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ANNUAL REPORT
DECEMBER 31, 2000
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Our cover icon represents the underpinnings
of Gabelli. The Teton mountains in Wyoming
represent what we believe in in America --
that creativity, ingenuity, hard work and a
global uniqueness provide enduring values.
They also stand out in an increasingly
complex, interconnected and interdependent
economic world.
INVESTMENT OBJECTIVE:
The Gabelli Utility Trust is a closed-end, non-diversified
management investment company whose primary objectives are
long-term growth of capital and income. The Utility Trust
will invest in companies that provide products, services or
equipment for the generation or distribution of electricity,
gas and water. Additionally, the Utility Trust will invest
in companies in telecommunications services or
infrastructure operations.
THIS REPORT IS PRINTED ON RECYCLED PAPER.
TO OUR SHAREHOLDERS,
The fourth quarter of 2000 saw a continuation of some trends seen in the
prior quarter, only to a larger degree. The broad equity market continued to
suffer from the widespread perception of economic weakness. This led to
continued price strength for most traditional electric, gas and water stocks.
The only utilities showing real price weakness were the major California
electric distributors, Edison International and Pacific Gas & Electric ("Pacific
G&E"), and the wholesale generating companies that sell power into California.
With retail rates frozen while market-based wholesale rates continue to rise,
the California companies are losing large sums of money on every kilowatt-hour
that they sell. The political leadership (if one can call it that) of California
has not come up with a solution that will restore the economic viability of
Edison International and Pacific G&E. In mid-January, Edison announced that it
does not intend to pay a large wholesale power bill, and is suspending interest
payments on its debt. The rating agencies have reduced debt ratings of both
Edison and Pacific G&E to junk levels, which puts Pacific G&E (which will not
run out of cash for another couple of weeks as this is written) into technical
default.
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If the two largest California electric utilities go bankrupt, which seems
as likely as not at the moment, then the wholesale generators at a minimum face
the inability to collect the price of power that has been provided but not yet
paid for. This is manageable for even the most exposed generators, but it will
certainly put a damper on the generation stocks. It is not clear what the
failure of Edison and Pacific G&E would mean for wholesale electricity
generators going forward, but it would not be good.
The California fiasco has utterly discredited the disaggregation model for
deregulation of power supply, which involves the divestiture of utility
generation assets. Because most states have already implemented plans to
deregulate generation, however, it is too late to simply halt the move towards
competitive wholesale power markets. In spite of the California experience, this
is ultimately a good thing for customers and, we believe, for investors. The bad
news is that the public uproar over the bungled California market restructuring
will make efforts to restructure in other states more difficult. This is only
partially offset by utilities taking risk management more seriously and by
politicians and regulators looking at markets more realistically.
It is worth pondering why over twenty states have implemented wholesale
generation competition, and only California is seeing prices soar, availability
decline, and distribution companies fail. Basically, California botched its
restructuring plan, and its unfortunate residents are now seeing the painful
consequences of its actions.
Electric power is a commodity. Commodity markets are volatile. Electric
power is an unusually volatile commodity because electricity, unlike other
commodities, cannot be stored but must be made as it is consumed. A vertically
integrated utility owning both generation and distribution assets is physically
hedged against price volatility. The generation assets create a structural
"long" electricity supply position, while the distribution assets create a
structurally "short" position. In a vertically integrated utility company, the
long and short positions more or less cancel each other out, and retail price
volatility is a function of changes in the price of the underlying fuel, which
can, if desired, be hedged in futures markets or by contract.
In a partially or fully disaggregated utility industry, which has been
created in California, New York, Massachusetts, Illinois, Maine, and other
states, that physical hedge no longer exists, and the utility companies need to
actively manage their price exposure as other commodity producers and consumers
do. Producers (the generators) will seek to obtain long term power sales
agreements with major customers (large retail customers and the distribution
companies), which in turn can be hedged with long term fuel supply contracts
with gas, oil and coal companies. Consumers (the electricity distribution
companies) will in turn seek to obtain wholesale power supply contracts from
generators and sign retail power supply contracts with major retail customers.
