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
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The Gabelli Equity Trust Inc.
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(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
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(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
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Date of fiscal year end: December 31
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Date of reporting period: June 30, 2006
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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 OMITTED]
THE GABELLI
EQUITY TRUST INC.
THE GABELLI EQUITY TRUST INC.
Semi-Annual Report
June 30, 2006
TO OUR SHAREHOLDERS,
During the second quarter of 2006, the Gabelli Equity Trust's (the "Fund")
total return was 1.5% on a net asset value ("NAV") basis while the Standard &
Poor's ("S&P") 500 Index declined 1.4% and the Dow Jones Industrial Average
("DJIA") rose 0.9%. For the six month period ended June 30, 2006, the Fund's NAV
total return was 10.3% versus gains of 2.7% and 5.3% for the S&P 500 Index and
the DJIA, respectively. For the one year period ended June 30, 2006, the Fund's
NAV total return was 15.6% versus increases for the S&P 500 Index and DJIA of
8.6% and 11.1%, respectively. The Fund's market price on June 30, 2006 was
$8.21, which equates to a 3.9% discount to its NAV of $8.54. The Fund's market
price declined 1.1% during the second quarter and has risen 6.9% and 3.7%,
respectively, for the six and twelve month periods ended June 30, 2006.
Enclosed are the financial statements and the investment portfolio as of
June 30, 2006.
COMPARATIVE RESULTS
--------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 2006 (A)
------------------------------------------------
Since
Year to Inception
Quarter Date 1 Year 3 Year 5 Year 10 Year 15 Year (8/21/86)
--------------------------------------------------------------------------------------------------------------------
GABELLI EQUITY TRUST
NAV RETURN (B) ...................... 1.52% 10.30% 15.62% 19.52% 8.65% 10.72% 11.80% 11.96%
INVESTMENT RETURN (C) ............... (1.06) 6.93 3.70 14.00 4.02 10.45 11.29 11.30
S&P 500 Index ......................... (1.44) 2.71 8.62 11.21 2.49 8.32 10.73 11.11
Dow Jones Industrial Average .......... 0.93 5.25 11.07 9.95 3.47 9.17 11.87 12.25
Nasdaq Composite Index ................ (7.17) (1.51) 5.60 10.21 0.10 6.25 10.65 9.16
(a) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND THE PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE.
WHEN SHARES ARE SOLD, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA
PRESENTED. VISIT WWW.GABELLI.COM FOR PERFORMANCE INFORMATION AS OF THE MOST
RECENT MONTH END. PERFORMANCE RETURNS FOR LESS THAN ONE YEAR ARE NOT
ANNUALIZED. INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES,
RISKS, CHARGES, AND EXPENSES OF THE FUND BEFORE INVESTING. THE DOW JONES
INDUSTRIAL AVERAGE IS AN UNMANAGED INDEX OF 30 LARGE INDUSTRIAL STOCKS. THE
S&P 500 AND THE NASDAQ COMPOSITE INDICES ARE UNMANAGED INDICATORS OF STOCK
MARKET PERFORMANCE. DIVIDENDS ARE CONSIDERED REINVESTED EXCEPT FOR THE
NASDAQ COMPOSITE INDEX.
(b) TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN NAV,
REINVESTMENT OF DISTRIBUTIONS AT NAV ON THE EX-DIVIDEND DATE, ADJUSTMENTS
FOR RIGHTS OFFERINGS, SPIN-OFFS, AND TAXES PAID ON UNDISTRIBUTED LONG-TERM
CAPITAL GAINS, AND ARE NET OF EXPENSES. SINCE INCEPTION RETURN IS BASED ON
AN INITIAL NET ASSET VALUE OF $9.34.
(c) TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN CLOSING MARKET
VALUES ON THE NEW YORK STOCK EXCHANGE, REINVESTMENT OF DISTRIBUTIONS,
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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
We have separated the portfolio manager's commentary from the financial
statements and investment portfolio due to corporate governance regulations
stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that
the content of the portfolio manager's commentary is unrestricted. The financial
statements and investment portfolio are mailed separately from the commentary.
Both the commentary and the financial statements, including the portfolio of
investments, will be available on our website at www.gabelli.com/funds.
--------------------------------------------------------------------------------
THE GABELLI EQUITY TRUST INC.
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total
investments as of June 30, 2006:
Repurchase Agreements .............................. 12.7%
Financial Services ................................. 8.3%
Energy and Utilities ............................... 8.3%
Food and Beverage .................................. 8.0%
Telecommunications ................................. 6.6%
Diversified Industrial ............................. 5.8%
Publishing ......................................... 4.9%
Entertainment ...................................... 4.4%
Consumer Products .................................. 4.4%
Cable and Satellite ................................ 4.2%
Health Care ........................................ 3.3%
Equipment and Supplies ............................. 3.1%
Automotive: Parts and Accessories .................. 2.8%
Hotels and Gaming .................................. 2.6%
Aviation: Parts and Services ....................... 2.2%
Consumer Services .................................. 1.7%
Communications Equipment ........................... 1.7%
Broadcasting ....................................... 1.5%
Aerospace .......................................... 1.4%
Agriculture ........................................ 1.4%
Machinery .......................................... 1.2%
Environmental Services ............................. 1.1%
Specialty Chemicals ................................ 1.0%
Wireless Communications ............................ 1.0%
Metals and Mining .................................. 0.9%
Business Services .................................. 0.9%
Real Estate ........................................ 0.8%
Automotive ......................................... 0.7%
Retail ............................................. 0.7%
Electronics ........................................ 0.6%
Transportation ..................................... 0.4%
Closed-End Funds ................................... 0.3%
Computer Software and Services ..................... 0.3%
U.S. Government Obligations ........................ 0.3%
Manufactured Housing and Recreational Vehicles ..... 0.2%
Paper and Forest Products .......................... 0.2%
Real Estate Investment Trusts ...................... 0.1%
-----
100.0%
=====
THE GABELLI EQUITY TRUST INC. (THE "FUND") FILES A COMPLETE SCHEDULE OF
PORTFOLIO HOLDINGS WITH THE SEC FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL
YEAR ON FORM N-Q, THE LAST OF WHICH WAS FILED FOR THE QUARTER ENDED MARCH 31,
2006. 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
COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE
OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING
1-800-SEC-0330.
PROXY VOTING
The 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, (i)
by calling 800-GABELLI (800-422-3554); (ii) by writing to The Gabelli Funds at
One Corporate Center, Rye, NY 10580-1422; and (iii) by visiting the Securities
and Exchange Commission's website at www.sec.gov.
SHAREHOLDER MEETING - MAY 15, 2006 - FINAL RESULTS
The Annual Meeting of Shareholders was held on May 15, 2006 at the
Greenwich Library in Greenwich, Connecticut. At that meeting, common and
preferred shareholders voting together as a single class elected Anthony R.
Pustorino as a Director of the Fund. There were 154,489,180 votes cast in favor
of Mr. Pustorino and 2,492,111 votes withheld. In addition, preferred
shareholders voting as a single class elected James P. Conn as a Director. There
were 9,118,257 votes cast in favor of Mr. Conn and 83,386 votes withheld.
Mario J. Gabelli, Thomas E. Bratter, Anthony J. Colavita, Frank J.
Fahrenkopf, Jr., Arthur V. Ferrara, and Salvatore J. Zizza continue to serve in
their capacities as Directors.
We thank you for your participation and appreciate your continued support.
2
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES
QUARTER ENDED JUNE 30, 2006 (UNAUDITED)
OWNERSHIP AT
JUNE 30,
SHARES 2006
-------- ---------------
NET PURCHASES
COMMON STOCKS
ARIAKE JAPAN Co. Ltd. ...................... 2,000 36,000
Arkema (a) ................................. 815 815
Assa Abloy AB, Cl. B ....................... 42,000 42,000
Bayer AG ................................... 26,000 26,000
Canon Inc. (b) ............................. 7,500 22,500
Citigroup Inc. ............................. 25,000 150,000
Coca-Cola Co. .............................. 20,000 100,000
ConocoPhillips (c) ......................... 277,739 322,739
Curtiss-Wright Corp. (d) ................... 198,000 396,000
Duke Energy Corp. (e) ...................... 280,000 280,000
Embarq Corp. (f) ........................... 26,619 26,619
Fortune Brands Inc. ........................ 20,000 50,000
Gallaher Group plc ......................... 20,000 50,000
General Motors Corp. ....................... 30,000 30,000
Host Hotels & Resorts Inc. (g) ............. 20,000 20,000
Imperial Oil Ltd. (h) ...................... 27,000 27,000
Janus Capital Group Inc. ................... 20,000 80,000
Kerr-McGee Corp. (d) ....................... 250,001 270,000
Kinder Morgan Inc. ......................... 3,100 3,100
Ladbrokes plc (i) .......................... 1,344,116 1,344,116
Leucadia National Corp. (d) ................ 66,000 136,000
Liberty Media Holding Corp. -
Capital, Cl. A (j) ....................... 110,000 110,000
Liberty Media Holding Corp. -
Interactive, Cl. A (j) ................... 550,000 550,000
Manitowoc Co. Inc. (d) ..................... 1,000 2,000
MasterCard Inc., Cl. A ..................... 119,000 119,000
McClatchy Co., Cl A (k) .................... 9,212 14,212
Mirant Corp. ............................... 6,206 10,000
Modern Times Group AB, Cl. B (l) ........... 30,000 30,000
Modern Times Group AB, Cl. B,
Redeemable Shares (l) .................... 30,000 30,000
Moody's Corp. .............................. 5,000 65,000
Navistar International Corp. ............... 30,000 360,000
Niko Resources Ltd. ........................ 1,000 1,000
Oceaneering International Inc. (d) ......... 10,000 20,000
Procter & Gamble Co. ....................... 30,250 300,000
Sasol Ltd. ................................. 13,000 13,000
Sequa Corp., Cl. A (m) ..................... 4,230 88,230
Sprint Nextel Corp. ........................ 17,613 550,000
Superior Industries International Inc. ..... 1,000 31,000
SUPERVALU Inc. (n) ......................... 50,960 50,960
Svenska Cellulosa AB, Cl. B ................ 4,000 4,000
T. Rowe Price Group Inc. (d) ............... 75,000 150,000
Total SA (o) ............................... 32,628 32,628
Tribune Co. ................................ 25,900 340,900
Trinity Industries Inc. (p) ................ 25,000 75,000
UniCredito Italiano SpA .................... 90,000 90,000
UnitedHealth Group Inc. .................... 20,000 20,000
Univision Communications Inc., Cl. A ....... 5,000 5,000
Waddell & Reed Financial Inc., Cl. A ....... 30,000 100,000
Western Gas Resources Inc. ................. 140,000 140,000
OWNERSHIP AT
JUNE 30,
SHARES 2006
-------- ---------------
Woolworths Ltd. ............................ 43,000 63,000
Wm. Wrigley Jr. Co., Cl. B (q) ............. 42,500 42,500
NET SALES
COMMON STOCKS
Abgenix Inc. (r) ........................... (133,700) --
Acuity Brands Inc. ......................... (10,000) 150,000
Albertson's Inc. (n) ....................... (280,000) --
Allergan Inc. .............................. (1) 7,023
Altadis SA ................................. (6,000) 24,000
America Movil SA de CV, Cl. L, ADR ........ (10,000) 200,000
Ameriprise Financial Inc. .................. (10,000) 100,000
AMETEK Inc. ................................ (3,000) 185,000
Andrew Corp. ............................... (15,000) 10,000
Archer-Daniels-Midland Co. ................. (335,000) 605,000
Arden Realty Inc. (s) ...................... (100,000) --
Autonation Inc. (t) ........................ (60,748) 169,252
Aztar Corp. ................................ (75,000) 40,000
Bank of America Corp. ...................... (5,000) 10,000
BCE Inc. ................................... (10,000) 250,000
BT Group plc ............................... (60,000) 1,700,000
Burlington Resources Inc. (c) .............. (385,000) --
Cendant Corp. .............................. (20,000) 80,000
Chiron Corp. (u) ........................... (400,000) --
Cincinnati Bell Inc. ....................... (20,000) 840,000
Cinergy Corp. (e) .......................... (40,000) --
Citizens Communications Co. ................ (10,000) 60,000
CLARCOR Inc. ............................... (2,700) 197,300
CMS Energy Corp. ........................... (5,000) 80,000
Coldwater Creek Inc. ....................... (14,000) 37,000
Comcast Corp., Cl. A ....................... (50,000) 270,000
Compagnie Financiere Richemont AG, Cl. A ... (21,000) 69,000
Corning Inc. ............................... (10,000) 480,000
Crane Co. .................................. (10,000) 260,000
CRH plc .................................... (23,000) 77,500
Dana Corp. ................................. (40,000) 460,000
Deere & Co. ................................ (20,000) 235,000
Deutsche Bank AG, ADR ...................... (2,000) 150,000
Donaldson Co. Inc. ......................... (3,000) 205,000
Duke Energy Corp. .......................... (250,000) --
Dun & Bradstreet Corp. ..................... (2,000) 18,000
El Paso Electric Co. ....................... (7,000) 360,000
EMI Group plc, ADR ......................... (500) 79,500
Fedders Corp. .............................. (5,000) 70,000
Fleetwood Enterprises ...................... (10,000) 40,000
Flowers Foods Inc. ......................... (5,000) 80,000
H.B. Fuller Co. ............................ (5,000) 25,000
Gemstar-TV Guide International Inc. ........ (10,000) 630,000
GrafTech International Ltd. ................ (5,000) 80,000
Gray Television Inc., Cl. A ................ (500) 27,000
Greek Organization of
Football Prognostics SA .................. (20,000) 35,000
Greif Inc., Cl. A .......................... (2,000) 228,000
See accompanying notes to financial statements.
