June 30, 2010
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The Gabelli Equity Trust Inc. is a non-diversified, closed-end management investment
company whose primary objective is long-term growth of capital, with income as a
This report is printed on recycled paper.
To Our Shareholders,
The Gabelli Equity Trust’s (the “Fund”) net asset value (“NAV”) total return was
–13.0% during the second quarter of 2010, compared with total returns of –11.4% and
–9.4% for the Standard & Poor’s (“S&P”) 500 Index and the Dow Jones Industrial
Average, respectively. The total return for the Fund’s publicly traded shares was –9.5%
during the second quarter. For the one year period ended June 30, 2010, the Fund’s NAV
total return was 27.0% and the total return for the Fund’s publicly traded shares was
11.2%, compared with total returns of 14.4% and 18.9% for the S&P 500 Index and the
Dow Jones Industrial Average, respectively. On June 30, 2010, the Fund’s NAV per share
was $4.55, while the price of the publicly traded shares closed at $4.49 on the New York
Stock Exchange (“NYSE”).
Mario J. Gabelli, CFA
Average Annual Returns through June 30, 2010 (a) Since
Year to Inception
Quarter Date 1 Year 3 Year 5 Year 10 Year 15 Year 20 Year (08/21/86)
Gabelli Equity Trust
NAV Total Return (b) . . . . . . . . (13.03)% (5.55)% 27.02% (11.12)% 1.04% 3.00% 7.44% 8.31% 9.43%
Investment Total Return (c) . . (9.53) (6.86) 11.23 (12.18) (0.75) 2.35 7.06 8.12 8.98
S&P 500 Index . . . . . . . . . . . . . . . . (11.41) (6.64) 14.43 (9.80) (0.79) (1.59) 6.24 7.67 8.55(d)
Dow Jones Industrial Average . . . . (9.36) (5.00) 18.90 (7.38) 1.65 1.70 7.56 8.89 9.96(d)
Nasdaq Composite Index . . . . . . . . (12.04) (7.05) 14.94 (6.77) 0.50 (6.12) 5.59 7.88 7.43
(a) Returns represent past performance and do not guarantee future results. Investment returns and the principal value of an
investment will fluctuate. When shares are sold, they may be worth more or less than their original cost. Current performance may
be lower or higher than the performance data presented. Visit www.gabelli.com for performance information as of the most recent
month end. Performance returns for periods of less than one year are not annualized. Investors should carefully consider the
investment objectives, risks, charges, and expenses of the Fund before investing. The Dow Jones Industrial Average is an
unmanaged index of 30 large capitalization stocks. The S&P 500 and the Nasdaq Composite Indices are unmanaged indicators
of stock market performance. Dividends are considered reinvested except for the Nasdaq Composite Index. You cannot invest
directly in an index.
(b) Total returns and average annual returns reflect changes in the net asset value (“NAV”) per share, reinvestment of distributions
at NAV on the ex-dividend date, adjustments for rights offerings, spin-offs, and taxes paid on undistributed long-term capital gains
and are net of expenses. Since inception return is based on an initial NAV of $9.34.
(c) Total returns and average annual returns reflect changes in closing market values on the New York Stock Exchange, reinvestment
of distributions, and adjustments for rights offerings, spin-offs, and taxes paid on undistributed long-term capital gains. Since
inception return is based on an initial offering price of $10.00.
(d) From August 31, 1986, the date closest to the Fund’s inception for which data is available.
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.
Premium / Discount Discussion
As a refresher for our shareholders, the price of a closed-end fund is determined in the open market by willing buyers
and sellers. Shares of the Fund trade on the NYSE and may trade at a premium to (higher than) net asset value (the market
value of the Fund’s underlying portfolio and other assets less any liabilities) or a discount to (lower than) net asset value.
Of the 615 closed-end funds that are publicly traded in the U.S. as of June 30, 2010, approximately 37% trade at premiums
to NAV compared with 30% five years ago and 13% ten years ago.