It is important to understand that a decision by a supplier or a distribution
company to sell into or buy from the volatile spot market is a choice, not a
requirement (except in California, of course).
California made a number of fatal errors in setting up its competitive
system in 1996. Retail rates were frozen and no provision was made for changes
in the price of energy or fuel to be passed on to retail customers. Retail
customers, whose rates
INVESTMENT RESULTS (a)
--------------------------------------------------------------------------------
Quarter
----------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
2000: Net Asset Value .......... $7.66 $7.63 $8.26 $8.21 $8.21
Total Return ............. 2.6% 1.5% 10.3% 6.3% 22.0%
-------------------------------------------------------------------------------
1999: Net Asset Value .......... -- -- $7.51 $7.62 $7.62
Total Return ............. -- -- 0.1% 3.5% 3.6%
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Average Annual Returns - December 31, 2000
-------------------------------------------
NAV Average Average Annual
Annual Return (a) Investment Return (c)
----------------- ---------------------
1 Year ..................... 22.01% 29.95%
Life of Fund (b) ........... 17.11% 17.09%
--------------------------------------------------------------------------------
(a) Total returns and average annual returns reflect changes in net asset value
and reinvestment of distributions and are net of expenses. Based on initial
net asset value of $7.50. Of course, the returns noted 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.
(b) From commencement of investment operations on July 9, 1999.
(c) Based on initial offering price of $7.50 and closing market values on the
New York Stock Exchange.
--------------------------------------------------------------------------------
were frozen, had no incentive to reduce consumption even if, as happened,
wholesale prices climbed. This was fundamentally bad planning, but would not
have been fatal if the distributors had been allowed to seek and obtain
contracts with generators or in the futures markets to hedge energy price
fluctuations. The distribution companies were specifically forbidden to do this,
however, for reasons that apparently made sense at the time but seem absurd
today. Instead, the distributors were required to buy all of their electricity
from the California Independent System Operator or the parallel California Power
Exchange in either the spot or the day-ahead market. As a result, the
distributors had no ability to manage, mitigate or hedge energy price
volatility. The creators of the current system in California expected wholesale
prices to fall under competition, and instead they rose. A hard lesson is being
learned, one that any commodity producer or consumer should understand as second
nature: Never bet your company on a commodity price forecast.
Electricity distributors in most other states are allowed and indeed
encouraged to actively manage their price risk through bilateral contracts and
hedging transactions. In addition, in most states the utilities are able to pass
on prudently incurred market-based power costs to consumers subject to
regulatory approval. In Massachusetts, retail rates have risen nearly 30%, an
increase that would be enough to make the California electricity distributors
whole and healthy. There has been some minor grumbling, but the lights stayed
on, supplies are adequate, and the utility companies, the generators and the
customers are doing well enough. The California experience is probably not going
to be replicated in other states. California made this mess all by itself, and
California is going to have to clean it up.
There is, from our point of view, a modest silver lining to this gray
cloud. Small companies are inherently disadvantaged in the brave new world of
competitive generation because the trading and risk management capabilities
needed to prosper are scarce and costly. The big companies can afford them, and
the smaller companies generally cannot. The need to acquire and maintain the
capabilities to manage commodity price risk will in our view lead to continued
consolidation of the industry. Since consolidation is a major investment focus
for the Fund, we view this favorably.
INVESTMENT PERFORMANCE
For the fourth quarter ended December 31, 2000, The Gabelli Utility
Trust's (the "Utility Trust") net asset value ("NAV") total return rose 6.25%
after adjusting for the reinvestment of the $0.55 per share in distributions.
The Lipper Utility Fund Average declined 2.91%, while the Standard & Poor's
("S&P") Utility Index gained 4.49%, over the same period. The Lipper
2
Average reflects the average performance of mutual funds classified in this
particular category, while the S&P Utility Index is an unmanaged indicator of
electric and gas utility stock performance.