3
THE GABELLI EQUITY TRUST INC.
PORTFOLIO CHANGES (CONTINUED)
QUARTER ENDED JUNE 30, 2006 (UNAUDITED)
OWNERSHIP AT
JUNE 30,
SHARES 2006
-------- ---------------
NET SALES (CONTINUED)
COMMON STOCKS (CONTINUED)
Group 4 Securicor plc ...................... (12,500) 200,000
Grupo Televisa SA, ADR ..................... (5,000) 675,000
Harley-Davidson Inc. ....................... (4,000) 36,000
Hercules Inc. .............................. (10,000) 190,000
Huttig Building Products Inc. .............. (1,222) 31,000
IDEX Corp. ................................. (5,000) 215,000
Johnson Controls Inc. ...................... (7,000) 133,000
Kellogg Co. ................................ (5,000) 140,000
Keyence Corp. .............................. (800) 4,920
Knight-Ridder Inc. (k) ..................... (18,000) --
Lamson & Sessions Co. ...................... (50,000) 75,000
Landauer Inc. .............................. (1,000) 94,000
Lenox Group Inc. ........................... (10,000) 40,000
Liberty Global Inc., Cl. C ................. (10,999) 139,001
Liberty Media Corp., Cl. A (j) ............. (2,200,000) --
Lockheed Martin Corp. ...................... (1,000) 12,000
Media General Inc., Cl. A .................. (8,000) 322,000
Meredith Corp. ............................. (2,000) 122,000
Modern Times Group, Cl. B .................. (30,000) --
Modine Manufacturing Co. ................... (12,500) 317,500
Motorola Inc. .............................. (5,000) 105,000
National Presto Industries Inc. ............ (2,000) 25,000
New York Times Co., Cl. A .................. (5,000) 70,000
Newmont Mining Corp. ....................... (25,000) 105,000
Nextel Partners Inc., Cl. A (v) ............ (600,000) --
Nikko Cordial Corp. ........................ (20,000) 108,750
Nippon Television Network Corp. ............ (7,800) --
Northrop Grumman Corp. ..................... (5,000) 100,000
PepsiAmericas Inc. ......................... (15,000) 465,000
Petroleo Brasileiro SA, ADR ................ (5,000) 18,000
Phoenix Companies Inc. ..................... (5,000) 140,000
PRIMEDIA Inc. .............................. (3,000) 387,000
Qwest Communications International Inc. .... (70,000) 830,000
Roche Holding AG ........................... (1,700) 16,400
Rogers Communications Inc., Cl. B,
New York ................................. (10,000) 385,345
Rohm Co. Ltd. .............................. (9,500) --
Sanofi-Aventis ............................. (8,700) 15,108
Schering AG ................................ (9,600) --
Seven & I Holdings Co. Ltd. ................ (5,000) 39,800
Six Flags Inc. ............................. (5,000) 75,000
St. Joe. Co. ............................... (5,000) 160,000
Standard Motor Products Inc. ............... (5,000) 160,000
Sybron Dental Specialties Inc. (w) ......... (50,000) --
Telefonica SA, ADR ......................... (4,799) 250,001
Telephone & Data Systems Inc.,
Special .................................. (10,000) 380,000
TELUS Corp., ADR ........................... (3,000) 27,000
Thomas & Betts Corp. ....................... (18,000) 290,000
Thomas Nelson Inc. (x) ..................... (80,000) --
Tokai Carbon Co. Ltd. ...................... (25,000) 165,000
SHARES/ OWNERSHIP AT
PRINCIPAL JUNE 30,
AMOUNT 2006
-------- ---------------
Tronox Inc., Cl. B ......................... (1) 4,032
TXU Corp. .................................. (6,000) 86,000
Viacom Inc., Cl. A ......................... (10,000) 440,000
Vivo Participacoes SA, ADR ................. (1) 174,122
Vodafone Group plc, ADR .................... (10,000) 80,000
Waste Management Inc. ...................... (20,000) 470,000
Watts Water Technologies Inc., Cl. A ....... (5,000) 225,000
CONVERTIBLE PREFERRED STOCKS
Sequa Corp., $5 Cv. Pfd. (m) ............... (3,200) --
CONVERTIBLE CORPORATE BONDS
Charter Communications Inc., Cv.,
4.750%, 06/01/06 ......................... $ (500,000) --
U.S. GOVERNMENT & AGENCY OBLIGATIONS
FHLB, 3.060%, 04/13/06 ..................... (500,000) --
U.S. Treasury Note, 4.625%, 05/15/06 ....... (300,000) --
----------------
(a) Rights Exercised - 1 share of Arkema for every 10 rights issued by Total SA
(b) 50% stock dividend
(c) Cash and Stock Merger - $46.50 for every 1 share and 0.7214 share of
ConocoPhillips for every 1 share of Burlington Resources Inc.
(d) 2 for 1 stock split
(e) Merger - 1.5600 shares of Duke Energy Corp for every 1 share of Cinergy
Corp.
(f) Spin-off - 1 share of Embarq Corp. for every 20 shares of Sprint Nextel
Corp.
(g) Spin-off - 0.6122 share of Host Hotels & Resorts Inc. for every 1 share of
Starwood Hotel & Resorts Worldwide Inc.
(h) 3 for 1 stock split
(i) Reverse Split - 6:17
(j) Merger - 0.2500 share of Liberty Media Holding Corp. - Interactive, Cl. A
and 0.0500 share of Liberty Media Holding Corp. - Capital, Cl. A for every 1
share of Liberty Media Corp., Cl. A
(k) Cash and Stock Merger - $40.00 for every 1 share and 0.5118 share of
McClatchy Co., Cl. A for every 1 share of Knight-Ridder Inc.
(l) Spin-off - 1 share of Modern Times Group AB, Cl. B, Redeemable Shares for
every 1 share of Modern Times Group AB, Cl. B
(m) Exchange Shares - 1.3220 shares of Sequa Corp., Cl. A for 1 share Sequa
Corp., $5.00 Cv. Pfd.
(n) Merger - 0.1820 share of SUPERVALU Inc. for every 1 share of Ablertson's
Inc.
(o) 4 for 1 stock split
(p) 3 for 2 stock split
(q) Spin-off - 0.2500 share of Wm. Wrigley Jr. Co., Cl. B for every 1 share of
Wm. Wrigley Jr. Co.
(r) Cash Merger - $22.50 for every 1 share
(s) Cash Merger - $45.25 for every 1 share
(t) Pro-rated Tender Offer - $23.00 for every .26412 share
(u) Cash Merger - $48.00 for every 1 share
(v) Cash Merger - $28.50 for every 1 share
(w) Tender Offer - $47.00 for every 1 share
(x) Cash Merger - $29.85 for every 1 share
See accompanying notes to financial statements.
4
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 2006 (UNAUDITED)
MARKET
SHARES COST VALUE
-------- ---- --------
COMMON STOCKS -- 86.7%
FINANCIAL SERVICES -- 8.3%
7,000 Allianz AG .................... $ 866,497 $ 1,105,918
550,000 American Express Co. .......... 26,001,250 29,271,000
100,000 Ameriprise Financial Inc. ..... 2,466,156 4,467,000
30,000 Argonaut Group Inc.+ .......... 752,879 901,200
95,000 Aviva plc ..................... 1,163,351 1,344,795
90,000 Banco Santander Central
Hispano SA, ADR ............. 322,130 1,315,800
10,000 Bank of America Corp. ......... 469,200 481,000
100,000 Bank of Ireland ............... 584,533 1,784,275
75,000 Bank of New York Co. Inc. ..... 2,749,625 2,415,000
275,000 Bankgesellschaft Berlin AG+ ... 5,495,399 1,565,238
260 Berkshire Hathaway
Inc.,Cl. A+ ................. 1,074,049 23,831,340
7,500 Calamos Asset Management
Inc., Cl. A ................. 135,000 217,425
150,000 Citigroup Inc. ................ 7,216,958 7,236,000
185,000 Commerzbank AG, ADR ........... 3,747,342 6,715,704
22,000 Credit Suisse Group ........... 986,436 1,230,870
150,000 Deutsche Bank AG .............. 13,166,572 16,875,000
18,000 Dun and Bradstreet Corp.+ ..... 395,898 1,254,240
20,000 H&R Block Inc. ................ 329,930 477,200
65,000 Irish Life & Permanent plc .... 506,648 1,546,372
80,000 Janus Capital Group Inc. ...... 1,217,298 1,432,000
55,000 JPMorgan Chase & Co. .......... 1,360,152 2,310,000
136,000 Leucadia National Corp. ....... 1,694,497 3,969,840
45,000 Mediobanca SpA ................ 932,143 881,202
100,000 Mellon Financial Corp. ........ 3,140,094 3,443,000
189,000 Midland Co. ................... 1,386,764 7,178,220
65,000 Moody's Corp. ................. 3,285,357 3,539,900
108,750 Nikko Cordial Corp. ........... 1,351,625 1,391,209
140,000 Phoenix Companies Inc. ........ 2,008,948 1,971,200
2,500 Prudential Financial Inc. ..... 68,750 194,250
80,000 Shizuoka Bank Ltd. ............ 791,848 864,034
3,000 St. Paul Travelers
Companies Inc. .............. 113,277 133,740
50,000 Standard Chartered plc ........ 954,007 1,220,482
80,000 State Street Corp. ............ 4,001,480 4,647,200
20,000 SunTrust Banks Inc. ........... 419,333 1,525,200
150,000 T. Rowe Price Group Inc. ...... 4,610,820 5,671,500
5,000 The Allstate Corp. ............ 209,064 273,650
45,000 The Charles Schwab Corp. ...... 657,563 719,100
20,000 UBS AG ........................ 1,875,967 2,192,139
90,000 UniCredito Italiano SpA ....... 648,209 704,501
100,000 Waddell & Reed Financial
Inc., Cl. A ................. 2,058,579 2,056,000
53,000 Westpac Banking Corp. ......... 833,192 916,869
-------------- --------------
102,048,820 151,270,613
-------------- --------------
ENERGY AND UTILITIES -- 8.3%
70,000 AES Corp.+ .................... 397,267 1,291,500
10,000 AGL Resources Inc. ............ 174,924 381,200
MARKET
SHARES COST VALUE
-------- ---- --------
120,000 Allegheny Energy Inc.+ ........ $ 1,557,788 $ 4,448,400
70,000 Apache Corp. .................. 2,728,670 4,777,500
247,000 BP plc, ADR ................... 15,155,797 17,193,670
115,000 CH Energy Group Inc. .......... 4,749,282 5,520,000
80,000 CMS Energy Corp.+ ............. 512,403 1,035,200
322,739 ConocoPhillips ................ 19,761,780 21,149,087
8,000 Constellation Energy Group .... 449,608 436,160
60,000 DPL Inc. ...................... 1,411,620 1,608,000
14,000 DTE Energy Co. ................ 619,459 570,360
280,000 Duke Energy Corp. ............. 6,666,460 8,223,600
110,000 Duquesne Light Holdings Inc. .. 1,845,274 1,808,400
270,000 El Paso Corp. ................. 3,253,601 4,050,000
360,000 El Paso Electric Co.+ ......... 5,167,785 7,257,600
50,000 Energy East Corp. ............. 1,065,733 1,196,500
80,000 Eni SpA ....................... 2,246,480 2,356,522
80,000 Exxon Mobil Corp. ............. 2,750,108 4,908,000
20,000 FPL Group Inc. ................ 556,256 827,600
70,000 Halliburton Co. ............... 1,726,011 5,194,700
27,000 Imperial Oil Ltd. ............. 1,010,138 986,348
270,000 Kerr-McGee Corp. .............. 16,855,504 18,724,500
3,100 Kinder Morgan Inc. ............ 309,752 309,659
10,000 Marathon Oil Corp. ............ 242,414 833,000
10,000 Mirant Corp.+ ................. 192,014 268,000
1,000 Niko Resources Ltd. ........... 57,456 56,472
10,000 NiSource Inc. ................. 215,500 218,400
300,000 Northeast Utilities ........... 5,838,917 6,201,000
20,000 Oceaneering International
Inc.+ ....................... 538,223 917,000
2,000 PetroChina Co. Ltd., ADR ...... 137,965 215,940
18,000 Petroleo Brasileiro SA,
ADR ......................... 1,265,864 1,607,580
100,000 Progress Energy Inc., CVO+ .... 52,000 30,000
60,000 Saipem SpA .................... 1,126,995 1,365,258
13,000 Sasol Ltd. .................... 500,463 498,605
60,000 SJW Corp. ..................... 883,106 1,527,000
20,000 Southwest Gas Corp. ........... 451,132 626,800
32,628 Total SA ...................... 1,986,057 2,147,156
86,000 TXU Corp. ..................... 1,057,261 5,141,940
290,000 Westar Energy Inc. ............ 5,079,698 6,104,500
140,000 Western Gas Resources Inc. .... 8,363,350 8,379,000
-------------- --------------
118,960,115 150,392,157
-------------- --------------
FOOD AND BEVERAGE -- 8.0%
85,000 Ajinomoto Co. Inc. ............ 998,444 941,061
25,000 Anheuser-Busch
Companies Inc. .............. 1,109,972 1,139,750
36,000 ARIAKE JAPAN Co. Ltd. ......... 857,851 795,876
98,000 Cadbury Schweppes plc ......... 1,009,810 945,078
60,000 Cadbury Schweppes plc, ADR .... 1,902,198 2,329,200
100,000 Campbell Soup Co. ............. 2,678,697 3,711,000
100,000 Coca-Cola Co. ................. 4,461,443 4,302,000
20,000 Coca-Cola Enterprises Inc. .... 376,515 407,400
See accompanying notes to financial statements.