Ideally, the Fund’s market price will generally track the NAV. However, the Fund’s premium or discount to NAV
may vary over time. Over the Fund’s twenty-three year history, the range fluctuated from a 38% premium in June 2002 to
a 27% discount in December 1987. On June 30, 2010, the market price of the Fund closed at a 1.3% discount to its NAV.
“Mr. Market” often provides opportunities to invest at a discount. The Fund has undertaken various initiatives to
narrow the discount when appropriate through distribution policies, rights offerings, and share repurchase programs.
The Fund’s long-term investment goal is growth of capital, with income as a secondary objective. The Fund seeks
to generate a real rate of return of 10%. We believe that our stock selection process adds to the investment equation. We
have a successful history of investment, providing shareholders average annual returns of 9.4% since inception. However,
it is important to remember that “Mr. Market” is a pendulum that swings both ways.
PREMIUM/DISCOUNT SINCE INCEPTION
June 30, 2010
Net Asset Value $4.55
Market Price $4.49
20% Discount 1.32%
’86 ’87 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09
Data points as of each month end.
The Summer of Our Discontent
After a sigh of relief in late 2009, indicators from stock market averages to consumer confidence surveys suggest
that Americans have a severe case of the summer doldrums. Television footage of riots in Greece has been replaced by
images of oil covered waterfowl from the BP Gulf of Mexico oil spill. Unemployment remains stubbornly high and the
housing market is still bottoming. Concerns about the solvency of large financial institutions have given way to concerns
about the solvency of whole nation states. Austerity is the prescription of the day as governments around the world attempt
to rein in spending, while at the same time showing little restraint in raising or creating new taxes and expanding the scope
of regulation. In succession, industry after industry in the U.S. – healthcare, energy, financial services, telecommunications,
and education – have been targeted with new rules and oversight.
None of these dynamics are good for capital investment by business or for consumer spending which, including
healthcare, accounts for 70% of GDP. Combined with the roll off of government stimulus spending, the prospects for a
robust recovery appear muted. Investors are assigning a higher probability to a “double dip” recession impacting 2011
earnings. Already, American companies selling in Europe face multi-pronged headwinds. Demand from many of those
suffering economies has been reduced in aggregate, while a 10% appreciation in the value of the dollar makes American
goods more expensive relative to European goods. By the same token, earnings from the eurozone are now worth 10%
less in dollar terms. Over time, this cost advantage should help European economies to recover and the euro to reach some
equilibrium with the dollar, but the short-term dislocation will have a real effect on results.
Of course, even summer storm clouds have silver linings. We see several: (a) corporate earnings were better than
expected in the first quarter and should remain strong in the second quarter as even small increases in sales are leveraged
against reduced cost bases; (b) cash on corporate balance sheets (nearly 11% of non-financial company assets) remains at
multi-decade highs, leaving ample room for investment, buybacks, and dividends, and; (c) stocks look inexpensive by
most measures, especially when compared with other asset classes – the S&P 500 now has a current return of over 2%
versus a yield of less than 3% on 10 year U.S. Treasury Notes. Historically, only a portion of the total return from stocks
has come from dividends, with far greater opportunity for capital appreciation, especially in nominal terms, during periods
of inflation. We believe equities are attractive for long-term investors and that careful stock selection using our Private
Market Value with a Catalyst™ methodology can deliver superior returns.
Deals, Deals and More Deals
We think a combination of the reasons for optimism discussed above will lead to an increase in deal activity. We
have written about and begun to see, the “fifth wave” of deals in 2009. Global mergers and acquisitions (M&A) rose 7%
from the second quarter of 2009 to $585 billion in the second quarter of 2010. However, deal activity declined sequentially
and is down nearly 60% from the second quarter of 2008. Turmoil in both the equity and debt markets may be responsible
for the pause in M&A, which we believe is only temporary as strong companies will seek to expand their market positions
via global acquisitions.