The Utility Trust was up 22.01% for 2000 after adjusting for the
reinvestment of the $1.00 per share in distributions. The S&P Utility Index and
Lipper Utility Fund Average rose 58.68% and 7.86%, respectively, over the same
twelve-month period. Since inception on July 9, 1999 through December 31, 2000,
the Utility Trust had a cumulative total return of 26.43%, including adjustments
of $1.15 per share in distributions, which equates to an average annual total
return of 17.11%.
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TEXT AS FOLLOWS:
EPS
PMV
MANAGMENT
CASH FLOW
RESEARCH
The Utility Trust's common shares ended the fourth quarter at $8.75 per
share on the New York Stock Exchange, a premium to the net asset value of 6.58%
and a total return of 12.53% for the fourth quarter. The Utility Trust's common
shares rose 29.95% during 2000 after adjusting for all distributions.
The Utility Trust noticeably underperformed the S&P Utility Index in 2000,
while somewhat less substantially outperforming the Lipper Utility Fund Average,
and this merits some discussion. The Trust is not a utility index fund, and its
performance will by design deviate from the index. Sometimes that deviation will
be positive. Sometimes, as has been the case this year, the Trust will lag the
index. Indices do not hold cash or incur transaction costs, while funds do, and
this has been a minor negative for the Trust's performance versus the index.
OUR APPROACH
There are nearly 80 publicly traded investor-owned electric utilities in
the U.S., and this is at least 50 more than we need from the standpoint of
economic efficiency. The balkanized structure of the industry is inherently
inefficient, and competitive forces are now putting pressure on the marginal
players. The big companies feel the need to get bigger, and the small companies
are selling out as the cost of staying in the game rises. It is only because of
a complex and lengthy merger review and approval process that the industry has
remained so fragmented. Our investments in utility companies have primarily,
though not exclusively, focused on fundamentally sound, reasonably priced
mid-cap and small-cap utilities that are likely acquisition targets for large
utilities seeking to bulk up.
COMMENTARY
The electric and gas utilities have undergone a great deal of change in
the U.S. A handful of companies have built upon their substantial size and scale
advantages to become major players in emerging wholesale and retail bulk power
and energy services markets. Some companies have sold off most of their
generating assets and now supply and distribute electricity to end customers.
This looked like a low risk business with predictable cash flows. It has become
clear, however, that in California and certain other states, the disaggregation
and deregulation models initially adopted were flawed, and that the distributors
face greater risks than initially assumed. The companies will have to actively
manage their risks more than they have in the past, and will have to seek
regulatory and legislative relief in order to do so. The electricity distributor
stocks are statistically cheap, and will continue to trade at low multiples
until it becomes clear that the risk to earnings of wholesale market price
volatility has been effectively mitigated.
Natural gas pipelines have enjoyed rising earnings from their exploration
and production operations and from energy supply and trading. Going forward, the
current pricing environment of lower oil prices and high natural gas prices may
put pressure on midstream operating results. Telecommunications companies
continued to see pressures in the fourth quarter. The pricing structure of long
distance basically collapsed as capacity additions greatly outpaced demand, and
the three major U.S. long distance companies saw their stock prices fall
sharply. The major local telephone companies struggled as SBC Communications and
BellSouth guided expectations lower for 2001. New entrants (competitive local
exchange companies, or CLECs, and local data carriers) saw their stocks marked
down sharply as access to equity and debt capital was restricted to only the
premier companies, and terms were tightened even for these top tier carriers.
The Fund added to telecommunications holdings in the fourth quarter because it
seemed that the pervasive pessimism was getting excessive.
3
DEAL ACTIVITY
A component of our investment methodology is to identify industry and
sector trends and themes ahead of the curve and position ourselves to take
advantage of these developments. Consolidation in a particular industry is one
such dynamic. As we have shared with you in previous quarterly letters, the
continued high level of activity in mergers and acquisitions contributed
significantly to the solid performance of our Utility Trust. The accompanying
table illustrates how deal activity surfaced value in a small sample of the
portfolio holdings.
