not apply where the Advisers do not have voting discretion or where the
Advisers have agreed to with a client to vote the client's proxies in accordance
with specific guidelines or procedures supplied by the client (to the extent
permitted by ERISA).
I. PROXY VOTING COMMITTEE
The Proxy Voting Committee was originally formed in April 1989 for the
purpose of formulating guidelines and reviewing proxy statements within the
parameters set by the substantive proxy voting guidelines originally published
in 1988 and updated periodically, a copy of which are appended as Exhibit A. The
Committee will include representatives of Research, Administration, Legal, and
the Advisers. Additional or replacement members of the Committee will be
nominated by the Chairman and voted upon by the entire Committee.
Meetings are held as needed basis to form views on the manner in which
the Advisers should vote proxies on behalf of their clients.
In general, the Director of Proxy Voting Services, using the Proxy
Guidelines, recommendations of Institutional Shareholder Corporate Governance
Service ("ISS"), other third-party services and the analysts of Gabelli &
Company, Inc., will determine how to vote on each issue. For non-controversial
matters, the Director of Proxy Voting Services may vote the proxy if the vote is
(1) consistent with the recommendations of the issuer's Board of Directors and
not contrary to the Proxy Guidelines; (2) consistent with the recommendations of
the issuer's Board of Directors and is a non-controversial issue not covered by
the Proxy Guidelines; or (3) the vote is contrary to the recommendations of the
Board of Directors but is consistent with the Proxy Guidelines. In those
instances, the Director of Proxy Voting Services or the Chairman of the
Committee may sign and date the proxy statement indicating how each issue will
be voted.
All matters identified by the Chairman of the Committee, the Director
of Proxy Voting Services or the Legal Department as controversial, taking into
account the recommendations of ISS or other third party services and the
analysts of Gabelli & Company, Inc., will be presented to the Proxy Voting
Committee. If the Chairman of the Committee, the Director of Proxy Voting
Services or the Legal Department has identified the matter as one that (1) is
controversial; (2) would benefit from deliberation by the Proxy Voting
Committee; or (3) may give rise to a conflict of interest between the Advisers
and their clients, the Chairman of the Committee will initially determine what
vote to recommend that the Advisers should cast and the matter will go before
the Committee.
A. CONFLICTS OF INTEREST.
The Advisers have implemented these proxy voting procedures in
order to prevent conflicts of interest from influencing their
proxy voting decisions. By following the Proxy Guidelines, as
well as the recommendations of ISS, other third-party services
and the analysts of Gabelli & Company, the Advisers are able
to avoid, wherever possible, the influence of potential
conflicts of interest. Nevertheless, circumstances may arise
in which one or more of the Advisers are faced with a conflict
of interest or the appearance of a conflict of interest in
connection with its vote. In general, a conflict of interest
may arise when an Adviser knowingly does business with an
issuer, and may appear to have a material conflict between its
own interests and the interests of the shareholders of an
investment company managed by one of the Advisers regarding
how the proxy is to be voted. A conflict also may exist when
an Adviser has actual knowledge of a material business
arrangement between an issuer and an affiliate of the Adviser.
In practical terms, a conflict of interest may arise, for
example, when a proxy is voted for a company that is a client
of one of the Advisers, such as GAMCO Asset Management Inc. A
conflict also may arise when a client of one of the Advisers
has made a shareholder proposal in a proxy to be voted upon by
one or more of the Advisers. The Director of Proxy Voting
Services, together with the Legal Department, will scrutinize
all proxies for these or other situations that may give rise
to a conflict of interest with respect to the voting of
proxies.
B. OPERATION OF PROXY VOTING COMMITTEE
For matters submitted to the Committee, each member of the
Committee will receive, prior to the meeting, a copy of the
proxy statement, any relevant third party research, a summary
of any views provided by the Chief Investment Officer and any
recommendations by Gabelli & Company, Inc. analysts. The Chief
Investment Officer or the Gabelli & Company, Inc. analysts may
be invited to present their viewpoints. If the Director of
Proxy Voting Services or the Legal Department believe that the
matter before the committee is one with respect to which a
conflict of interest may exist between the Advisers and their
clients, counsel will provide an opinion to the Committee
concerning the conflict. If the matter is one in which the
interests of the clients of one or more of Advisers may
diverge, counsel will so advise and the Committee may make
different recommendations as to different clients. For any
matters where the recommendation may trigger appraisal rights,
counsel will provide an opinion concerning the likely risks
and merits of such an appraisal action.