The largest contributors to relative return in the second quarter included Cablevision (flat) and Rogers
Communications (–2%) which held up well in a down market. Newmont Mining (+21%) was a strong performer. We have
long maintained positions in gold mining companies as we believe gold’s safe haven and inflation hedging qualities
complement the portfolio. Other notable contributors were Park-Ohio (+65%), Universal Entertainment (+27%), and
Liberty Capital (+15%).
The biggest detractors from performance included BP (–49%), Flowserve (–23%), and Deutsche Bank (–25%). BP
was a relatively small holding in the Fund, but it was impacted significantly by the Gulf of Mexico oil leak. The effects
of this incident continue to ripple through the economy, impacting suppliers to the energy industry like Flowserve. Like
many around the world, we continue to monitor the situation in the Gulf closely.
Let’s Talk Stocks
The following are stock specifics on selected holdings of our Fund. Favorable earnings prospects do not necessarily
translate into higher stock prices, but they do express a positive trend that we believe will develop over time. Individual
securities mentioned are not necessarily representative of the entire portfolio. The share prices of the following holdings
are stated in U.S. dollars or U.S. dollar equivalent terms as of June 30, 2010.
American Express Co. (AXP - $39.70 - NYSE) is the largest closed loop credit card company in the world. The company
operates its eponymous premiere branded payment network and lends to its largely affluent customer base. American
Express has eighty-nine million cards in force and $57 billion in loans, while its customers charged nearly $665 billion of
spending on their cards during the twelve months ended June 30, 2010. The company’s strong consumer brand has allowed
American Express to enter the deposit gathering market as an alternate source of funding, while the company’s affluent
customers have begun to show slight improvements in spending. Longer term, American Express should capitalize on its
higher spending customer base and continue to expand into other payment related businesses like corporate purchasing,
while also growing in emerging markets.
Berkshire Hathaway Inc. (BRK.A - $120,000 - NYSE), a holding company managed by Warren Buffett, owns subsidiaries
in diverse businesses including insurance and reinsurance, utilities and energy, railroads, finance, manufacturing, service,
and retailing. Berkshire’s insurance and reinsurance business, which includes two of the largest reinsurance companies in
the world, General Re Corporation and Berkshire Hathaway Reinsurance Group, generated $62 billion of “float” for
management to invest in 2009. The utility group includes MidAmerican Energy Company, with energy generation,
transmission, and distribution assets primarily in the U.S. and UK. Berkshire’s manufacturing, servicing, and retailing
segment includes companies ranging from Fruit of the Loom to the holding company, The Marmon Group. Berkshire
recently completed its acquisition of Burlington Northern Santa Fe Railway, one of the largest railroad systems in North
America. The combination of operating subsidiaries that generate strong cash flow and the prudent allocation of the capital
generated have made this an attractive long-term investment opportunity.
Cablevision Systems Corp. (CVC - $24.01 - NYSE) is one of the nation’s leading communications and entertainment
companies. Headquartered in Bethpage, NY, Cablevision serves the telecommunications needs of over three million
residential and business subscribers in the attractive New York market. Through the recent economic downturn,
Cablevision has posted strong free cash flow growth as it leverages its advanced cable plant with multiple products. The
company spun off its Madison Square Garden sports and entertainment assets on a one-for-four basis on February 9, 2010.
We think Cablevision may eventually consolidate the New York area cable market.
Deere & Co. (DE - $55.68 - NYSE) was founded in 1837 and is headquartered in Moline, IL. DE manufactures and
distributes agricultural and commercial equipment worldwide. The company operates in three business segments:
Agriculture and Turf, Construction and Forestry, and Credit. We continue to believe in a prolonged agricultural equipment
up-cycle due to continued high farmer cash receipts, growth in emerging markets, and the increasing availability of credit
for equipment financing. The stock has moved up substantially over the last year, and we maintain our positive opinion
on Deere shares.