--------------------------------------------------------------------------------
2000 COMPLETED DEALS
NUMBER AVERAGE COST CLOSING
FUND HOLDING OF SHARES (a) PER SHARE (b) PRICE (c) CLOSING DATE %RETURN (d)
------------ ------------- ------------- --------- ------------ -----------
FIRST QUARTER 2000 ANNOUNCED DEALS
----------------------------------
CommNet Cellular Inc. 99,000 $30.83 $32.38 01/06/00 5.03%
SECOND QUARTER 2000 ANNOUNCED DEALS
-----------------------------------
WICOR Inc. 200,000 29.87 31.38 04/20/00 5.06%
THIRD QUARTER 2000 ANNOUNCED DEALS
----------------------------------
United Water Resources Inc. 105,500 33.16 35.44 07/28/00 6.87%
Berkshire Energy Resources 26,500 26.36 37.81 09/01/00 43.45%
CMP Group Inc. 35,000 26.93 29.50 09/05/00 9.54%
CTG Resources Inc. 7,500 36.58 40.31 09/06/00 10.20%
Fall River Gas Co. 17,000 20.68 23.50 09/25/00 13.64%
Providence Energy Corp. 30,000 30.71 42.44 09/28/00 38.20%
FOURTH QUARTER 2000 ANNOUNCED DEALS
-----------------------------------
Columbia Energy Group 45,000 63.17 71.88 11/01/00 13.78%
Eastern Enterprises 60,985 46.48 64.63 11/09/00 39.04%
EnergyNorth Inc. 53,500 46.12 61.63 11/09/00 33.62%
Florida Progress Corp. 40,000 46.53 54.48 12/01/00 17.09%
LG&E Energy Corp. 200,000 23.82 25.00 12/11/00 4.95%
--------------------------------------------------------------------------------
(a) Number of shares held by the Utility Trust on the final day of trading for
the issuer.
(b) Average purchase price of issuer's shares held by the Utility Trust on the
final day of trading for the issuer.
(c) Closing price on the final day of trading for the issuer or the tender price
on the closing date of the tender offer.
(d) Represents average estimated return based on average cost per share and
closing price per share.
NOTE: SEE THE PORTFOLIO OF INVESTMENTS FOR A COMPLETE LISTING OF HOLDINGS
--------------------------------------------------------------------------------
The following is an excerpt from Sandra Block's article in USATODAY, January 19,
2001
BUSH PORTFOLIO SHOWS FISCAL CONSERVATISM.
It's hard to tell if George W. Bush's investment portfolio is
compassionate, but it's certainly conservative. The president has more than half
his assets in U.S. Treasury notes, according to financial disclosures filed last
year. Stocks and mutual funds account for 11% to 17% of his portfolio. The rest
is invested in real estate, cash and private partnerships. That strategy paid
off in 2000.
------------------------------
GEORGE W. BUSH'S FUNDS
----------------------
Gabelli Equity Trust
Gabelli Global Multimedia
Gabelli Utility Trust
American Funds
------------------------------
Northern Trust, the trust manager, makes investment decisions without his
knowledge. The arrangement is designed to avoid conflicts of interest.
THE FIRST DECADE OF THE NEW MILLENNIUM
The longest economic expansion and bull market in history has spoiled
equity investors. With the exception of 1991, when the S&P 500 retreated
approximately 3%, the value of equity indices has risen, often substantially,
every year in the decade. How will investors react to this year's
disappointment? Our guess is with more resolve than might be expected.
4
Economists (even those at the Federal Reserve), business leaders, and
market strategists were taken by surprise by the economy's rapid deceleration in
the second half of 2000. To date, investors have reacted quite responsibly --
bailing out of stocks with the most excessive valuations and displaying
considerably more patience with more fundamentally sound equities. Going
forward, we believe investors will be less prone to repeating the mistakes of
the past several years. They will recognize that valuations do matter, even for
stocks in growth industries like technology. If the economy stabilizes, as we
believe it will sometime in the first half of 2001, the ensuing market recovery
will be based on fundamentals, not fantasy. We believe this market will favor
portfolios comprised of fundamentally attractive equities.
AND THE QUESTION IS ...