Each matter submitted to the Committee will be determined by the vote
of a majority of the members present at the meeting. Should the vote concerning
one or more recommendations be tied in a vote of the Committee, the Chairman of
the Committee will cast the deciding vote. The Committee will notify the proxy
department of its decisions and the proxies will be voted accordingly.
Although the Proxy Guidelines express the normal preferences for the
voting of any shares not covered by a contrary investment guideline provided by
the client, the Committee is not bound by the preferences set forth in the Proxy
Guidelines and will review each matter on its own merits. Written minutes of all
Proxy Voting Committee meetings will be maintained. The Advisers subscribe to
ISS, which supplies current information on companies, matters being voted on,
regulations, trends in proxy voting and information on corporate governance
issues.
If the vote cast either by the analyst or as a result of the
deliberations of the Proxy Voting Committee runs contrary to the recommendation
of the Board of Directors of the issuer, the matter will be referred to legal
counsel to determine whether an amendment to the most recently filed Schedule
13D is appropriate.
II. SOCIAL ISSUES AND OTHER CLIENT GUIDELINES
If a client has provided special instructions relating to the voting of
proxies, they should be noted in the client's account file and forwarded to the
proxy department. This is the responsibility of the investment professional or
sales assistant for the client. In accordance with Department of Labor
guidelines, the Advisers' policy is to vote on behalf of ERISA accounts in the
best interest of the plan participants with regard to social issues that carry
an economic impact. Where an account is not governed by ERISA, the Advisers will
vote shares held on behalf of the client in a manner consistent with any
individual investment/voting guidelines provided by the client. Otherwise the
Advisers will abstain with respect to those shares.
III. CLIENT RETENTION OF VOTING RIGHTS
If a client chooses to retain the right to vote proxies or if there is
any change in voting authority, the following should be notified by the
investment professional or sales assistant for the client.
- Operations
- Legal Department
- Proxy Department
- Investment professional assigned to the account
In the event that the Board of Directors (or a Committee thereof) of
one or more of the investment companies managed by one of the Advisers has
retained direct voting control over any security, the Proxy Voting Department
will provide each Board Member (or Committee member) with a copy of the proxy
statement together with any other relevant information including recommendations
of ISS or other third-party services.
IV. VOTING RECORDS
The Proxy Voting Department will retain a record of matters voted upon
by the Advisers for their clients. The Advisers will supply information on how
an account voted its proxies upon request.
A letter is sent to the custodians for all clients for which the
Advisers have voting responsibility instructing them to forward all proxy
materials to:
[Adviser name]
Attn: Proxy Voting Department
One Corporate Center
Rye, New York 10580-1433
The sales assistant sends the letters to the custodians along with the
trading/DTC instructions. Proxy voting records will be retained in compliance
with Rule 204-2 under the Investment Advisers Act.
V. VOTING PROCEDURES
1. Custodian banks, outside brokerage firms and clearing firms are responsible
for forwarding proxies directly to the Advisers.
Proxies are received in one of two forms:
o Shareholder Vote Authorization Forms ("VAFs") - Issued by Broadridge
Financial Solutions, Inc. ("Broadridge") VAFs must be voted through the
issuing institution causing a time lag. Broadridge is an outside service
contracted by the various institutions to issue proxy materials.
o Proxy cards which may be voted directly.
2. Upon receipt of the proxy, the number of shares each form represents is
logged into the proxy system according to security.
3. In the case of a discrepancy such as an incorrect number of shares, an
improperly signed or dated card, wrong class of security, etc., the issuing
custodian is notified by phone. A corrected proxy is requested. Any arrangements
are made to insure that a proper proxy is received in time to be voted
(overnight delivery, fax, etc.). When securities are out on loan on record date,
the custodian is requested to supply written verification.
4. Upon receipt of instructions from the proxy committee (see Administrative),
the votes are cast and recorded for each account on an individual basis.
Records have been maintained on the Proxy Edge system. The system is backed up
regularly.