5
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2006 (UNAUDITED)
MARKET
SHARES COST VALUE
-------- ---- --------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE (CONTINUED)
40,000 Coca-Cola Hellenic
Bottling Co. SA ............. $ 519,295 $ 1,192,075
95,000 Corn Products
International Inc. .......... 1,310,497 2,907,000
60,000 Del Monte Foods Co. ........... 564,374 673,800
10,108 Denny's Corp.+ ................ 14,358 37,299
80,000 Diageo plc .................... 1,174,064 1,345,489
224,000 Diageo plc, ADR ............... 9,660,541 15,131,200
80,000 Flowers Foods Inc. ............ 890,243 2,291,200
35,000 Fomento Economico Mexicano
SA de CV, ADR ............... 1,378,845 2,930,200
165,000 General Mills Inc. ............ 7,893,483 8,523,900
200,000 Groupe Danone ................. 19,701,934 25,414,732
500,000 Grupo Bimbo SA de CV,
Cl. A ....................... 1,052,379 1,498,512
145,000 H.J. Heinz Co. ................ 5,196,338 5,976,900
20,000 Hain Celestial Group Inc.+ .... 267,663 515,200
140,000 Kellogg Co. ................... 5,052,167 6,780,200
75,000 Kerry Group plc, Cl. A ........ 860,877 1,591,633
12,100 LVMH Moet Hennessy
Louis Vuitton SA ............ 419,053 1,200,977
2,500 Nestle SA ..................... 513,610 785,244
465,000 PepsiAmericas Inc. ............ 8,320,926 10,281,150
350,000 PepsiCo Inc. .................. 16,929,287 21,014,000
6,750 Pernod-Ricard SA .............. 470,174 1,338,206
68,200 Ralcorp Holdings Inc.+ ........ 1,308,415 2,900,546
90,000 Sara Lee Corp. ................ 1,671,269 1,441,800
45,000 The Hershey Co. ............... 1,915,127 2,478,150
2,000 The J.M. Smucker Co. .......... 52,993 89,400
115,360 Tootsie Roll Industries Inc. .. 1,562,923 3,360,437
170,000 Wm. Wrigley Jr. Co. ........... 8,244,515 7,711,200
42,500 Wm. Wrigley Jr. Co., Cl. B .... 2,191,580 1,925,250
-------------- --------------
112,531,860 145,907,065
-------------- --------------
TELECOMMUNICATIONS -- 6.5%
5,000 ALLTEL Corp. .................. 111,101 319,150
480,000 AT&T Inc. ..................... 13,847,443 13,387,200
250,000 BCE Inc. ...................... 6,516,461 5,912,500
30,000 Brasil Telecom Participacoes
SA, ADR ...................... 1,743,257 977,100
1,700,000 BT Group plc .................. 7,029,679 7,521,220
4,440,836 Cable & Wireless Jamaica Ltd.+ 101,639 53,939
840,000 Cincinnati Bell Inc.+ ......... 6,084,948 3,444,000
60,000 Citizens Communications Co. 737,671 783,000
170,000 Commonwealth Telephone
Enterprises Inc. ............ 6,485,526 5,637,200
110,000 Compania de
Telecomunicaciones de
Chile SA, ADR ............... 1,610,859 752,400
170,000 Deutsche Telekom AG, ADR ...... 2,827,195 2,726,800
MARKET
SHARES COST VALUE
-------- ---- --------
26,619 Embarq Corp.+ ................. $ 1,491,894 $ 1,091,113
15,000 Embratel Participacoes
SA, ADR ..................... 266,400 233,700
5,000 France Telecom SA, ADR ........ 146,305 109,300
100,000 KPN NV ........................ 232,728 1,124,285
830,000 Qwest Communications
International Inc.+ ......... 2,459,835 6,714,700
550,000 Sprint Nextel Corp. ........... 15,436,707 10,994,500
186,554 Tele Norte Leste
Participacoes SA, ADR ....... 2,477,755 2,378,563
48,000 Telecom Argentina SA,
Cl. B, ADR+ ................. 369,540 556,800
1,488,075 Telecom Italia SpA ............ 6,089,193 4,144,486
250,001 Telefonica SA, ADR ............ 12,790,994 12,435,050
62,000 Telefonos de Mexico
SA de CV, Cl. L, ADR ........ 469,422 1,291,460
310,000 Telephone & Data
Systems Inc. ................ 14,444,104 12,834,000
380,000 Telephone & Data
Systems Inc., Special ....... 16,087,139 14,782,000
27,000 TELUS Corp., ADR .............. 500,379 1,117,534
190,000 Verizon Communications
Inc. ........................ 7,436,960 6,363,100
-------------- --------------
127,795,134 117,685,100
-------------- --------------
DIVERSIFIED INDUSTRIAL -- 5.8%
150,000 Acuity Brands Inc. ............ 4,553,778 5,836,500
55,000 Amano Corp. ................... 956,301 817,022
195,000 Ampco-Pittsburgh Corp. ........ 2,627,873 5,586,750
26,000 Bayer AG ...................... 1,093,829 1,195,196
25,000 Bouygues SA ................... 1,244,322 1,285,446
200,000 Cooper Industries Ltd., Cl. A . 11,224,646 18,584,000
260,000 Crane Co. ..................... 5,942,015 10,816,000
77,500 CRH plc ....................... 1,027,655 2,519,793
228,000 Greif Inc., Cl. A ............. 4,647,546 17,090,880
5,000 Greif Inc., Cl. B ............. 135,354 346,000
405,500 Honeywell International Inc. .. 13,533,476 16,341,650
260,000 ITT Industries Inc. ........... 6,774,340 12,870,000
75,000 Lamson & Sessions Co.+ ........ 441,734 2,127,000
101,000 Park-Ohio Holdings Corp.+ ..... 1,073,670 1,744,270
4,000 Sulzer AG ..................... 850,053 2,997,014
30,000 Technip SA .................... 721,269 1,661,487
75,000 Trinity Industries Inc. ....... 945,000 3,030,000
-------------- --------------
57,792,861 104,849,008
-------------- --------------
PUBLISHING -- 4.9%
50,000 Dow Jones & Co. Inc. .......... 2,060,493 1,750,500
348,266 Independent News &
Media plc ................... 663,968 1,020,080
14,212 McClatchy Co., Cl. A .......... 730,814 570,201
200,000 McGraw-Hill Companies Inc. .... 7,669,017 10,046,000
322,000 Media General Inc., Cl. A ..... 19,271,073 13,488,580
122,000 Meredith Corp. ................ 5,066,964 6,043,880
See accompanying notes to financial statements.
6
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2006 (UNAUDITED)
MARKET
SHARES COST VALUE
-------- ---- --------
COMMON STOCKS (CONTINUED)
PUBLISHING (CONTINUED)
70,000 New York Times Co., Cl. A ..... $ 3,095,394 $ 1,717,800
1,744,800 News Corp., Cl. A ............. 23,233,744 33,465,264
20,000 News Corp., Cl. B ............. 186,274 403,600
200,000 Penton Media Inc.+ ............ 439,128 60,000
387,000 PRIMEDIA Inc.+ ................ 1,710,400 708,210
170,000 Reader's Digest
Association Inc. ............ 3,072,373 2,373,200
261,319 SCMP Group Ltd. ............... 191,790 88,326
66,585 Seat Pagine Gialle SpA ........ 177,139 31,000
150,000 The E.W. Scripps Co., Cl. A ... 5,032,324 6,471,000
340,900 Tribune Co. ................... 14,864,484 11,055,387
-------------- --------------
87,465,379 89,293,028
-------------- --------------
ENTERTAINMENT -- 4.4%
32,000 Canal+ Groupe ................. 34,011 316,795
2,002 Chestnut Hill Ventures+ (a) ... 54,500 42,991
220,000 Discovery Holding Co.,
Cl. A+ ...................... 3,185,692 3,218,600
1,600 DreamWorks Animation
SKG Inc., Cl. A+ ............ 39,461 36,640
110,000 EMI Group plc ................. 292,543 617,869
79,500 EMI Group plc, ADR ............ 941,481 893,270
630,000 Gemstar-TV Guide
International Inc.+ ......... 3,223,014 2,217,600
675,000 Grupo Televisa SA, ADR ........ 6,364,956 13,034,250
125 Live Nation Inc.+ ............. 1,296 2,545
17,500 Oriental Land Co. Ltd. ........ 1,043,187 984,796
160,000 Publishing &
Broadcasting Ltd. ........... 893,720 2,165,102
1,629,500 Rank Group plc ................ 7,987,535 6,011,525
12,000 Regal Entertainment
Group, Cl. A ................ 165,788 243,840
75,000 Six Flags Inc.+ ............... 360,725 421,500
260,000 The Walt Disney Co. ........... 5,453,387 7,800,000
810,000 Time Warner Inc. .............. 17,932,501 14,013,000
19,750 Triple Crown Media Inc.+ ...... 230,216 171,232
440,000 Viacom Inc., Cl. A+ ........... 21,823,733 15,818,000
33,900 Vivendi SA .................... 1,750,629 1,188,059
320,000 Vivendi SA, ADR ............... 7,966,482 11,171,200
-------------- --------------
79,744,857 80,368,814
-------------- --------------
CONSUMER PRODUCTS -- 4.4%
24,000 Altadis SA .................... 1,010,055 1,134,569
65,000 Avon Products Inc. ............ 1,883,408 2,015,000
43,000 Christian Dior SA ............. 1,633,717 4,215,686
15,000 Church & Dwight Co. Inc. ...... 99,536 546,300
33,000 Clorox Co. .................... 1,832,427 2,012,010
10,000 Colgate-Palmolive Co. ......... 513,338 599,000
69,000 Compagnie Financiere
Richemont AG, Cl. A ......... 2,879,288 3,160,607
115,000 Energizer Holdings Inc.+ ...... 4,952,999 6,735,550
50,000 Fortune Brands Inc. ........... 3,390,240 3,550,500
MARKET
SHARES COST VALUE
-------- ---- --------
50,000 Gallaher Group plc ............ $ 765,150 $ 781,293
232,000 Gallaher Group plc, ADR ....... 13,677,686 14,509,280
2,000 Givaudan SA ................... 550,742 1,574,578
36,000 Harley-Davidson Inc. .......... 1,672,430 1,976,040
40,000 Lenox Group Inc.+ ............. 371,488 283,600
15,000 Matsushita Electric
Industrial Co. Ltd., ADR .... 178,325 316,950
15,000 Mattel Inc. ................... 270,000 247,650
25,000 National Presto
Industries Inc. ............. 862,113 1,307,000
300,000 Procter & Gamble Co. .......... 15,983,165 16,680,000
60,000 Reckitt Benckiser plc ......... 1,849,650 2,241,249
7,500 Swatch Group AG ............... 442,219 1,266,819
890,000 Swedish Match AB .............. 9,252,561 14,345,364
-------------- --------------
64,070,537 79,499,045
-------------- --------------
CABLE AND SATELLITE -- 4.2%
1,610,000 Cablevision Systems
Corp., Cl. A+ ............... 19,751,186 34,534,500
270,000 Comcast Corp., Cl. A+ ......... 8,947,049 8,839,800
85,000 Comcast Corp., Cl. A,
Special+ .................... 756,584 2,786,300
153,444 DIRECTV Group Inc.+ ........... 2,214,257 2,531,826
55,000 EchoStar Communications
Corp., Cl. A+ ............... 1,722,522 1,694,550
156,770 Liberty Global Inc., Cl. A+ ... 2,194,421 3,370,555
139,001 Liberty Global Inc., Cl. C+ ... 2,087,381 2,859,251
385,345 Rogers Communications
Inc., Cl. B, New York ....... 4,905,237 15,567,938
9,655 Rogers Communications
Inc., Cl. B, Toronto ........ 137,424 388,431
80,000 Shaw Communications Inc.,
Cl. B, New York ............. 329,197 2,263,200
20,000 Shaw Communications Inc.,
Cl. B, Toronto .............. 52,983 565,260
-------------- --------------
43,098,241 75,401,611
-------------- --------------
HEALTH CARE -- 3.3%
10,000 Abbott Laboratories ........... 398,848 436,100
7,023 Allergan Inc. ................. 655,380 753,287
52,000 Amgen Inc.+ ................... 3,039,863 3,391,960
19,146 AstraZeneca plc ............... 949,527 1,155,930
27,000 Biogen Idec Inc.+ ............. 163,601 1,250,910
140,000 Bristol-Myers Squibb Co. ...... 3,619,759 3,620,400
65,036 GlaxoSmithKline plc ........... 1,653,252 1,817,212
4,000 GlaxoSmithKline plc, ADR ...... 216,096 223,200
30,000 Henry Schein Inc.+ ............ 764,324 1,401,900
38,300 Hisamitsu Pharmaceutical
Co. Inc. .................... 935,510 1,174,703
10,000 Hospira Inc.+ ................. 342,400 429,400
40,000 Invitrogen Corp.+ ............. 2,065,234 2,642,800
100,000 Merck & Co. Inc. .............. 3,922,616 3,643,000
2,000 Nobel Biocare Holding AG ...... 286,712 474,827
39,000 Novartis AG ................... 2,076,654 2,111,816
See accompanying notes to financial statements.