DIRECTV (DTV - $33.92 - NYSE) owns the world’s largest video delivery platform with eighteen million subscribers in
the United States and six million subscribers in Latin America, respectively. The company has steadily added subscribers
by providing a superior television experience, with a market leading lineup of high definition channels and exclusive
programming, such as the NFL SUNDAY TICKET. In November 2009, Liberty Media Entertainment, owner of 57% of
DIRECTV’s stock, and non-Liberty holders of DIRECTV, combined their stakes into a single new company. We think the
simplification of DIRECTV’s ownership structure should facilitate a variety of transactions, including a spin off of its
Latin American business and an eventual merger with AT&T or Verizon. In the meantime, we expect the company to
continue to aggressively repurchase its stock.
Honeywell International Inc. (HON - $39.03 - NYSE) is a leading producer of avionics, power, and electronic systems for
the aerospace market, process automation, and security products for the industrial, residential, and commercial building
markets. The company also makes turbochargers for the automotive industry and provides technologies to the energy
market. HON has excellent products, a strong balance sheet, and generates substantial free cash flow that could be used
for internal growth, acquisitions, and stock repurchases. In addition, the company is executing on its long-term strategy to
expand in less costly regions of the world, while reducing costs in higher cost countries by closing plants, consolidating
facilities, and implementing six sigma and lean manufacturing. These dynamics should position HON for bigger
profitability gains in the future.
News Corp. (NWSA - $11.96 - Nasdaq) is a leading global media firm with interests in broadcast television, cable
networks, filmed entertainment, global satellite distribution, and British, American, and Australian newspapers, including
the iconic Wall Street Journal. Few companies have News Corp.’s breadth or global reach, which, we think, puts the
company at the forefront of the digital revolution and expansion into emerging markets, such as Eastern Europe, India,
and China. Founder Rupert Murdoch and his family control a 38% voting stake in NWS.
Rollins Inc. (ROL - $20.69 - NYSE) provides pest control services under the Orkin and Western Pest brand names to over
1.7 million residential and commercial customers throughout North America. The company both owns and franchises
local operations. Rollins’ top line has been relatively recession resistant; the company continues to grow earnings through
increased efficiency. We see the commercial market, e.g. retailers, restaurants, and healthcare facilities, as promising
opportunities. The company is majority owned by members of the Rollins family.
Swedish Match AB (SWMA.SS - $21.97 - Stockholm Stock Exchange) produces tobacco products including snus, snuff,
chewing tobacco, cigars, and lights. The company benefited from the growth of the smokeless tobacco market in both
Scandinavia and the U.S., as public smoking bans and health concerns are driving consumers to seek alternate tobacco
products to cigarettes. In February 2009, Swedish Match created a joint venture with Philip Morris International to sell
Swedish snus in markets around the world, taking advantage of Swedish Match’s brands and production capabilities and
Philip Morris International’s distribution network. In September 2009, the company sold its South African pipe tobacco
business to Philip Morris International for about 1.9 billion SEK and is using most of the proceeds to repurchase shares.
In January 2010, Swedish Match announced that it will combine its European and premium cigar portfolios with
Scandinavian cigar and pipe tobacco company STG, creating a new company that will benefit from enhanced scale and
Telephone & Data Systems Inc. (TDS - $30.39 - NYSE), based in Chicago, IL, is a telecommunications company with
wireless and rural local exchange wireline operations. U.S. Cellular, TDS’s 82% owned subsidiary, is the sixth largest
wireless operator in the U.S., providing service to 6.1 million subscribers in markets covering eighty-three million points
of presence in twenty-six states. TDS Telecom, the wireline unit, serves 1.1 million access line equivalents in thirty states,
and has the largest presence in Wisconsin and Michigan. In May 2010, U.S. Cellular hired a new President and CEO, Mary
Dillon, who was previously Global Chief Marketing Officer at McDonald’s Corporation. Prior to McDonald’s, Dillon was
president of the Quaker Foods division of PepsiCo. While U.S. Cellular’s margins are unlikely to show meaningful
expansion over the next few quarters due to increased equipment subsidies and a decline in roaming revenues, in the longer
term lack of significant new market launches should contribute to margin expansion and increased free cash flow
Uncertainty about the global macroeconomic picture has brought increased volatility back to the stock market. Our
mission is unchanged: focus on Plain Old Stock Picking (POSP). By seeking cash generating companies that sell for
significantly below their private market values, we think we are well positioned for whatever the environment brings.