Proxy Edge records include:
Security Name and Cusip Number
Date and Type of Meeting (Annual, Special, Contest)
Client Name
Adviser or Fund Account Number
Directors' Recommendation
How GAMCO voted for the client on each issue
5. VAFs are kept alphabetically by security. Records for the current proxy
season are located in the Proxy Voting Department office. In preparation for the
upcoming season, files are transferred to an offsite storage facility during
January/February.
6. Shareholder Vote Authorization Forms issued by Broadridge are always sent
directly to a specific individual at Broadridge.
7. If a proxy card or VAF is received too late to be voted in the conventional
matter, every attempt is made to vote on one of the following manners:
o VAFs can be faxed to Broadridge up until the time of the meeting. This is
followed up by mailing the original form.
o When a solicitor has been retained, the solicitor is called. At the
solicitor's direction, the proxy is faxed.
8. In the case of a proxy contest, records are maintained for each opposing
entity.
9. Voting in Person
a) At times it may be necessary to vote the shares in person. In this case, a
"legal proxy" is obtained in the following manner:
o Banks and brokerage firms using the services at Broadridge:
The back of the VAF is stamped indicating that we wish to vote in person.
The forms are then sent overnight to Broadridge. Broadridge issues individual
legal proxies and sends them back via overnight (or the Adviser can pay
messenger charges). A lead-time of at least two weeks prior to the meeting is
needed to do this. Alternatively, the procedures detailed below for banks not
using Broadridge may be implemented.
o Banks and brokerage firms issuing proxies directly:
The bank is called and/or faxed and a legal proxy is requested.
All legal proxies should appoint:
"REPRESENTATIVE OF [ADVISER NAME] WITH FULL POWER OF SUBSTITUTION."
b) The legal proxies are given to the person attending the meeting along with
the following supplemental material:
o A limited Power of Attorney appointing the attendee an Adviser
representative.
o A list of all shares being voted by custodian only. Client names and account
numbers are not included. This list must be presented, along with the
proxies, to the Inspectors of Elections and/or tabulator at least one-half
hour prior to the scheduled start of the meeting. The tabulator must
"qualify" the votes (i.e. determine if the vote have previously been cast, if
the votes have been rescinded, etc. vote have previously been cast, etc.).
o A sample ERISA and Individual contract.
o A sample of the annual authorization to vote proxies form.
o A copy of our most recent Schedule 13D filing (if applicable).
APPENDIX A
PROXY GUIDELINES
PROXY VOTING GUIDELINES
GENERAL POLICY STATEMENT
It is the policy of GAMCO INVESTORS, INC. to vote in the best economic interests
of our clients. As we state in our Magna Carta of Shareholders Rights,
established in May 1988, we are neither FOR nor AGAINST management. We are for
shareholders.
At our first proxy committee meeting in 1989, it was decided that each proxy
statement should be evaluated on its own merits within the framework first
established by our Magna Carta of Shareholders Rights. The attached guidelines
serve to enhance that broad framework.
We do not consider any issue routine. We take into consideration all of our
research on the company, its directors, and their short and long-term goals for
the company. In cases where issues that we generally do not approve of are
combined with other issues, the negative aspects of the issues will be factored
into the evaluation of the overall proposals but will not necessitate a vote in
opposition to the overall proposals.
BOARD OF DIRECTORS
The advisers do not consider the election of the Board of Directors a routine
issue. Each slate of directors is evaluated on a case-by-case basis.
Factors taken into consideration include:
o Historical responsiveness to shareholders
This may include such areas as:
-Paying greenmail
-Failure to adopt shareholder resolutions receiving a majority of
shareholder votes
o Qualifications
o Nominating committee in place
o Number of outside directors on the board
o Attendance at meetings
o Overall performance
SELECTION OF AUDITORS
In general, we support the Board of Directors' recommendation for auditors.
BLANK CHECK PREFERRED STOCK
We oppose the issuance of blank check preferred stock.
Blank check preferred stock allows the company to issue stock and establish
dividends, voting rights, etc. without further shareholder approval.
CLASSIFIED BOARD
A classified board is one where the directors are divided into classes with
overlapping terms. A different class is elected at each annual meeting.
While a classified board promotes continuity of directors facilitating long
range planning, we feel directors should be accountable to shareholders on an
annual basis. We will look at this proposal on a case-by-case basis taking into
consideration the board's historical responsiveness to the rights of
shareholders.