7
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2006 (UNAUDITED)
MARKET
SHARES COST VALUE
-------- ---- --------
COMMON STOCKS (CONTINUED)
HEALTH CARE (CONTINUED)
105,000 Novartis AG, ADR .............. $ 4,622,998 $ 5,661,600
310,000 Pfizer Inc. ................... 8,792,241 7,275,700
16,400 Roche Holding AG .............. 2,587,332 2,711,088
15,108 Sanofi-Aventis ................ 1,354,266 1,474,413
100,000 Schering-Plough Corp. ......... 1,917,839 1,903,000
80,000 Smith & Nephew plc ............ 752,722 616,158
5,250 Straumann Holding AG .......... 1,087,318 1,338,749
10,000 Synthes Inc. .................. 677,094 1,206,495
23,000 Takeda Pharmaceutical
Co. Ltd. .................... 1,140,219 1,430,968
20,000 UnitedHealth Group Inc. ....... 900,959 895,600
82,000 William Demant
Holding A/S+ ................ 3,730,842 6,130,473
100,000 Wyeth ......................... 4,105,470 4,441,000
-------------- --------------
52,759,076 59,612,689
-------------- --------------
EQUIPMENT AND SUPPLIES -- 3.1%
185,000 AMETEK Inc. ................... 4,650,728 8,765,300
2,000 Amphenol Corp., Cl. A ......... 14,775 111,920
42,000 Assa Abloy AB, Cl. B .......... 797,978 706,152
94,000 CIRCOR International Inc. ..... 974,241 2,866,060
205,000 Donaldson Co. Inc. ............ 2,958,285 6,943,350
70,000 Fedders Corp.+ ................ 367,767 169,400
110,000 Flowserve Corp.+ .............. 2,075,580 6,259,000
24,000 Franklin Electric Co. Inc. .... 258,462 1,239,360
100,000 Gerber Scientific Inc.+ ....... 1,060,701 1,301,000
80,000 GrafTech International Ltd.+ .. 859,091 464,000
215,000 IDEX Corp. .................... 7,645,560 10,148,000
40,000 Ingersoll-Rand Co. Ltd.,
Cl. A ....................... 855,378 1,711,200
106,000 Lufkin Industries Inc. ........ 1,027,848 6,299,580
2,000 Manitowoc Co. Inc. ............ 25,450 89,000
11,000 Mueller Industries Inc. ....... 485,034 363,330
1,000 Sealed Air Corp. .............. 17,404 52,080
225,000 Watts Water Technologies
Inc., Cl. A ................. 3,387,347 7,548,750
100,000 Weir Group plc ................ 420,789 800,710
-------------- --------------
27,882,418 55,838,192
-------------- --------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.7%
60,000 BorgWarner Inc. ............... 1,396,719 3,906,000
197,300 CLARCOR Inc. .................. 1,582,379 5,877,567
460,000 Dana Corp. .................... 4,935,123 1,214,400
80,500 Earl Scheib Inc.+ ............. 637,614 301,875
350,000 Genuine Parts Co. ............. 12,868,192 14,581,000
133,000 Johnson Controls Inc. ......... 6,820,679 10,935,260
116,000 Midas Inc.+ ................... 1,508,953 2,134,400
317,500 Modine Manufacturing Co. ...... 8,027,340 7,416,800
180,000 Proliance International Inc.+ 1,288,912 831,600
160,000 Standard Motor Products Inc. .. 1,743,588 1,334,400
MARKET
SHARES COST VALUE
-------- ---- --------
31,000 Superior Industries
International Inc. .......... $ 755,560 $ 566,990
-------------- --------------
41,565,059 49,100,292
-------------- --------------
HOTELS AND GAMING -- 2.6%
40,000 Aztar Corp.+ .................. 692,875 2,078,400
190,000 Gaylord Entertainment Co.+ .... 5,061,983 8,291,600
35,000 Greek Organization of
Football Prognostics SA ..... 438,023 1,266,899
19,000 GTECH Holdings Corp. .......... 162,999 660,820
6,000 Harrah's Entertainment Inc. ... 441,360 427,080
550,000 Hilton Hotels Corp. ........... 9,124,217 15,554,000
10,000 Kerzner International Ltd.+ ... 506,373 792,800
1,344,116 Ladbrokes plc ................. 14,291,853 10,128,655
6,000 Las Vegas Sands Corp.+ ........ 221,279 467,160
118,000 MGM Mirage+ ................... 3,549,795 4,814,400
38,000 Starwood Hotels &
Resorts Worldwide Inc. ...... 580,223 2,292,920
-------------- --------------
35,070,980 46,774,734
-------------- --------------
AVIATION: PARTS AND SERVICES -- 2.2%
396,000 Curtiss-Wright Corp. .......... 5,702,006 12,228,480
200,100 Fairchild Corp., Cl. A+ ....... 1,185,595 416,208
200,000 GenCorp Inc.+ ................. 2,572,011 3,206,000
180,000 Precision Castparts Corp. ..... 9,256,216 10,756,800
88,230 Sequa Corp., Cl. A+ ........... 3,606,532 7,190,745
74,600 Sequa Corp., Cl. B+ ........... 3,852,673 6,098,550
-------------- --------------
26,175,033 39,896,783
-------------- --------------
CONSUMER SERVICES -- 1.7%
230,000 IAC/InterActiveCorp+ .......... 6,252,263 6,092,700
550,000 Liberty Media Holding
Corp. - Interactive, Cl. A+ 11,350,165 9,493,000
820,000 Rollins Inc. .................. 12,606,301 16,104,800
-------------- --------------
30,208,729 31,690,500
-------------- --------------
COMMUNICATIONS EQUIPMENT -- 1.7%
48,000 Agere Systems Inc.+ ........... 756,267 705,600
10,000 Andrew Corp.+ ................. 109,277 88,600
480,000 Corning Inc.+ ................. 4,124,295 11,611,200
180,000 Lucent Technologies Inc.+ ..... 949,628 435,600
105,000 Motorola Inc. ................. 1,288,972 2,115,750
160,000 Nortel Networks Corp.+ ........ 848,865 358,400
290,000 Thomas & Betts Corp.+ ......... 8,280,958 14,877,000
-------------- --------------
16,358,262 30,192,150
-------------- --------------
BROADCASTING -- 1.5%
422,500 CBS Corp., Cl. A .............. 13,569,047 11,432,850
1,000 Clear Channel
Communications Inc. ......... 31,113 30,950
2,000 Cogeco Inc. ................... 39,014 35,833
16,666 Corus Entertainment
Inc., Cl. B ................. 62,035 541,201
See accompanying notes to financial statements.
8
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2006 (UNAUDITED)
MARKET
SHARES COST VALUE
-------- ---- --------
COMMON STOCKS (CONTINUED)
BROADCASTING (CONTINUED)
120,000 Gray Television Inc. .......... $ 1,060,168 $ 694,800
27,000 Gray Television Inc., Cl. A ... 317,211 164,970
100,000 ION Media Networks Inc.+ ...... 237,503 92,000
110,000 Liberty Media Holding Corp.
- Capital, Cl. A+ ........... 8,219,085 9,214,700
75,000 Lin TV Corp., Cl. A+ .......... 1,180,678 566,250
120,000 Mediaset SpA .................. 1,288,354 1,415,141
30,000 Modern Times Group AB, Cl. B+ . 781,911 1,577,796
30,000 Modern Times Group AB, Cl. B,
Redeemable Shares+ .......... 41,153 72,074
100,000 Television Broadcasts Ltd. .... 396,239 618,055
5,000 Univision Communications Inc.,
Cl. A+ ..................... 171,633 167,500
110,000 Young Broadcasting Inc., Cl. A+ 1,268,746 345,400
-------------- --------------
28,663,890 26,969,520
-------------- --------------
AGRICULTURE -- 1.4%
605,000 Archer-Daniels-Midland Co. .... 12,881,797 24,974,400
5,000 Delta & Pine Land Co. ......... 84,396 147,000
10,000 Mosaic Co.+ ................... 139,584 156,500
-------------- --------------
13,105,777 25,277,900
-------------- --------------
AEROSPACE -- 1.3%
105,000 Boeing Co. .................... 6,475,976 8,600,550
12,000 Lockheed Martin Corp. ......... 699,442 860,880
100,000 Northrop Grumman Corp. ........ 5,511,672 6,406,000
1,000,000 Rolls-Royce Group plc+ ........ 7,431,061 7,655,750
53,800,000 Rolls-Royce Group plc, Cl. B .. 55,145 101,975
-------------- --------------
20,173,296 23,625,155
-------------- --------------
MACHINERY -- 1.2%
20,000 Caterpillar Inc. .............. 136,559 1,489,600
235,000 Deere & Co. ................... 14,013,106 19,620,150
-------------- --------------
14,149,665 21,109,750
-------------- --------------
ENVIRONMENTAL SERVICES -- 1.1%
65,000 Republic Services Inc. ........ 875,761 2,622,100
470,000 Waste Management Inc. ......... 11,765,637 16,863,600
-------------- --------------
12,641,398 19,485,700
-------------- --------------
SPECIALTY CHEMICALS -- 1.0%
815 Arkema+ ....................... 104,440 31,804
5,400 Ciba Specialty Chemicals AG, ADR 4,285 150,822
20,000 E.I. du Pont de Nemours and Co. 802,600 832,000
325,000 Ferro Corp. ................... 6,928,725 5,187,000
25,000 H.B. Fuller Co. ............... 668,859 1,089,250
190,000 Hercules Inc.+ ................ 2,274,347 2,899,400
232,300 Omnova Solutions Inc.+ ........ 1,879,165 1,319,464
300,000 Sensient Technologies Corp. ... 5,529,921 6,273,000
MARKET
SHARES COST VALUE
-------- ---- --------
10,000 Syngenta AG, ADR .............. $ 16,177 $ 265,600
165,000 Tokai Carbon Co. Ltd. ......... 677,815 924,196
4,032 Tronox Inc., Cl. B ............ 44,467 53,102
-------------- --------------
18,930,801 19,025,638
-------------- --------------
WIRELESS COMMUNICATIONS -- 1.0%
200,000 America Movil SA de CV,
Cl. L, ADR .................. 2,247,380 6,652,000
1,500 NTT DoCoMo Inc. ............... 3,553,937 2,202,027
3,340 Tele Norte Celular
Participacoes SA, ADR ....... 51,601 31,396
8,350 Telemig Celular
Participacoes SA, ADR ....... 241,320 295,590
32,165 Tim Participacoes SA, ADR ..... 390,212 886,146
100,000 United States Cellular Corp.+ 4,333,517 6,060,000
270 Vivo Participacoes SA+ ........ 941 1,196
174,122 Vivo Participacoes SA, ADR .... 2,370,462 428,340
5,845 Vivo Participacoes SA, Pfd.+ .. 89,788 14,249
80,000 Vodafone Group plc, ADR ....... 1,902,872 1,704,000
-------------- --------------
15,182,030 18,274,944
-------------- --------------
METALS AND MINING -- 0.9%
33,000 Anglo American plc ............ 1,250,229 1,353,514
89,148 Barrick Gold Corp. ............ 2,610,253 2,638,781
72,500 Harmony Gold
Mining Co. Ltd.+ ............ 347,738 1,153,731
35,000 Harmony Gold
Mining Co. Ltd., ADR+ ....... 460,008 570,150
75,000 Ivanhoe Mines Ltd.+ ........... 560,208 511,500
105,000 Newmont Mining Corp. .......... 2,525,310 5,557,650
110,000 Novelis Inc. .................. 2,381,034 2,373,800
50,000 Xstrata plc ................... 948,090 1,895,445
-------------- --------------
11,082,870 16,054,571
-------------- --------------
BUSINESS SERVICES -- 0.9%
7,050 Acco Brands Corp.+ ............ 126,069 154,395
60,000 ANC Rental Corp.+ ............. 578,273 72
22,500 Canon Inc. .................... 865,859 1,102,980
80,000 Cendant Corp. ................. 1,600,104 1,303,200
1,000 CheckFree Corp.+ .............. 9,040 49,560
15,000 Clear Channel Outdoor
Holdings Inc., Cl. A+ ....... 289,301 314,400
186,554 Contax Participacoes SA,
ADR ......................... 76,632 165,492
200,000 Group 4 Securicor plc ......... 0 620,411
94,000 Landauer Inc. ................. 2,511,653 4,502,600
119,000 MasterCard Inc., Cl. A+ ....... 4,776,000 5,712,000
72,500 Nashua Corp.+ ................. 656,627 498,075
25,000 Secom Co. Ltd. ................ 1,095,891 1,181,842
-------------- --------------
12,585,449 15,605,027
-------------- --------------
REAL ESTATE -- 0.8%
70,000 Cheung Kong (Holdings) Ltd. ... 815,521 758,469
98,000 Florida East Coast
Industries Inc. ............. 2,113,491 5,128,340
See accompanying notes to financial statements.