Mario J. Gabelli, CFA
Portfolio Manager and
Chief Investment Officer
July 20, 2010
Note: The views expressed in this Shareholder Commentary reflect those of the Portfolio Manager only through the
end of the period stated in this Shareholder Commentary. The Portfolio Manager’s views are subject to change at any time
based on market and other conditions. The information in this Portfolio Manager’s Shareholder Commentary represents
the opinions of the individual Portfolio Manager and is not intended to be a forecast of future events, a guarantee of future
results, or investment advice. Views expressed are those of the Portfolio Manager and may differ from those of other
portfolio managers or of the Firm as a whole. This Shareholder Commentary does not constitute an offer of any transaction
in any securities. Any recommendation contained herein may not be suitable for all investors. Information contained in
this Shareholder Commentary has been obtained from sources we believe to be reliable, but cannot be guaranteed.
Portfolio Manager Compensation
Mr. Gabelli’s incentive-based, variable compensation structure and dollar amount have been fully disclosed each
year since April of 2000 in the annual proxy statement for GAMCO Investors, Inc. (NYSE:GBL). Mr. Gabelli receives no
base salary, no annual bonus, and no stock options.
As founder and portfolio manager of The Gabelli Equity Trust Inc., Mr. Gabelli received $3,753,516 in calendar year
2009. For the Fund’s first twelve months of operation starting in August 1986, Mr. Gabelli received less than $950,000.
Mario J. Gabelli and various entities he is deemed to control owned 1,616,704 common shares of the Fund for a total
amount invested of $7,259,002, as of June 30, 2010. Mr. Gabelli may not have pecuniary interest equal to a one hundred
percent economic ownership in some of the entities he is deemed to control.
10% Distribution Policy for Common Stockholders
The Board of Directors of the Fund (the “Board”) has reaffirmed the continuation of the Fund’s 10% distribution
policy for the second quarter of 2010. Pursuant to its distribution policy, the Fund paid a $0.11 per share cash distribution
on June 23, 2010 to common stockholders of record on June 16, 2010.
The Fund intends to pay a quarterly distribution of an amount determined each quarter by the Board. Under the
Fund’s current distribution policy, the Fund intends to pay a minimum annual distribution of 10% of the average net asset
value of the Fund within a calendar year or an amount sufficient to satisfy the minimum distribution requirements of the
Internal Revenue Code, whichever is greater. The average net asset value of the Fund is based on the average net asset
values as of the last day of the four preceding calendar quarters.
Each quarter, the Board reviews the amount of any potential distribution and the income, capital gain, or capital
available. The Board will continue to monitor the Fund’s quarterly distribution level, taking into consideration the Fund’s
net asset value and the financial market environment. The Fund’s distribution policy is subject to modification by the
Board at any time.
If the Fund does not generate sufficient earnings from dividends and interest received and net realized capital gains
to cover the aggregate distributions paid by the Fund in a given year, then the amount distributed in excess of the Fund’s
investment income and net realized capital gains would be deemed a non-taxable return of capital. Since this would be
considered a return of a portion of a shareholder’s original investment, it is not taxable and is treated as a reduction in the
shareholder’s cost basis. However, despite the challenges of the extra record keeping, a distribution that is occasionally
supplemented with a return of capital serves as a smoothing mechanism resulting in a more stable and consistent cash flow
available to shareholders. For a closed-end fund with a distribution policy, a return of capital becomes progressively less
likely with the passage of time because in later years it is more likely that long-term capital gains can be realized and
therefore become available for distribution. A portion of the distribution may be treated as long-term capital gain and
qualified dividend income for individuals, each subject to the maximum federal income tax rate, which is currently 15%
in taxable accounts for individuals. Long-term capital gains, qualified dividend income, ordinary income, and paid-in
capital, if any, will be allocated on a pro-rata basis to all distributions to common shareholders for the year. Based on the
accounting records of the Fund as of June 16, 2010, each of the distributions paid in 2010 would be deemed 100% from
paid-in capital. The estimated components of each distribution are provided to shareholders of record in a notice
accompanying the distribution and are available on our website (www.gabelli.com). The final determination of the sources
of all distributions in 2010 will be made after year end and can vary from the quarterly estimates. All shareholders with
taxable accounts will receive written notification regarding the components and tax treatment for all 2010 distributions in
early 2011 via Form 1099-DIV.