OVER THE NEXT SEVERAL MONTHS, THE OVERALL MARKET NEEDS TO UNDERSTAND
WHETHER MONETARY POLICY (GREENSPAN'S RATE CUTS) MARRIED WITH FISCAL POLICY
(BUSH'S TAX CUTS) WILL PROVIDE THE BALLAST TO OVERCOME THE ECONOMIC DRAG CREATED
BY: A CONSUMER SPENDING BINGE (TIED TO THE STOCK MARKET'S WEALTH EFFECT);
OVERSPENDING ON CAPITAL EQUIPMENT; AND A TRADE DEFICIT OF GIGANTIC PROPORTIONS.
LET'S TALK STOCKS
The following are stock specifics on selected holdings of the Utility
Trust. Favorable earnings prospects do not necessarily translate into higher
stock prices, but they do express a positive trend which we believe will develop
over time.
BELLSOUTH CORP. (BLS - $40.9375 - NYSE) is the incumbent local exchange carrier
serving most of the Southeast. The stock has been held back by investor concern
that BellSouth is contemplating a significant domestic acquisition, and by the
fallout from the company's lower earnings guidance issued in December. The lower
earnings guidance was in part due to nonrecurring factors, and also due to the
acceleration of the company's digital subscriber line ("DSL") rollout, which
will inflate expenses in the near term. We support the DSL acceleration, since
it enhances the company's competitive position in the long term at the cost of
putting pressure on current EPS. As for the acquisition issue, we think that
BellSouth is as likely to be a seller as a buyer. BellSouth's management has
shown its aversion to dilution over many years, which gives us some comfort
about this issue. The stock trades at 16 times this year's estimate of $2.55,
which is 2 times this year's depressed EPS growth rate, but only modestly above
the company's sustainable EPS growth rate in the low-to-mid teens.
CENTURYTEL INC. (CTL - $35.75 - NYSE), based in Monroe, Louisiana, is the eighth
largest local telephone company in the U.S., with over 1.8 million access lines
in the South and Midwest. CenturyTel also has over 740,000 cellular customers.
Through acquisitions, CTL has created clusters of rural telephone and cellular
companies within commuting distance of metropolitan areas in states including
Wisconsin, Michigan, Ohio, Louisiana and Arkansas. With the $2.2 billion
acquisition of Portland-based Pacific Telecom, CenturyTel has added seven
states, ten cellular markets and 640,000 access lines to its customer base. The
acquired operations have nearly doubled Century's revenues. The company is in
the process of acquiring recently announced 475,000 access lines in 3 states for
$1.5 billion. The company continues to build value through other ventures,
primarily its long distance and competitive local exchange carrier operations.
DYNEGY INC. (DYN - $56.0625 - NYSE) is a diversified energy company with major
operations in electricity generation and distribution and natural gas processing
and marketing. EPS have risen rapidly as the company has built its asset base
and generated additional revenues and profits through asset-backed trading of
electricity and natural gas.
EL PASO ELECTRIC CO. (EE - $13.20 - AMEX) is a public utility engaged in the
generation, transmission and distribution of electricity in an area of
approximately 10,000 square miles in west Texas and southern New Mexico. The
company also serves wholesale customers in Texas, New Mexico, California and
Mexico. EE owns, or has significant ownership interests in, four major 345 kV
transmission lines and three 500 kV lines to provide power from Palo Verde, and
owns the distribution network within its retail service territory. The company's
energy sources consist of nuclear fuel, natural gas, coal and purchased power.
GPU INC. (GPU - $36.8125 - NYSE) was our pick as National Grid's acquisition
target, as we discussed in the second quarter shareholder letter. First Energy
of Ohio beat the Grid to the punch, and announced in early August that it would
acquire GPU for $36.50 per share. The Grid had other names in its little black
book, however, and announced its own deal less than a month later.
5
MCN ENERGY GROUP INC. (MCN - $27.6875 - NYSE) is a large natural gas
distribution utility serving southeastern Michigan. MCN is under an agreement to
be acquired by DTE Energy for $28.50 in cash and stock. The acquisition is hung
up at the Federal Trade Commission, which continues to have concerns about
competition in generation and energy supply in the overlapping service
territories. The close of the merger had initially been expected in the third
quarter of 2000, and is now expected to occur in the first quarter of 2001.