9
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2006 (UNAUDITED)
MARKET
SHARES COST VALUE
-------- ---- --------
COMMON STOCKS (CONTINUED)
REAL ESTATE (CONTINUED)
55,000 Griffin Land &
Nurseries Inc.+ ............. $ 513,144 $ 1,718,750
160,000 St. Joe Co. ................... 9,164,787 7,446,400
-------------- --------------
12,606,943 15,051,959
-------------- --------------
AUTOMOTIVE -- 0.7%
30,000 General Motors Corp. .......... 803,468 893,700
360,000 Navistar International Corp.+ 13,011,758 8,859,600
43,000 PACCAR Inc. ................... 431,444 3,542,340
-------------- --------------
14,246,670 13,295,640
-------------- --------------
RETAIL -- 0.7%
169,252 AutoNation Inc.+ .............. 2,279,796 3,628,763
37,000 Coldwater Creek Inc.+ ......... 81,293 990,120
25,000 Costco Wholesale Corp. ........ 1,141,563 1,428,250
50,000 Matsumotokiyoshi Co. Ltd. ..... 1,372,604 1,271,408
30,000 Next plc ...................... 811,183 905,376
39,800 Seven & I Holdings Co.
Ltd. ........................ 1,114,381 1,311,132
50,960 SUPERVALU Inc. ................ 1,516,060 1,564,472
63,000 Woolworths Ltd. ............... 872,140 943,331
-------------- --------------
9,189,020 12,042,852
-------------- --------------
ELECTRONICS -- 0.6%
10,000 Advanced Micro Devices Inc.+ .. 106,090 244,200
3,000 Hitachi Ltd., ADR ............. 218,796 198,210
4,920 Keyence Corp. ................. 941,170 1,256,225
20,000 Molex Inc., Cl. A ............. 519,697 574,600
7,500 NEC Corp., ADR ................ 43,625 39,975
38,000 Royal Philips
Electronics NV, ADR ......... 52,354 1,183,320
265,000 Texas Instruments Inc. ........ 6,407,535 8,026,850
-------------- --------------
8,289,267 11,523,380
-------------- --------------
TRANSPORTATION -- 0.4%
100,000 AMR Corp.+ .................... 1,924,248 2,542,000
110,000 GATX Corp. .................... 2,036,677 4,675,000
15,000 Grupo TMM SA, Cl. A, ADR+ ..... 80,460 61,050
-------------- --------------
4,041,385 7,278,050
-------------- --------------
CLOSED-END FUNDS -- 0.3%
107,785 Central Europe and
Russia Fund Inc. ............ 2,436,296 4,954,877
70,000 New Germany Fund Inc. ......... 754,518 867,300
31,500 Royce Value Trust Inc. ........ 388,298 609,840
-------------- --------------
3,579,112 6,432,017
-------------- --------------
MARKET
SHARES COST VALUE
-------- ---- --------
COMPUTER SOFTWARE AND SERVICES -- 0.3%
146 CA Inc. ....................... $ 4,526 $ 3,000
10,000 Check Point Software
Technologies Ltd.+ .......... 169,874 175,800
830 NIWS Co. HQ Ltd. .............. 1,012,369 709,315
24,100 Square Enix Co. Ltd. .......... 648,849 501,206
25,256 Telecom Italia Media SpA ...... 26,868 11,791
110,000 Yahoo! Inc.+ .................. 3,765,954 3,630,000
-------------- --------------
5,628,440 5,031,112
-------------- --------------
MANUFACTURED HOUSING AND
RECREATIONAL VEHICLES -- 0.2%
70,000 Champion Enterprises Inc.+ .... 659,503 772,800
40,000 Fleetwood Enterprises Inc.+ ... 474,238 301,600
31,000 Huttig Building Products Inc.+ 78,168 251,100
13,000 Martin Marietta Materials Inc. 274,588 1,184,950
10,000 Nobility Homes Inc. ........... 195,123 271,700
22,000 Skyline Corp. ................. 883,239 941,160
4,600 Southern Energy Homes Inc.+ ... 24,312 31,050
-------------- --------------
2,589,171 3,754,360
-------------- --------------
PAPER AND FOREST PRODUCTS -- 0.2%
115,000 Pactiv Corp.+ ................. 1,207,241 2,846,250
4,000 Svenska Cellulosa AB, Cl. B ... 171,233 165,352
-------------- --------------
1,378,474 3,011,602
-------------- --------------
REAL ESTATE INVESTMENT TRUSTS -- 0.1%
6,000 Camden Property Trust ......... 112,470 441,300
2,000 Equity Residential ............ 39,570 89,460
20,000 Host Hotels & Resorts Inc. .... 408,888 437,400
2,187 Prosperity REIT+ .............. 615 470
24,984 Rayonier Inc. ................. 798,811 947,144
-------------- --------------
1,360,354 1,915,774
-------------- --------------
TOTAL
COMMON STOCKS ............... 1,232,951,373 1,572,536,732
-------------- --------------
CONVERTIBLE PREFERRED STOCKS -- 0.2%
AEROSPACE -- 0.1%
13,500 Northrop Grumman Corp.,
7.000% Cv. Pfd., Ser. B ..... 1,573,020 1,707,750
-------------- --------------
TELECOMMUNICATIONS -- 0.1%
26,000 Cincinnati Bell Inc.,
6.750% Cv. Pfd., Ser. B ..... 820,367 1,118,000
-------------- --------------
See accompanying notes to financial statements.
10
THE GABELLI EQUITY TRUST INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 2006 (UNAUDITED)
MARKET
SHARES COST VALUE
-------- ---- --------
CONVERTIBLE PREFERRED STOCKS (CONTINUED)
BROADCASTING -- 0.0%
90 Gray Television Inc.,
8.000% Cv. Pfd.,
Ser. C (a)(b)(c) ............ $ 900,000 $ 900,000
-------------- --------------
TOTAL CONVERTIBLE
PREFERRED STOCKS ............ 3,293,387 3,725,750
-------------- --------------
PRINCIPAL
AMOUNT
----------
CONVERTIBLE CORPORATE BONDS -- 0.1%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1%
$ 500,000 Pep Boys - Manny, Moe &
Jack, Cv., 4.250%,
06/01/07 .................... 492,866 492,500
1,000,000 Standard Motor Products Inc.,
Sub. Deb. Cv.,
6.750%, 07/15/09 ............ 963,806 887,500
-------------- --------------
1,456,672 1,380,000
-------------- --------------
AEROSPACE -- 0.0%
669,000 Kaman Corp., Sub. Deb. Cv.,
6.000%, 03/15/12 ............ 643,373 662,310
-------------- --------------
TOTAL CONVERTIBLE
CORPORATE BONDS ............. 2,100,045 2,042,310
-------------- --------------
SHARES
----------
WARRANTS -- 0.0%
ENERGY AND UTILITIES -- 0.0%
12,183 Mirant Corp., Ser. A,
expire 01/03/11+ ............ 36,353 123,048
-------------- --------------
PRINCIPAL
AMOUNT
----------
U.S. GOVERNMENT OBLIGATIONS -- 0.0%
U.S. TREASURY NOTES -- 0.0%
$ 300,000 3.500%, 11/15/06 ............ 300,421 298,184
-------------- --------------
SHORT-TERM OBLIGATIONS -- 13.0%
REPURCHASE AGREEMENTS -- 12.7%
100,000,000 ABN Amro, 4.480%, dated
06/30/06, due 07/03/06,
proceeds at maturity,
$100,037,333 (d) ............ 100,000,000 100,000,000
130,789,000 Barclays Capital Inc.,
4.400%, dated
06/30/06, due 07/03/06,
proceeds at maturity,
$130,836,956 (e) ............ 130,789,000 130,789,000
-------------- --------------
230,789,000 230,789,000
-------------- --------------
PRINCIPAL MARKET
AMOUNT COST VALUE
-------- ---- --------
U.S. GOVERNMENT OBLIGATIONS -- 0.3%
$ 5,000,000 U.S. Treasury Bill,
4.704%++, 07/27/06 .......... $ 4,983,335 $ 4,983,335
-------------- --------------
TOTAL SHORT-TERM
OBLIGATIONS ................. 235,772,335 235,772,335
-------------- --------------
TOTAL INVESTMENTS -- 100.0% .................. $1,474,453,914 1,814,498,359
==============
OTHER ASSETS AND LIABILITIES (NET) .......................... (11,640,323)
PREFERRED STOCK
(7,906,900 preferred shares outstanding) .................. (377,492,500)
---------------
NET ASSETS -- COMMON STOCK
(166,832,166 common shares outstanding) ................... $1,425,365,536
==============
NET ASSET VALUE PER COMMON SHARE
($1,425,365,536 / 166,832,166 shares outstanding) ......... $8.54
=====
----------------------
(a) Security fair valued under procedures established by the Board of Directors.
At June 30, 2006, the market value of fair valued securities amounted to
$942,991 or 0.05% of total investments.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 2006,
the market value of the Rule 144A security amounted to $900,000 or 0.05% of
total investments.
(c) At June 30, 2006, the Fund held an investment in a restricted and illiquid
security amounting to $900,000 or 0.05% of total investments, which was
valued under methods approved by the Board as follows:
06/30/06
ACQUISITION ACQUISITION ACQUISITION CARRYING VALUE
SHARES ISSUER DATE COST PER UNIT
------ ------ ---- ---- --------
90 Gray Television Inc.,
8.000% Cv. Pfd.,
Ser. C ................. 04/23/02 $900,000 $10,000.0000
(d) Collateralized by U.S. Treasury Note, 4.875%, due 04/30/08, market value
$102,000,000.
(e) Collateralized by U.S. Treasury Bonds, 8.125% and 6.125%, due 08/15/21 and
08/15/29, market value $132,524,520 and $880,260.
+ 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
North America ...................... 80.6% $1,461,294,301
Europe ............................. 14.9 270,921,913
Latin America ...................... 3.0 55,026,288
Japan .............................. 1.1 19,415,605
Asia/Pacific ....................... 0.3 5,617,766
South Africa ....................... 0.1 2,222,486
----- --------------
Total Investments .................. 100.0% $1,814,498,359
===== ==============
See accompanying notes to financial statements.
11
THE GABELLI EQUITY TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2006 (UNAUDITED)
ASSETS:
Investments, at value (cost $1,243,664,914) ............... $1,583,709,359
Repurchase agreements, at value (cost $230,789,000) ....... 230,789,000
Foreign currency, at value (cost $370,767) ................ 389,565
Cash ...................................................... 632
Dividends and interest receivable ......................... 1,755,461
Unrealized appreciation on swap contracts ................. 1,477,325
Receivable for investments sold ........................... 1,194,358
Other assets .............................................. 29,554
--------------
TOTAL ASSETS .............................................. 1,819,345,254
--------------
LIABILITIES:
Payable for investments purchased ......................... 12,195,137
Payable for investment advisory fees ...................... 3,223,267
Payable for shareholder communications expenses ........... 397,142
Dividends payable ......................................... 245,936
Payable for payroll expenses .............................. 78,666
Payable for Directors' fees ............................... 4,943
Other accrued expenses .................................... 342,127
--------------
TOTAL LIABILITIES ......................................... 16,487,218
--------------
PREFERRED STOCK:
Series B Cumulative Preferred Stock (7.20%,
$25 liquidation value, $0.001 par value, 6,600,000
shares authorized with 4,950,000
shares issued and outstanding) .......................... 123,750,000
Series C Cumulative Preferred Stock (Auction Rate,
$25,000 liquidation value, $0.001 par value, 5,200
shares authorized with 5,200 shares
issued and outstanding) ................................. 130,000,000
Series D Cumulative Preferred Stock (5.875%, $25
liquidation value, $0.001 par value, 3,000,000
shares authorized with 2,949,700
shares issued and outstanding) .......................... 73,742,500
Series E Cumulative Preferred Stock (Auction Rate,
$25,000 liquidation value, $0.001 par value, 2,000
shares authorized with 2,000 shares issued
and outstanding) ........................................ 50,000,000
--------------
TOTAL PREFERRED STOCK ..................................... 377,492,500
--------------
NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS ...... $1,425,365,536
==============
NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS CONSIST OF:
Capital stock, at $0.001 par value ........................ $ 166,832
Additional paid-in capital ................................ 1,091,442,717
Accumulated distributions in excess of net realized
gain on investments, options, futures contracts,
swap contracts, and foreign currency transactions ....... (7,800,361)
Net unrealized appreciation on investments
and swap contracts ...................................... 341,521,770
Net unrealized appreciation on foreign
currency translations ................................... 34,578
--------------
NET ASSETS ................................................ $1,425,365,536
==============
NET ASSET VALUE PER COMMON SHARE
($1,425,365,536 / 166,832,166 shares outstanding;
182,000,000 shares authorized) ........................... $8.54
=====
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of foreign taxes of $505,900) .............. $ 25,089,114
Interest .................................................. 5,066,762
------------
TOTAL INVESTMENT INCOME ................................... 30,155,876
------------
EXPENSES:
Investment advisory fees .................................. 9,145,348
Auction agent fees ........................................ 224,620
Shareholder communications expenses ....................... 222,122
Custodian fees ............................................ 114,040
Payroll expenses .......................................... 113,153
Shareholder services fees ................................. 89,674
Directors' fees ........................................... 70,881
Legal and audit fees ...................................... 60,512
Interest expense .......................................... 861
Miscellaneous expenses .................................... 189,533
------------
TOTAL EXPENSES ............................................ 10,230,744
Less: Custodian fee credits ............................... (24,670)
------------
TOTAL NET EXPENSES ........................................ 10,206,074
------------
NET INVESTMENT INCOME ..................................... 19,949,802
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FUTURES CONTRACTS, SWAP CONTRACTS,
AND FOREIGN CURRENCY:
Net realized gain on investments .......................... 46,099,963
Net realized gain on futures contracts .................... 2,522,193
Net realized gain on swap contracts ....................... 80,225
Net realized loss on foreign currency transactions ........ (106,804)
------------
Net realized gain on investments, futures contracts,
swap contracts, and foreign currency transactions ....... 48,595,577
Net change in unrealized appreciation/depreciation on
investments, swap contracts,
and foreign currency translations ....................... 80,253,283
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS,
FUTURES CONTRACTS, SWAP CONTRACTS,
AND FOREIGN CURRENCY .................................... 128,848,860
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ......................................... 148,798,662
Total Distributions to Preferred
Stock Shareholders ...................................... (12,243,848)
------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO
COMMON STOCK SHAREHOLDERS RESULTING
FROM OPERATIONS ......................................... $136,554,814
============
See accompanying notes to financial statements.