Where a classified board is in place we will generally not support attempts to
change to an annually elected board.
When an annually elected board is in place, we generally will not support
attempts to classify the board.
INCREASE AUTHORIZED COMMON STOCK
The request to increase the amount of outstanding shares is considered on a
case-by-case basis.
Factors taken into consideration include:
o Future use of additional shares
-Stock split
-Stock option or other executive compensation plan
-Finance growth of company/strengthen balance sheet
-Aid in restructuring
-Improve credit rating
-Implement a poison pill or other takeover defense
o Amount of stock currently authorized but not yet issued or reserved for
stock option plans
o Amount of additional stock to be authorized and its dilutive effect
We will support this proposal if a detailed and verifiable plan for the use of
the additional shares is contained in the proxy statement.
CONFIDENTIAL BALLOT
We support the idea that a shareholder's identity and vote should be treated
with confidentiality.
However, we look at this issue on a case-by-case basis.
In order to promote confidentiality in the voting process, we endorse the use of
independent Inspectors of Election.
CUMULATIVE VOTING
In general, we support cumulative voting.
Cumulative voting is a process by which a shareholder may multiply the number of
directors being elected by the number of shares held on record date and cast the
total number for one candidate or allocate the voting among two or more
candidates.
Where cumulative voting is in place, we will vote against any proposal to
rescind this shareholder right.
Cumulative voting may result in a minority block of stock gaining representation
on the board. When a proposal is made to institute cumulative voting, the
proposal will be reviewed on a case-by-case basis. While we feel that each board
member should represent all shareholders, cumulative voting provides minority
shareholders an opportunity to have their views represented.
DIRECTOR LIABILITY AND INDEMNIFICATION
We support efforts to attract the best possible directors by limiting the
liability and increasing the indemnification of directors, except in the case of
insider dealing.
EQUAL ACCESS TO THE PROXY
The SEC's rules provide for shareholder resolutions. However, the resolutions
are limited in scope and there is a 500 word limit on proponents' written
arguments. Management has no such limitations. While we support equal access to
the proxy, we would look at such variables as length of time required to
respond, percentage of ownership, etc.
FAIR PRICE PROVISIONS
Charter provisions requiring a bidder to pay all shareholders a fair price are
intended to prevent two-tier tender offers that may be abusive. Typically, these
provisions do not apply to board-approved transactions.
We support fair price provisions because we feel all shareholders should be
entitled to receive the same benefits.
Reviewed on a case-by-case basis.
GOLDEN PARACHUTES
Golden parachutes are severance payments to top executives who are terminated or
demoted after a takeover.
We support any proposal that would assure management of its own welfare so that
they may continue to make decisions in the best interest of the company and
shareholders even if the decision results in them losing their job. We do not,
however, support excessive golden parachutes. Therefore, each proposal will be
decided on a case-by-case basis.
NOTE: CONGRESS HAS IMPOSED A TAX ON ANY PARACHUTE THAT IS MORE THAN THREE TIMES
THE EXECUTIVE'S AVERAGE ANNUAL COMPENSATION.
ANTI-GREENMAIL PROPOSALS
We do not support greenmail. An offer extended to one shareholder should be
extended to all shareholders equally across the board.
LIMIT SHAREHOLDERS' RIGHTS TO CALL SPECIAL MEETINGS
We support the right of shareholders to call a special meeting.
CONSIDERATION OF NONFINANCIAL EFFECTS OF A MERGER
This proposal releases the directors from only looking at the financial effects
of a merger and allows them the opportunity to consider the merger's effects on
employees, the community, and consumers.
As a fiduciary, we are obligated to vote in the best economic interests of our
clients. In general, this proposal does not allow us to do that. Therefore, we
generally cannot support this proposal.
Reviewed on a case-by-case basis.
MERGERS, BUYOUTS, SPIN-OFFS, RESTRUCTURINGS
Each of the above is considered on a case-by-case basis. According to the
Department of Labor, we are not required to vote for a proposal simply because
the offering price is at a premium to the current market price. We may take into
consideration the long term interests of the shareholders.
MILITARY ISSUES
Shareholder proposals regarding military production must be evaluated on a
purely economic set of criteria for our ERISA clients. As such, decisions will
be made on a case-by-case basis.