Series C Auction Rate Cumulative Preferred Stock
The dividend rates for the Series C Auction Rate Cumulative Preferred Stock ranged from 0.240% to 0.420% during
the second quarter of 2010. Dividend rates for the Series C Preferred Shares are cumulative at a rate that may be reset
every seven days based on the results of an auction. Since February 2008, the number of Series C Preferred Shares subject
to bid orders by potential holders has been less than the number of Series C Preferred Shares subject to sell orders.
Therefore, the weekly auctions have failed, and the holders have not been able to sell any or all of the Series C Preferred
Shares for which they submitted sell orders. The dividend rate since then has been the maximum rate. The current
maximum rate is 150% of the “AA” Financial Composite Commercial Paper Rate on the day of such auction. The Series
C Preferred Shares do not trade on an exchange. The Series C Preferred Shares are rated “Aaa” by Moody’s Investors
Service and “AAA” by Standard & Poor’s Ratings Services. The Fund issued 5,200 Series C Preferred Shares on June 27,
2002 at $25,000 per share. As of June 30, 2010, 2,880 Series C Preferred Shares were outstanding.
5.875% Series D Cumulative Preferred Stock
The Fund’s 5.875% Series D Cumulative Preferred Stock paid a $0.3671875 per share cash distribution on June 28,
2010 to preferred shareholders of record on June 21, 2010. The Series D Preferred Shares, which trade on the NYSE under
the symbol “GAB Pr D”, are rated “Aaa” by Moody’s Investors Service and have an annual dividend rate of $1.46875 per
share. The Series D Preferred Shares were issued on October 7, 2003 at $25.00 per share and pay distributions quarterly.
After five years of call protection, the Series D Preferred Shares became callable at any time at the liquidation value of
$25.00 per share plus accrued dividends. The next distribution is scheduled for September 2010. The Fund is authorized
to purchase its Series D Preferred Shares in the open market from time to time when such shares are trading at a discount
to the liquidation value of $25.00 per share. In total through June 30, 2010, the Fund has repurchased and retired 156,140
Series D Preferred Shares in the open market under this share repurchase authorization. The Fund did not repurchase any
Series D Preferred Shares during the second quarter of 2010.
Series E Auction Rate Cumulative Preferred Stock
The dividend rates for the Series E Auction Rate Cumulative Preferred Stock ranged from 0.135% to 0.525% during
the second quarter of 2010. Dividend rates for the Series E Preferred Shares are cumulative at a rate that may be reset
every seven days based on the results of an auction. Since February 2008, the number of Series E Preferred Shares subject
to bid orders by potential holders has been less than the number of Series E Preferred Shares subject to sell orders.
Therefore, the weekly auctions have failed, and the holders have not been able to sell any or all of the Series E Preferred
Shares for which they submitted sell orders. The dividend rate since then has been the maximum rate. The current
maximum rate is 150% of the “AA” Financial Composite Commercial Paper Rate on the day of such auction. The Series
E Preferred Shares do not trade on an exchange. The Series E Preferred Shares are rated “Aaa” by Moody’s Investors
Service and “AAA” by Standard & Poor’s Ratings Services. The Fund issued 2,000 Series E Preferred Shares on
October 7, 2003 at $25,000 per share. As of June 30, 2010, 1,120 Series E Preferred Shares were outstanding.
6.20% Series F Cumulative Preferred Stock
The Fund’s 6.20% Series F Cumulative Preferred Stock paid a $0.3875 per share cash distribution on June 28, 2010
to preferred shareholders of record on June 21, 2010. The Series F Preferred Shares, which trade on the NYSE under the
symbol “GAB Pr F”, are rated “Aaa” by Moody’s Investors Service and have an annual dividend rate of $1.55 per share.