12
THE GABELLI EQUITY TRUST INC.
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS
SIX MONTHS ENDED
JUNE 30, 2006 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2005
---------------- -----------------
OPERATIONS:
Net investment income ............................................................ $ 19,949,802 $ 15,621,752
Net realized gain on investments, options, futures contracts, swap contracts,
and foreign currency transactions . ............................................ 48,595,577 132,556,780
Net change in unrealized appreciation/depreciation on investments, futures contracts,
swap contracts, and foreign currency translations .............................. 80,253,283 (60,827,456)
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................. 148,798,662 87,351,076
-------------- --------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS:
Net investment income ............................................................ (3,634,045)* (2,181,294)
Net realized short-term gains on investments, futures contracts, and foreign
currency transactions .......................................................... (1,616,003)* (182,478)
Net realized long-term gains on investments, futures contracts,
and foreign currency transactions .............................................. (6,993,800)* (19,817,252)
-------------- --------------
TOTAL DISTRIBUTIONS TO PREFERRED SHAREHOLDERS .................................... (12,243,848) (22,181,024)
-------------- --------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS
RESULTING FROM OPERATIONS ...................................................... 136,554,814 65,170,052
-------------- --------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Net investment income ............................................................ (16,877,284)* (12,530,700)
Net realized short-term gains on investments, options, futures contracts,
and foreign currency transactions .............................................. (7,505,062)* (1,048,266)
Net realized long-term gains on investments, options, futures contracts,
and foreign currency transactions .............................................. (32,480,712)* (113,842,518)
Return of capital ................................................................ (6,247,072)* --
-------------- --------------
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS ....................................... (63,110,130) (127,421,484)
-------------- --------------
FUND SHARE TRANSACTIONS:
Net increase in net assets from common shares issued upon reorganization and
reinvestment of dividends and distributions .................................... 6,181,276 45,583,893
Net increase in net assets from common shares issued upon rights offering ........ -- 143,681,307
Offering costs for preferred shares charged to paid-in capital ................... 2,864 (5,050)
Offering costs for issuance of rights charged to paid-in capital ................. (154,685) (600,000)
-------------- --------------
NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS .......................... 6,029,455 188,660,150
-------------- --------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS ................... 79,474,139 126,408,718
NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS:
Beginning of period .............................................................. 1,345,891,397 1,219,482,679
-------------- --------------
End of period (including undistributed net investment income
of $0 and $561,527, respectively) .............................................. $1,425,365,536 $1,345,891,397
============== ==============
-----------------------
* Based on fiscal year to date book income. Amounts are subject to change and
recharacterization at fiscal year end.
See accompanying notes to financial statements.
13
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION. The Gabelli Equity Trust Inc. (the "Fund") 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 Fund 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 Fund will provide shareholders with notice at
least 60 days prior to the implementation of any change in the 80% Policy.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with 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.
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
14
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
payment for such securities only upon physical delivery or upon evidence of book
entry transfer of the collateral to the account of the custodian. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to maintain the adequacy of the
collateral. If the seller defaults and the value of the collateral declines or
if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Fund may be delayed or limited.
At June 30, 2006, the Fund had investments of $230,789,000 in repurchase
agreements.
SWAP AGREEMENTS. The Fund may enter into 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. 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. Interest rate swap and cap
transactions introduce additional risk because the Fund would remain obligated
to pay preferred stock dividends when due in accordance with the Articles
Supplementary even if the counterparty defaulted. If there is a default by the
counterparty to a swap contract, the Fund will be limited to contractual
remedies pursuant to the agreements related to the transaction. There is no
assurance that the swap contract counterparties will be able to meet their
obligations pursuant to a swap contract or that, in the event of default, the
Fund will succeed in pursuing contractual remedies. The Fund thus assumes the
risk that it may be delayed in or prevented from obtaining payments owed to it
pursuant to a swap contract. The creditworthiness of the swap contract
counterparties is closely monitored in order to minimize this risk. Depending on
the general state of short-term interest rates and the returns on the Fund's
portfolio securities at that point in time, such a default could negatively
affect the Fund's ability to make dividend payments for Series C Preferred
Stock. In addition, at the time an interest rate swap or cap transaction reaches
its scheduled termination date, there is a risk that the 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 on Series
C Preferred Stock.
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.
The Fund has entered into an interest rate swap agreement with Citibank
N.A. Under the agreement, the Fund receives a floating rate of interest and pays
a respective fixed rate of interest on the nominal value of the swap. Details of
the swap at June 30, 2006 are as follows:
NOTIONAL FLOATING RATE* TERMINATION UNREALIZED
AMOUNT FIXED RATE (RATE RESET MONTHLY) DATE APPRECIATION
--------- ---------- -------------------- ------------ ------------
$130,000,000 4.494% 5.10906% July 2, 2007 $1,477,325
---------------------
* Based on Libor (London Interbank Offered Rate).
15
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
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. At June 30, 2006, there were no open
futures contracts.
FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
included in unrealized appreciation/depreciation on investments and foreign
currency translations. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate
fluctuations in the underlying prices of the Fund's portfolio securities, but it
does establish a rate of exchange that can be achieved in the future. Although
forward foreign exchange contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, the Fund could be
exposed to risks if the counterparties to the contracts are unable to meet the
terms of their contracts. At June 30, 2006, there were no open forward foreign
exchange contracts.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are
maintained in U.S. dollars. Foreign currencies, investments, and other assets
and liabilities are translated into U.S. dollars at the current exchange rates.
Purchases and sales of investment securities, income, and expenses are
translated at the exchange rate prevailing on the respective dates of such
transactions. Unrealized gains and losses that result from changes in foreign
exchange rates and/or changes in market prices of securities have been included
in unrealized appreciation/depreciation on investments and foreign currency
translations. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions, and the difference between the amounts of interest and
dividends recorded on the books of the Fund and the amounts actually received.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial trade date and subsequent sale trade date is
included in realized gain/(loss) on investments.
FOREIGN SECURITIES. The Fund may directly purchase securities of foreign
issuers. Investing in securities of foreign issuers involves special risks not
typically associated with investing in securities of U.S. issuers. The risks
include possible revaluation of currencies, the ability to repatriate funds,
less complete financial information about companies, and possible future adverse
political and economic developments. Moreover, securities of many foreign
issuers and their markets may be less liquid and their prices more volatile than
those of securities of comparable U.S. issuers.
FOREIGN TAXES. The Fund may be subject to foreign taxes on income, gains on
investments, or currency repatriation, a portion of which may be recoverable.
The Fund will accrue such taxes and recoveries as applicable, based upon its
current interpretation of tax rules and regulations that exist in the markets in
which it invests.
16
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
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 Securities and
Exchange Commission (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. 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".
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. These
reclassifications have no impact on the net asset value ("NAV") of the Fund. For
the fiscal year ended December 31, 2005, reclassifications were made to decrease
accumulated net investment income by $2,052,100 and decrease accumulated
distributions in excess of net realized gain on investments, futures contracts,
swap contracts, and foreign currency transactions by $2,052,100.
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, and Series E Auction Rate Cumulative Preferred
Stock ("Cumulative Preferred Stock") are recorded on a daily basis and are
determined as described in Note 5.
The tax character of distributions paid during the fiscal year ended
December 31, 2005 was as follows:
COMMON PREFERRED
------ ---------
DISTRIBUTIONS PAID FROM:
Ordinary income
(inclusive of short-term capital gains).. $ 13,578,966 $ 2,363,772
Net long-term capital gains ............... 113,842,518 19,817,252
------------ -----------
Total distributions paid .................. $127,421,484 $22,181,024
============ ===========
17
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). It is the policy of the Fund to comply with the
requirements of the Code applicable to regulated investment companies and to
distribute substantially all of its net investment company taxable income and
net capital gains. Therefore, no provision for Federal income taxes is required.
As of December 31, 2005, the components of accumulated earnings/(losses) on
a tax basis were as follows:
Net unrealized appreciation on investments .... $253,104,499
Net unrealized appreciation on foreign currency
and swap contracts .......................... 428,687
Dividend payable .............................. (304,105)
Undistributed ordinary income ................. 835,150
------------
Total ......................................... $254,064,231
============
The following summarizes the tax cost of investments, swap contracts, and
the related unrealized appreciation/depreciation at June 30, 2006:
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
COST APPRECIATION DEPRECIATION (DEPRECIATION)
---- ------------ ------------ --------------
Investments ............. $1,476,237,136 $426,204,428 $(87,943,205) $338,261,223
Swap contracts .......... -- 1,477,325 -- 1,477,325
------------ ------------ ------------
$427,681,753 $(87,943,205) $339,738,548
============ ============ ============
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 corresponding swap rate of each particular
series of Cumulative Preferred Stock for the period. For the six months ended
June 30, 2006, the Fund's total return on the NAV of the common shares exceeded
the stated dividend rate or net swap expense of all outstanding Preferred Stock.
Thus, management fees were accrued on these assets.
During the six months ended June 30, 2006, the Fund paid brokerage
commissions of $116,382 to Gabelli & Company, Inc. ("Gabelli & Company"), an
affiliate of the Adviser.
In connection with the 2005 Rights Offering, holders of unexercised rights
("Rights") to purchase common shares of the Fund were able to instruct the
Subscription Agent (Computershare Shareholder Services, Inc.) to sell such
Rights on their behalf. The Subscription Agent was permitted to effect such
sales through Gabelli & Company, unless the Subscription Agent was able to
negotiate a lower commission rate with an independent broker. Total commissions
from sales of Rights effected by the Subscription Agent through Gabelli &
Company amounted to $93,506 for the year ended December 31, 2005.
18
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
The cost of calculating the Fund's NAV per share is a Fund expense pursuant
to the Advisory Agreement between the Fund and the Adviser. During the six
months ended June 30, 2006, the Fund paid or accrued $22,500 to the Adviser in
connection with the cost of computing the Fund's NAV, which is included in
miscellaneous expenses in the Statement of Operations.
The Fund is assuming its portion of the allocated cost of the Gabelli
Funds' Chief Compliance Officer in the amount of $15,334 for the six months
ended June 30, 2006, which is included in payroll expenses in the Statement of
Operations.
4. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for
the six months ended June 30, 2006, other than short-term securities, aggregated
$120,608,180 and $139,322,820, respectively.
5. CAPITAL. The charter permits the Fund to issue 182,000,000 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 at a discount of 10% or more (or
such other percentage as the Board may determine from time to time) from the NAV
of the shares. During the six months ended June 30, 2006, the Fund did not
repurchase any shares of its common stock in the open market.
Transactions in common stock were as follows:
SIX MONTHS ENDED
JUNE 30, 2006 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2005
------------------- -------------------------
Shares Amount Shares Amount
------- ---------- ---------- ------------
Shares issued upon reinvestment
of dividends and distributions .............. 752,896 $6,181,276 3,242,215 $ 27,277,033
Shares issued in rights offering .............. -- -- 20,525,901 143,081,307
Shares issued in connection with reorganization
of Sterling Capital Corporation ............. -- -- 1,978,190 18,306,860
------- ---------- ---------- ------------
Net increase .................................. 752,896 $6,181,276 25,746,306 $188,665,200
======= ========== ========== ============
The Fund's Articles of Incorporation, as amended, authorize 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 7.20% Series B, Series C Auction Rate, 5.875%
Series D, and Series E Auction Rate Cumulative Preferred Stock at redemption
prices of $25, $25,000, $25, and $25,000, respectively, per share plus an amount
equal to the accumulated and unpaid dividends whether or not declared on such
shares in order to meet these requirements. Additionally, failure to meet the
foregoing asset 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.