In voting on this proposal for our non-ERISA clients, we will vote according to
the client's direction when applicable. Where no direction has been given, we
will vote in the best economic interests of our clients. It is not our duty to
impose our social judgment on others.
NORTHERN IRELAND
Shareholder proposals requesting the signing of the MacBride principles for the
purpose of countering the discrimination of Catholics in hiring practices must
be evaluated on a purely economic set of criteria for our ERISA clients. As
such, decisions will be made on a case-by-case basis.
In voting on this proposal for our non-ERISA clients, we will vote according to
client direction when applicable. Where no direction has been given, we will
vote in the best economic interests of our clients. It is not our duty to impose
our social judgment on others.
OPT OUT OF STATE ANTI-TAKEOVER LAW
This shareholder proposal requests that a company opt out of the coverage of the
state's takeover statutes. Example: Delaware law requires that a buyer must
acquire at least 85% of the company's stock before the buyer can exercise
control unless the board approves.
We consider this on a case-by-case basis. Our decision will be based on the
following:
o State of Incorporation
o Management history of responsiveness to shareholders
o Other mitigating factors
POISON PILL
In general, we do not endorse poison pills.
In certain cases where management has a history of being responsive to the needs
of shareholders and the stock is very liquid, we will reconsider this position.
REINCORPORATION
Generally, we support reincorporation for well-defined business reasons. We
oppose reincorporation if proposed solely for the purpose of reincorporating in
a state with more stringent anti-takeover statutes that may negatively impact
the value of the stock.
STOCK OPTION PLANS
Stock option plans are an excellent way to attract, hold and motivate directors
and employees. However, each stock option plan must be evaluated on its own
merits, taking into consideration the following:
o Dilution of voting power or earnings per share by more than 10%
o Kind of stock to be awarded, to whom, when and how much
o Method of payment
o Amount of stock already authorized but not yet issued under existing
stock option plans
SUPERMAJORITY VOTE REQUIREMENTS
Supermajority vote requirements in a company's charter or bylaws require a level
of voting approval in excess of a simple majority of the outstanding shares. In
general, we oppose supermajority-voting requirements. Supermajority requirements
often exceed the average level of shareholder participation. We support
proposals' approvals by a simple majority of the shares voting.
LIMIT SHAREHOLDERS RIGHT TO ACT BY WRITTEN CONSENT
Written consent allows shareholders to initiate and carry on a shareholder
action without having to wait until the next annual meeting or to call a special
meeting. It permits action to be taken by the written consent of the same
percentage of the shares that would be required to effect proposed action at a
shareholder meeting.
Reviewed on a case-by-case basis.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
PORTFOLIO MANAGER
Mr. Mario J. Gabelli, CFA, is primarily responsible for the day-to-day
management of The Gabelli Equity Trust Inc., (the Trust). Mr. Gabelli has served
as Chairman, Chief Executive Officer, and Chief Investment Officer -Value
Portfolios of GAMCO Investors, Inc. and its affiliates since their organization.
Additionally, Mr. Caesar M. P. Bryan manages a portion of the Trust's assets.
Mr. Bryan is a Senior Vice President and Portfolio Manager with GAMCO Asset
Management Inc. (a wholly owned subsidiary of GAMCO Investors, Inc.) since 1994.
MANAGEMENT OF OTHER ACCOUNTS
The table below shows the number of other accounts managed by the Portfolio
Managers and the total assets in each of the following categories: registered
investment companies, other paid investment vehicles and other accounts. For
each category, the table also shows the number of accounts and the total assets
in the accounts with respect to which the advisory fee is based on account
performance.