The Series F Preferred Shares were issued on November 10, 2006 at $25.00 per share and pay distributions quarterly. The
Series F Preferred Shares will be callable at any time at the liquidation value of $25.00 per share plus accrued dividends
following the expiration of the five year call protection on November 10, 2011. The next distribution is scheduled for
September 2010. The Fund is authorized to purchase its Series F Preferred Shares in the open market from time to time
when such shares are trading at a discount to the liquidation value of $25.00 per share. In total through June 30, 2010, the
Fund has repurchased and retired 149,598 Series F Preferred Shares in the open market under this share repurchase
authorization. The Fund did not repurchase any Series F Preferred Shares during the second quarter of 2010.
It should be noted that the Investment Adviser does not receive a management fee on the incremental assets
attributable to the Preferred Stock unless the total return of the net asset value of the common stock during the year,
including distributions and management fee subject to reduction, exceeds the stated dividend rate or corresponding swap
rate of each particular series of Preferred Stock for the fiscal year. The Investment Adviser believes this fee arrangement
is in the best interest of all shareholders.
The Board shares the Investment Adviser’s view that the issuance of the Preferred Stock is designed to benefit the
common shareholders. To the extent that the Fund earns in excess of the dividend rate on the Preferred Stock, additional
value will thereby be created for its common shareholders.
A portion of the distributions may be treated as long-term capital gain and qualified dividend income for individuals,
each subject to the maximum federal income tax rate, which is currently 15% in taxable accounts for individuals. Long-
term capital gains, qualified dividend income, and ordinary income, if any, will be allocated on a pro-rata basis to all
distributions to preferred shareholders for the year. Based on the accounting records of the Fund as of June 16, 2010, each
of the distributions paid in 2010 would include approximately 90% from net investment income and 10% from net capital
gains. The estimated components of each distribution are provided to shareholders of record in a notice accompanying the
distribution and are available on our website (www.gabelli.com). The final determination of the sources of all distributions
in 2010 will be made after year end and can vary from the quarterly estimates. All shareholders with taxable accounts will
receive written notification regarding the components and tax treatment for all 2010 distributions in early 2011 via Form
Please visit us on the Internet. Our homepage at www.gabelli.com contains information about GAMCO Investors,
Inc., the Gabelli/GAMCO Mutual Funds, IRAs, 401(k)s, current and historical quarterly reports, closing prices, and other
current news. We welcome your comments and questions via e-mail at [email protected]
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We are pleased to offer electronic delivery of Gabelli fund documents. Shareholders of our closed-end funds can
now elect to receive e-mail announcements regarding available materials, including shareholder commentaries and fund
reports. For more information or to register for e-delivery, please visit our website at www.gabelli.com.
Top Ten Holdings
June 30, 2010
Cablevision Systems Corp. Swedish Match AB
Deere & Co. Telephone & Data Systems Inc.
The DIRECTV Group Inc. News Corp.
American Express Co. Honeywell International Inc.
Rollins Inc. Berkshire Hathaway Inc.
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLANS
Enrollment in the Plan
It is the policy of The Gabelli Equity Trust Inc. (the “Fund”) to automatically reinvest dividends payable to common
shareholders. As a “registered” shareholder you automatically become a participant in the Fund’s Automatic Dividend
Reinvestment Plan (the “Plan”). The Plan authorizes the Fund to credit shares of common stock to participants upon an
income dividend or a capital gains distribution regardless of whether the shares are trading at a discount or a premium to
net asset value. All distributions to shareholders whose shares are registered in their own names will be automatically
reinvested pursuant to the Plan in additional shares of the Fund. Plan participants may send their stock certificates to
Computershare Trust Company, N.A. (“Computershare”) to be held in their dividend reinvestment account. Registered
shareholders wishing to receive their distribution in cash must submit this request in writing to:
The Gabelli Equity Trust Inc.
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
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 elsew
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