On September 21, 2005, the Fund distributed one transferable right for each
of the 143,681,301 shares of common stock outstanding to shareholders of record
on that date. Seven rights were required to purchase one additional common share
at the subscription price of $7.00 per share. Shareholders who exercised their
full primary subscription rights were
19
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
eligible for an over-subscription privilege entitling them to subscribe, subject
to certain limitations and a pro-rata allotment, for any additional shares not
purchased pursuant to the primary subscription plus such additional amounts as
authorized by the Board in accordance with the registration statement. The
subscription period expired on October 26, 2005. The rights offering was fully
subscribed, having received over-subscription requests in excess of the shares
available for primary subscription resulting in the issuance of 20,525,901
shares of common stock and proceeds of $143,681,307 to the Fund, prior to the
deduction of estimated expenses of $754,685. The NAV per share of the Fund
common shareholders was reduced by approximately $0.15 per share as a result of
the issuance of shares below NAV.
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. Commencing June 20, 2006 and thereafter, the Fund, at its option, may
redeem the 7.20% Series B Cumulative Preferred Stock in whole or in part at the
redemption price at any time. On June 26, 2006, the Fund, as authorized by the
Board, redeemed 25% (1,650,000 shares) of its outstanding 7.20% Series B
Cumulative Preferred Stock at the redemption price of $25.00 per share of
Preferred Stock (the liquidation value), plus accumulated and unpaid dividends
through the redemption date of $0.45 per Preferred Share. The 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. At
June 30, 2006, 4,950,000 shares of 7.20% Series B Cumulative Preferred Stock
were outstanding and accrued dividends amounted to $123,750.
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 7 days, is expected to vary with short-term interest rates. The dividend
rates of Series C Auction Rate Cumulative Preferred Stock ranged from 4.21% to
5.25% for the six months ended June 30, 2006. Existing shareholders may submit
an order to hold, bid, or sell such shares on each auction date. Series C
Auction Rate Cumulative Preferred Stock shareholders may also trade shares in
the secondary market. The Fund, at its option, may redeem the Series C Auction
Rate Cumulative Preferred Stock in whole or in part at the redemption price at
any time. During the six months ended June 30, 2006, the Fund did not redeem any
shares of Series C Auction Rate Cumulative Preferred Stock. At June 30, 2006,
5,200 shares of Series C Auction Rate Cumulative Preferred Stock were
outstanding with an annualized dividend rate of 5.05% per share and accrued
dividends amounted to $54,708.
On October 7, 2003, the Fund received net proceeds of $72,387,500 (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 six months ended June 30, 2006, the
Fund did not repurchase any shares of 5.875% Series D Cumulative Preferred
Stock. At June 30, 2006, 2,949,700 shares of 5.875% Series D Cumulative
Preferred Stock were outstanding and accrued dividends amounted to $60,172.
On October 7, 2003, the Fund received net proceeds of $49,260,000 (after
underwriting discounts of $500,000 and offering expenses of $149,991) from the
public offering of 2,000 shares of Series E Auction Rate Cumulative Preferred
Stock. The dividend rate, as set by the auction process, which is generally held
every 7 days, is expected to vary with short-term interest rates. The dividend
rates of Series E Auction Rate Cumulative Preferred Stock ranged from 4.10% to
5.26% for the six months ended June 30, 2006. 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
20
THE GABELLI EQUITY TRUST INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
redemption price at any time. During the six months ended June 30, 2006, the
Fund did not redeem any shares of Series E Auction Rate Cumulative Preferred
Stock. At June 30, 2006, 2,000 shares of Series E Auction Rate Cumulative
Preferred Stock were outstanding with an annualized dividend rate of 5.26% per
share and accrued dividends amounted to $7,306.
The holders of Cumulative Preferred Stock generally are entitled to one
vote per share held on each matter submitted to a vote of shareholders of the
Fund and will vote together with holders of common stock as a single class. The
holders of Cumulative Preferred Stock voting together as a single class also
have the right currently to elect two Directors and under certain circumstances
are entitled to elect a majority of the Board of Directors. In addition, the
affirmative vote of a majority of the votes entitled to be cast by holders of
all outstanding shares of the preferred stock, voting as a single class, will be
required to approve any plan of reorganization adversely affecting the preferred
stock, and the approval of two-thirds of each class, voting separately, of the
Fund's outstanding voting stock must approve the conversion of the Fund from a
closed-end 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. REORGANIZATION. On September 13, 2005, the Fund acquired substantially all of
the net assets of the Sterling Capital Corp. pursuant to a Plan of
Reorganization approved by Sterling Capital Corp. on September 12, 2005. The
acquisition was accomplished by a tax-free exchange of 1,978,190 common shares
of the Fund valued at $18,306,860 for the net assets of the Sterling Capital
Corp. on September 12, 2005. Sterling Capital Corp.'s net assets of $18,306,860,
including $2,191,264 of unrealized appreciation, were combined with those of the
Fund on September 13, 2005. The net assets attributable to common stock
shareholders of the Fund immediately before the acquisition were $1,273,163,812.
8. OTHER MATTERS. The Adviser and/or affiliates have received subpoenas from the
Attorney General of the State of New York and the SEC requesting information on
mutual fund trading practices involving certain funds managed by the Adviser.
GAMCO Investors, Inc. ("GAMCO"), the Adviser's parent company, is responding to
these requests for documents and testimony. In June 2006, GAMCO began
discussions with the SEC regarding a possible resolution of their inquiry. Since
these discussions are ongoing, it cannot be determined at this time whether they
will ultimately result in a settlement of this matter. 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
seven 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.
21
THE GABELLI EQUITY TRUST INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
OUTSTANDING THROUGHOUT EACH PERIOD: JUNE 30, 2006 ---------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
---------------- -------- -------- -------- -------- --------
OPERATING PERFORMANCE:
Net asset value, beginning of period ................ $ 8.10 $ 8.69 $ 7.98 $ 6.28 $ 8.97 $ 10.89
-------- -------- -------- -------- -------- --------
Net investment income ............................... 0.12 0.09 0.02 0.04 0.07 0.08
Net realized and unrealized gain (loss) on investments 0.77 0.47 1.63 2.50 (1.65) (0.16)
-------- -------- -------- -------- -------- --------
Total from investment operations .................... 0.89 0.56 1.65 2.54 (1.58) (0.08)
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS:(A)
Net investment income ............................... (0.02)(e) (0.01) (0.00)(f) (0.00)(f) (0.01) (0.01)
Net realized gain on investments .................... (0.05)(e) (0.14) (0.14) (0.14) (0.16) (0.11)
-------- -------- -------- -------- -------- --------
Total distributions to preferred shareholders ....... (0.07) (0.15) (0.14) (0.14) (0.17) (0.12)
-------- -------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE
TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS .... 0.82 0.41 1.51 2.40 (1.75) (0.20)
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Net investment income ............................... (0.10)(e) (0.08) (0.01) (0.01) (0.05) (0.06)
Net realized gain on investments .................... (0.24)(e) (0.77) (0.79) (0.68) (0.90) (1.02)
Return of capital ................................... (0.04)(e) -- -- (0.00)(f) (0.00)(f) --
-------- -------- -------- -------- -------- --------
Total distributions to common shareholders .......... (0.38) (0.85) (0.80) (0.69) (0.95) (1.08)
-------- -------- -------- -------- -------- --------
FUND SHARE TRANSACTIONS:
Increase (decrease) in net asset value from common
stock share transactions .......................... (0.00)(f) (0.00)(f) 0.00(f) 0.01 0.02 0.03
Decrease in net asset value from shares issued in
rights offering ................................... -- (0.15) -- -- -- (0.62)
Increase in net asset value from repurchase of
preferred shares .................................. -- -- 0.00(f) -- -- --
Offering costs for preferred shares charged to
paid-in capital ................................... 0.00(f) (0.00)(f) 0.00(f) (0.02) (0.01) (0.05)
Offering costs for issuance of rights charged to
paid-in capital ................................... (0.00)(f) (0.00)(f) -- -- -- --
-------- -------- -------- -------- -------- --------
Total capital share transactions .................... (0.00) (0.15) 0.00(f) (0.01) 0.01 (0.64)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE ATTRIBUTABLE TO COMMON
SHAREHOLDERS, END OF PERIOD ....................... $ 8.54 $ 8.10 $ 8.69 $ 7.98 $ 6.28 $ 8.97
======== ======== ======== ======== ======== ========
Net Asset Value Total Return + ...................... 10.30% 5.50% 19.81% 39.90% (21.00)% (3.68)%
======== ======== ======== ======== ======== ========
Market Value, End of Period ......................... $ 8.21 $ 8.03 $ 9.02 $ 8.00 $ 6.85 $ 10.79
======== ======== ======== ======== ======== ========
Total Investment Return ++ .......................... 6.93% 0.66% 24.04% 28.58% (28.36)% 10.32%
======== ======== ======== ======== ======== ========
See accompanying notes to financial statements.
22
THE GABELLI EQUITY TRUST INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
SELECTED DATA FOR A COMMON SHARE SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
OUTSTANDING THROUGHOUT EACH PERIOD: JUNE 30, 2006 ---------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
---------------- -------- -------- -------- -------- --------
RATIOS AND SUPPLEMENTAL DATA:
Net assets including liquidation value of preferred
shares, end of period (in 000's) .................$1,802,858 $1,764,634 $1,638,225 $1,514,525 $1,271,600 $1,465,369
Net assets attributable to common shares,
end of period (in 000's) .........................$1,425,366 $1,345,891 $1,219,483 $1,094,525 $ 842,403 $1,166,171
Ratio of net investment income to average net assets
attributable to common shares .................... 2.82%(g) 1.27% 0.64% 0.67% 0.99% 0.81%
Ratio of operating expenses to average net assets
attributable to common shares net of
fee reduction (b) ................................ 1.45%(g) 1.39% 1.57% 1.62% 1.19% 1.12%
Ratio of operating expenses to average net assets
including liquidation value of preferred
shares net of fee reduction (b) .................. 1.12%(g) 1.04% 1.14% 1.14% 0.87% 0.95%
Portfolio turnover rate ............................ 7.4% 22.4% 28.6% 19.2% 27.1% 23.9%
PREFERRED STOCK:
7.25% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ........ -- -- -- -- $ 134,198 $ 134,198
Total shares outstanding (in 000's) ................ -- -- -- -- 5,368 5,368
Liquidation preference per share ................... -- -- -- -- $ 25.00 $ 25.00
Average market value (c) ........................... -- -- -- -- $ 25.75 $ 25.39
Asset coverage per share ........................... -- -- -- -- $ 74.07 $ 122.44
7.20% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ........$ 123,750 $ 165,000 $ 165,000 $ 165,000 $ 165,000 $ 165,000
Total shares outstanding (in 000's) ................ 4,950 6,600 6,600 6,600 6,600 6,600
Liquidation preference per share ...................$ 25.00 $ 25.00 $ 25.00 $ 25.00 $ 25.00 $ 25.00
Average market value (c) ...........................$ 25.23 $ 25.92 $ 26.57 $ 27.06 $ 26.40 $ 25.60
Asset coverage per share ...........................$ 119.40 $ 105.35 $ 97.81 $ 90.15 $ 74.07 $ 122.44
AUCTION RATE SERIES C CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ........$ 130,000 $ 130,000 $ 130,000 $ 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 ...........................$ 119,397 $ 105,353 $ 97,806 $ 90,150 $ 74,068 --
5.875% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ........$ 73,743 $ 73,743 $ 73,743 $ 75,000 -- --
Total shares outstanding (in 000's) ................ 2,950 2,950 2,950 3,000 -- --
Liquidation preference per share ...................$ 25.00 $ 25.00 $ 25.00 $ 25.00 -- --
Average market value (c) ...........................$ 23.87 $ 24.82 $ 24.81 $ 25.10 -- --
Asset coverage per share ...........................$ 119.40 $ 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 -- --
Total shares outstanding (in 000's) ................ 2 2 2 2 -- --
Liquidation preference per share ...................$ 25,000 $ 25,000 $ 25,000 $ 25,000 -- --
Average market value (c) ...........................$ 25,000 $ 25,000 $ 25,000 $ 25,000 -- --
Asset coverage per share ...........................$ 119,397 $ 105,353 $ 97,806 $ 90,150
ASSET COVERAGE (d) ................................. 478% 421% 391% 361% 296% 490%
-----------------
+ 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 2001 and 2005 rights
offerings, assuming full subscription by shareholder. Total return for the
period of less than one year is not annualized.
++ Based on market value per share, adjusted for reinvestment of distributions,
including the effect of shares issued pursuant to 2001 and 2005 rights
offerings, assuming full subscription by shareholder. Total return for the
period of less than one year is not annualized.