--------------------------- ------------------- ------------------- -------------- ----------------- ----------------
Total Assets
No. of Accounts in Accounts
Total where Advisory where Advisory
Name of Portfolio Type of No. of Accounts Total Fee is Based on Fee is Based
Manager Accounts Managed Assets Performance on Performance
--------------------------- ------------------- ------------------- -------------- ----------------- ----------------
1. Mario J. Gabelli Registered 23 $13.9B 6 $3.6B
Investment
Companies:
--------------------------- ------------------- ------------------- -------------- ----------------- ----------------
Other Pooled 12 $269.6M 11 $188.6M
Investment
Vehicles:
--------------------------- ------------------- ------------------- -------------- ----------------- ----------------
Other Accounts: 1991 $10.6B 6 $1.6B
--------------------------- ------------------- ------------------- -------------- ----------------- ----------------
2. Caesar M.P. Bryan Registered 4 $1.2B 0 $0
Investment
Companies:
--------------------------- ------------------- ------------------- -------------- ----------------- ----------------
Other Pooled 2 $6.3M 2 $6.3M
Investment
Vehicles:
--------------------------- ------------------- ------------------- -------------- ----------------- ----------------
Other Accounts: 5 $57.0M 0 $0
--------------------------- ------------------- ------------------- -------------- ----------------- ----------------
POTENTIAL CONFLICTS OF INTEREST
As reflected above, the Portfolio Managers manage accounts in addition to the
Trust. Actual or apparent conflicts of interest may arise when a Portfolio
Manager also has day-to-day management responsibilities with respect to one or
more other accounts. These potential conflicts include:
ALLOCATION OF LIMITED TIME AND ATTENTION. As indicated above, the Portfolio
Managers manage multiple accounts. As a result, they will not be able to devote
all of their time to management of the Trust. The Portfolio Manager, therefore,
may not be able to formulate as complete a strategy or identify equally
attractive investment opportunities for each of those accounts as might be the
case if he were to devote all of his attention to the management of only the
Trust.
ALLOCATION OF LIMITED INVESTMENT OPPORTUNITIES. As indicated above, the
Portfolio Managers manage managed accounts with investment strategies and/or
policies that are similar to the Trust. In these cases, if he identifies an
investment opportunity that may be suitable for multiple accounts, a Fund may
not be able to take full advantage of that opportunity because the opportunity
may be allocated among all or many of these accounts or other accounts managed
primarily by other Portfolio Managers of the Adviser, and their affiliates. In
addition, in the event the Portfolio Manager determines to purchase a security
for more than one account in an aggregate amount that may influence the market
price of the security, accounts that purchased or sold the security first may
receive a more favorable price than accounts that made subsequent transactions.
SELECTION OF BROKER/DEALERS. Because of Mr. Gabelli's position with the
Distributor and his indirect majority ownership interest in the Distributor, he
may have an incentive to use the Distributor to execute portfolio transactions
for a Fund.
PURSUIT OF DIFFERING STRATEGIES. At times, the Portfolio Manager may determine
that an investment opportunity may be appropriate for only some of the accounts
for which he exercises investment responsibility, or may decide that certain of
the funds or accounts should take differing positions with respect to a
particular security. In these cases, he may execute differing or opposite
transactions for one or more accounts which may affect the market price of the
security or the execution of the transaction, or both, to the detriment of one
or more other accounts.
VARIATION IN COMPENSATION. A conflict of interest may arise where the financial
or other benefits available to the Portfolio Managers differ among the accounts
that they manage. If the structure of the Adviser's management fee or the
Portfolio Manager's compensation differs among accounts (such as where certain
accounts pay higher management fees or performance-based management fees), the
Portfolio Manager may be motivated to favor certain accounts over others. The
Portfolio Manager also may be motivated to favor accounts in which he has an
investment interest, or in which the Adviser, or their affiliates have
investment interests. Similarly, the desire to maintain assets under management
or to enhance a Portfolio Manager's performance record or to derive other
rewards, financial or otherwise, could influence the Portfolio Manager in
affording preferential treatment to those accounts that could most significantly
benefit the Portfolio Manager. For example, as reflected above, if the Portfolio
Manager manages accounts which have performance fee arrangements, certain
portions of his compensation will depend on the achievement of performance
milestones on those accounts. The Portfolio Manager could be incented to afford
preferential treatment to those accounts and thereby by subject to a potential
conflict of interest.
The Adviser, and the Funds have adopted compliance policies and procedures that
are designed to address the various conflicts of interest that may arise for the
Adviser and their staff members. However, there is no guarantee that such
policies and procedures will be able to detect and prevent every situation in
which an actual or potential conflict may arise.
COMPENSATION STRUCTURE FOR MARIO J. GABELLI
Mr. Gabelli receives incentive-based variable compensation based on a percentage
of net revenues received by the Adviser for managing the Trust. Net revenues are
determined by deducting from gross investment management fees the firm's
expenses (other than Mr. Gabelli's compensation) allocable to this Trust. Five
closed-end registered investment companies (including this Trust) managed by Mr.
Gabelli have arrangements whereby the Adviser will only receive its investment
advisory fee attributable to the liquidation value of outstanding preferred
stock (and Mr. Gabelli would only receive his percentage of such advisory fee)
if certain performance levels are met. Additionally, he receives similar
incentive based variable compensation for managing other accounts within the
firm and its affiliates. This method of compensation is based on the premise
that superior long-term performance in managing a portfolio should be rewarded
with higher compensation as a result of growth of assets through appreciation
and net investment activity. The level of compensation is not determined with
specific reference to the performance of any account against any specific
benchmark. One of the other registered investment companies managed by Mr.
Gabelli has a performance (fulcrum) fee arrangement for which his compensation
is adjusted up or down based on the performance of the investment company
relative to an index. Mr. Gabelli manages other accounts with performance fees.
Compensation for managing these accounts has two components. One component is
based on a percentage of net revenues to the investment adviser for managing the
account. The second component is based on absolute performance of the account,
with respect to which a percentage of such performance fee is paid to Mr.
Gabelli. As an executive officer of the Adviser's parent company, GBL, Mr.
Gabelli also receives ten percent of the net operating profits of the parent
company. He receives no base salary, no annual bonus, and no stock options.
COMPENSATION STRUCTURE FOR CAESAR M. P. BRYAN
The compensation of Mr. Bryan for the Trust is structured to enable the Adviser
to attract and retain highly qualified professionals in a competitive
environment. The Portfolio Manager receives a compensation package that includes
a minimum draw or base salary, equity-based incentive compensation via awards of
stock options, and incentive based variable compensation based on a percentage
of net revenue received by the Adviser for managing the Trust to the extent that
the amount exceeds a minimum level of compensation. Net revenues are determined
by deducting from gross investment management fees certain of the firm's
expenses (other than the Portfolio Managers' compensation) allocable to the
Trust (the incentive-based variable compensation for managing other accounts is
also based on a percentage of net revenues to the investment adviser for
managing the account). This method of compensation is based on the premise that
superior long-term performance in managing a portfolio should be rewarded with
higher compensation as a result of growth of assets through appreciation and net
investment activity. The level of equity-based incentive and incentive-based
variable compensation is based on an evaluation by the Adviser's parent, GBL, of
quantitative and qualitative performance evaluation criteria. This evaluation
takes into account, in a broad sense, the performance of the accounts managed by
the Portfolio Manager, but the level of compensation is not determined with
specific reference to the performance of any account against any specific
benchmark. Generally, greater consideration is given to the performance of
larger accounts and to longer term performance over smaller accounts and
short-term performance.
OWNERSHIP OF SHARES IN THE FUND
Mario Gabelli and Caesar M. P. Bryan owned over $1,000,000 and $0, respectively,
of shares of the Trust as of December 31, 2007.
(B) Not applicable.
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
SHARES (OR UNITS) (B) AVERAGE PRICE PAID PER PUBLICLY ANNOUNCED PLANS YET BE PURCHASED UNDER THE
PERIOD PURCHASED SHARE (OR UNIT) OR PROGRAMS PLANS OR PROGRAMS
============= ========================= ========================== ========================== ===============================
Month #1 Common - N/A Common - N/A Common - N/A Common - 170,213,012
07/01/07
through Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
07/31/07
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 - 170,213,012
08/01/07
through Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
08/31/07
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 - 170,948,268
09/01/07
through Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
09/30/07
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 - 170,948,268
10/01/07
through Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
10/31/07
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 - 170,948,268
11/01/07
through Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
11/30/07
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 - 172,104,290
12/01/07
through Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
12/31/07
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) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) The Gabelli Equity Trust Inc.
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By (Signature and Title)* /s/ Bruce N. Alpert
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Bruce N. Alpert, Principal Executive Officer
Date 03/07/08
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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
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Bruce N. Alpert, Principal Executive Officer
Date 03/07/08
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By (Signature and Title)* /s/ Agnes Mullady
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Agnes Mullady,
Principal Financial Officer and Treasurer
Date 03/07/08
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* Print the name and title of each signing officer under his or her signature.