(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. Including such custodian fee
credits for the six months ended June 30, 2006 and the years ended December
31, 2002 and 2001, the ratios of operating expenses to average net assets
attributable to common shares net of fee reduction would have been 1.44%,
1.19%, and 1.11%, respectively, and the ratios of operating expenses to
average total net assets including liquidation value of preferred shares net
of fee reduction would have been 1.12%, 0.87%, and 0.94%, respectively. For
the fiscal years ended December 31, 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) Based on fiscal year to date book income. Amounts are subject to change and
recharacterization at fiscal year end.
(f) Amount represents less than $0.005 per share.
(g) Annualized.
See accompanying notes to financial statements.
23
THE GABELLI EQUITY TRUST INC.
BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED)
Section 15(c) of the Investment Company Act of 1940, as amended (the "1940
Act"), contemplates that the Board of Directors (the "Board") of The Gabelli
Equity Trust Inc. (the "Fund"), including a majority of the Directors who have
no direct or indirect interest in the investment advisory agreement and are not
"interested persons" of the Fund, as defined in the 1940 Act (the "Independent
Board Members"), are required to annually review and re-approve the terms of the
Fund's existing investment advisory agreement and approve any newly proposed
terms therein. In this regard, the Board reviewed and re-approved, during the
most recent six month period covered by this report, the Investment Advisory
Agreement (the "Advisory Agreement") with Gabelli Funds, LLC (the "Adviser") for
the Fund.
More specifically, at a meeting held on May 17, 2006, the Board, including the
Independent Board Members, considered the factors and reached the conclusions
described below relating to the selection of the Adviser and the re-approval of
the Advisory Agreement.
NATURE, EXTENT, AND QUALITY OF SERVICES. The Independent Board Members
considered the nature, quality, and extent of administrative and shareholder
services performed by the Adviser, including portfolio management, supervision
of Fund operations and compliance and regulatory filings and disclosures to
shareholders, general oversight of other service providers, review of Fund legal
issues, assisting the Independent Board Members in their capacity as directors,
and other services. The Independent Board Members concluded that the services
are extensive in nature and that the Adviser consistently delivered a high level
of service.
INVESTMENT PERFORMANCE OF THE FUND AND ADVISER. The Independent Board Members
considered short-term and long-term investment performance for the Fund over
various periods of time as compared to both relevant equity indices and the
performance of the Fund's Lipper, Inc. peer group, and concluded that the
Adviser was delivering satisfactory performance results consistent with the
investment strategies being pursued by the Fund.
COSTS OF SERVICES AND PROFITS REALIZED BY THE ADVISER.
(A) COSTS OF SERVICES TO FUND: FEES AND EXPENSES. The Independent Board Members
considered the Fund's advisory fee rate and expense ratio relative to industry
averages for the Fund's peer group category and the advisory fees charged by the
Adviser and its affiliates to other fund and non-fund clients. The Independent
Board Members noted that the mix of services under the Advisory Agreement are
much more extensive than those under the advisory agreements for non-fund
clients. The Independent Board Members recognized that the advisory fee paid by
the Fund and the Fund's overall expense ratio are higher than the averages for
its peer group, but concluded that the fee is acceptable based upon the
qualifications, experience, reputation, and performance of the Adviser.
(B) PROFITABILITY AND COSTS OF SERVICES TO ADVISER. The Independent Board
Members considered the Adviser's overall profitability and costs, and pro-forma
estimates of the Adviser's profitability and costs attributable to the Fund (i)
as part of the Gabelli fund complex and (ii) assuming the Fund constituted the
Adviser's only investment company under its management. The Independent Board
Members also considered whether the amount of profit is a fair entrepreneurial
profit for the management of the Fund, and noted that the Adviser has
substantially increased its resources devoted to Fund matters in response to
regulatory requirements and enhanced Fund policies and procedures. The
Independent Board Members concluded that the Adviser's profitability was at an
acceptable level.
24
EXTENT OF ECONOMIES OF SCALE AS FUND GROWS. The Independent Board Members
considered whether there have been economies of scale with respect to the
management of the Fund and whether the Fund has appropriately benefited from any
economies of scale. The Independent Board Members noted that economies of scale
may develop for certain funds as their assets increase and their fund-level
expenses decline as a percentage of assets, but that fund-level economies of
scale may not necessarily result in Adviser-level economies of scale. Aware that
the Adviser waives fees attributable to the liquidation value of the preferred
shares if the total return of the common shares does not exceed a specified
amount, the Independent Board Members concluded that there was an appropriate
sharing of economies of scale.
WHETHER FEE LEVELS REFLECT ECONOMIES OF SCALE. The Independent Board Members
also considered whether the advisory fee rate is reasonable in relation to the
asset size of the Fund and any economies of scale that may exist, and concluded
that it currently was reasonable.
OTHER RELEVANT CONSIDERATIONS.
(A) ADVISER PERSONNEL AND METHODS. The Independent Board Members considered the
size, education, and experience of the Adviser's staff, the Adviser's
fundamental research capabilities, and the Adviser's approach to recruiting,
training, and retaining portfolio managers and other research and management
personnel, and concluded that in each of these areas the Adviser was structured
in such a way to support the high level of services being provided to the Fund.
(B) OTHER BENEFITS TO THE ADVISER. The Independent Board Members also considered
the character and amount of other incidental benefits received by the Adviser
and its affiliates from its association with the Fund. The Independent Board
Members considered the brokerage commissions paid to an affiliate of the
Adviser. The Independent Board Members concluded that potential "fall-out"
benefits that the Adviser and its affiliates may receive, such as affiliated
brokerage commissions, greater name recognition, or increased ability to obtain
research services, appear to be reasonable.
CONCLUSIONS. In considering the Advisory Agreement, the Independent Board
Members did not identify any factor as all-important or all-controlling and
instead considered these factors collectively in light of the Fund's surrounding
circumstances. Based on this review, it was the judgment of the Independent
Board Members that shareholders had received over the long term satisfactory
absolute and relative performance at reasonable fees and, therefore, re-approval
of the Advisory Agreement was in the best interests of the Fund and its
shareholders. As a part of its decision making process, the Independent Board
Members noted that the Adviser has managed the Fund since its inception, and the
Independent Board Members believe that a long-term relationship with a capable,
conscientious adviser is in the best interests of the Fund. The Independent
Board Members considered, generally, that shareholders invested in the Fund
knowing that the Adviser managed the Fund and knowing its advisory fee schedule.
As such, the Independent Board Members considered, in particular, whether the
Adviser managed the Fund in accordance with its investment objectives and
policies as disclosed to shareholders. The Independent Board Members concluded
that the Fund was managed by the Adviser consistent with its investment
objectives and policies. Upon conclusion of their review and discussion, the
Independent Board Members unanimously agreed to recommend the continuation of
the Investment Advisory Agreement for the Fund.
25
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. 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 issue 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 re-registered in your own name. Once
registered in your own name your dividends will be automatically reinvested.
Certain brokers participate in the Plan. Shareholders holding shares in "street
name" at participating institutions will have dividends automatically
reinvested. Shareholders wishing a cash dividend at such institution must
contact their broker to make this change.
The number of shares of common stock distributed to participants in the Plan
in lieu of cash dividends is determined in the following manner. Under the Plan,
whenever the market price of the 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.
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.
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 Plans 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.
26
[GRAPHIC OMITTED]
PICTURE OF FLAGS
DIRECTORS AND OFFICERS
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER, RYE, NY 10580-1422
DIRECTORS
Mario J. Gabelli, CFA
CHAIRMAN & CHIEF EXECUTIVE OFFICER,
GAMCO INVESTORS, INC.
Dr. Thomas E. Bratter
PRESIDENT, JOHN DEWEY ACADEMY
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
James P. Conn
FORMER CHIEF INVESTMENT OFFICER,
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
Frank J. Fahrenkopf, Jr.
PRESIDENT & CHIEF EXECUTIVE OFFICER,
AMERICAN GAMING ASSOCIATION
Arthur V. Ferrara
FORMER CHAIRMAN & CHIEF EXECUTIVE OFFICER,
GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
Anthony R. Pustorino
CERTIFIED PUBLIC ACCOUNTANT,
PROFESSOR EMERITUS, PACE UNIVERSITY
Salvatore J. Zizza
CHAIRMAN, HALLMARK ELECTRICAL SUPPLIES CORP.
OFFICERS
Bruce N. Alpert
PRESIDENT
Carter W. Austin
VICE PRESIDENT
Dawn M. Donato
ASSISTANT VICE PRESIDENT & OMBUDSMAN
Peter D. Goldstein
CHIEF COMPLIANCE OFFICER
James E. McKee
SECRETARY
Agnes Mullady
TREASURER
INVESTMENT ADVISER
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
CUSTODIAN
Mellon Trust of New England, N.A.
COUNSEL
Willkie Farr & Gallagher LLP
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company, N.A.
STOCK EXCHANGE LISTING
7.20% 5.875%
Common Preferred Preferred
------ --------- ---------
NYSE-Symbol: GAB GABPrB GAB PrD
Shares Outstanding: 166,832,166 4,950,000 2,949,700
The Net Asset Value appears in the Publicly Traded Funds column, under the
heading "General Equity Funds," in Sunday's The New York Times and in Monday's
The Wall Street Journal. It is also listed in Barron's Mutual Funds/Closed End
Funds section under the heading "General Equity Funds".
The Net Asset Value may be obtained each day by calling (914) 921-5070.
--------------------------------------------------------------------------------
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 Series B and Series D
Cumulative Preferred Stock in the open market when the shares are trading at a
discount to the Liquidation Value of $25.00.
--------------------------------------------------------------------------------
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER
RYE, NY 10580-1422
(914) 921-5070
WWW.GABELLI.COM
SEMI-ANNUAL REPORT
JUNE 30, 2006
GAB SA 2006
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. 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.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
There has been no change, as of the date of this filing, in any of the portfolio
managers identified in response to paragraph (a)(1) of this Item in the
registrant's most recently filed annual report on Form N-CSR.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
REGISTRANT PURCHASES OF EQUITY SECURITIES
=============================================================================================================================
(C) TOTAL NUMBER OF (D) MAXIMUM NUMBER (OR
SHARES (OR UNITS) APPROXIMATE DOLLAR VALUE) OF
(A) TOTAL NUMBER OF PURCHASED AS PART OF SHARES (OR UNITS) THAT MAY YET
SHARES (OR UNITS) (B) AVERAGE PRICE PAID PUBLICLY ANNOUNCED PLANS BE PURCHASED UNDER THE PLANS
PERIOD PURCHASED PER SHARE (OR UNIT) OR PROGRAMS OR PROGRAMS
=============================================================================================================================
Month #1 Common - N/A Common - N/A Common - N/A Common - 166,079,270
01/01/06
through Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - 6,600,000
01/31/06
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
=============================================================================================================================
Month #2 Common - N/A Common - N/A Common - N/A Common - 166,079,270
02/01/06
through Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - 6,600,000
02/28/06
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
=============================================================================================================================
Month #3 Common - N/A Common - N/A Common - N/A Common - 166,079,270
03/01/06
through Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - 6,600,000
03/31/06
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
=============================================================================================================================
Month #4 Common - N/A Common - N/A Common - N/A Common - 166,079,270
04/01/06
through Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - 6,600,000
04/30/06
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
=============================================================================================================================
Month #5 Common - N/A Common - N/A Common - N/A Common - 166,079,270
05/01/06
through Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - N/A Preferred Series B - 6,600,000
05/31/06
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
=============================================================================================================================
Month #6 Common - N/A Common - N/A Common - N/A Common - 166,832,166
06/01/06
through Preferred Series B - Preferred Series B - Preferred Series B - Preferred Series B - 6,600,000
06/30/06 1,650,000 $25.00 1,650,000 - 1,650,000 = 4,950,000
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - 2,949,700
=============================================================================================================================
Total Common - N/A Common - N/A Common - N/A N/A
Preferred Series B - Preferred Series B - Preferred Series B -
1,650,000 $25.00 1,650,000
Preferred Series D - N/A Preferred Series D - N/A Preferred Series D - N/A
=============================================================================================================================
Footnote columns (c) and (d) of the table, by disclosing the following
information in the aggregate for all plans or programs publicly announced:
a. The date each plan or program was announced - The notice of the
potential repurchase of common and preferred shares occurs quarterly in
the Fund's quarterly report in accordance with Section 23(c) of the
Investment Company Act of 1940, as amended.
b. The dollar amount (or share or unit amount) approved - Any or all
common shares outstanding may be repurchased when the Fund's common
shares are trading at a discount of 10% or more from the net asset
value of the shares.
Any or all preferred shares outstanding may be repurchased when the
Fund's preferred shares are trading at a discount to the liquidation
value of $25.00.
c. The expiration date (if any) of each plan or program - The Fund's
repurchase plans are ongoing.
d. Each plan or program that has expired during the period covered by the
table - The Fund's repurchase plans are ongoing.
e. Each plan or program the registrant has determined to terminate prior
to expiration, or under which the registrant does not intend to make
further purchases. - The Fund's repurchase plans are ongoing.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's Board of Directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) The Gabelli Equity Trust Inc.
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By (Signature and Title)* /s/ Bruce N. Alpert
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Bruce N. Alpert, Principal Executive Officer
Date September 1, 2006
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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 September 1, 2006
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By (Signature and Title)* /s/ Agnes Mullady
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Agnes Mullady,
Principal Financial Officer and Treasurer
Date September 1, 2006
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* Print the name and title of each signing officer under his or her signature.