NIAGARA MOHAWK HOLDINGS (NMK - $16.6875 - NYSE) agreed to be acquired by the
National Grid of the U.K. in August for $19 per share in cash and stock. The
acquisition is expected to close by the end of 2001, although the Grid is
pushing hard to move up the closing date. The company's growth prospects are
minimal, but its operations are inefficient and its cost structure is bloated.
The Grid expects to be able to reduce Niagara Mohawk's cost base by 10% or $90
million. Assuming that the Grid attains its cost reduction targets, which we
think are readily attainable, the acquisition will be accretive to the Grid's
EPS in the first year.
RGS ENERGY (RGS - $32.4375 - NYSE) is a small electric and gas utility serving
metropolitan Rochester, NY, a city that is the economic hub of upstate New York.
RGS is sandwiched neatly between Niagara Mohawk/National Grid, and Energy East,
a major Northeast electric and gas distributor. RGS would be an easily-digested
bolt-on acquisition for either company, although we think Niagara Mohawk is the
better fit and more likely buyer. For complicated tax and regulatory reasons,
the acquisition of RGS is unlikely to occur before the second half of this year.
The major risk to the RGS investment case is its dependence on Eastman Kodak and
Xerox as major customers, which bears watching.
MONTHLY DISTRIBUTIONS
The Utility Trust has set a $.05 per share monthly distribution policy for
the year 2001.
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at http://www.gabelli.com
contains information about Gabelli Asset Management Inc., the Gabelli Mutual
Funds, IRAs, 401(k)s, quarterly reports, closing prices and other current news.
You can send us e-mail at info@gabelli.com.
In our efforts to bring our shareholders more timely portfolio
information, Gabelli Fund's portfolio managers regularly participate in chat
sessions at www.gabelli.com as reflected below.
WHO WHAT WHEN
----- ----- -----
Mario Gabelli Chief Investment Officer First Monday of each month
Howard Ward Large Cap Growth First Tuesday of each month
Barbara Marcin Large Cap Value Last Wednesday of each month
SECTOR/SPECIALTY 2nd and 3rd Wednesday of each month
------------
Tim O'Brien Utilities Industry
Caesar Bryan International Investing
Ivan Arteaga Telecom and Media
Hart Woodson Global Convertibles
6
The second and third Wednesday of each month will feature portfolio
managers responsible for our more focused offerings. All chat sessions are held
at 4:15 PM ET. Arrive early as attendance is limited. Days and times may vary
based on portfolio manager availability.
You may sign up for our HIGHLIGHTS email newsletter at www.gabelli.com and
receive early notice of chat sessions, closing mutual fund prices, news events
and media sightings.
IN CONCLUSION
It is our job to begin each day thinking how we will earn money for you.
At times, we may be faced with a challenge in reaching our objectives because of
the irrationality of Mr. Market. And, while we cannot and will not ignore the
overall price levels in the market, there is an abundance of opportunities to
meet our shared long term objectives in the years ahead. We thank you for
entrusting a portion of your investment assets to the Utility Trust, and we
reaffirm our commitment to your financial well-being. We are privileged to have
this opportunity, and we look forward to the next quarter century.
Sincerely,
/S/ SIGNATURE
MARIO J. GABELLI, CFA
Portfolio Manager and Chief Investment Officer
February 1, 2001
--------------------------------------------------------------------------------
TOP TEN HOLDINGS
DECEMBER 31, 2000
-----------------
Niagara Mohawk Power Corp. El Paso Electric Co.
Western Resources Inc. CenturyTel Inc.
Southwest Gas Corp. Northeast Utilities
Azurix Corp. Conectiv Inc.
RGS Energy Group Inc. MCN Energy Group Inc.
--------------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
7
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2000
MARKET
SHARES COST VALUE
------ ---- -----
COMMON STOCKS -- 73.1%
AGRICULTURE -- 0.1%
8,000 Cadiz Inc.+ ....................... $ 70,464 $ 71,500
----------- -----------
BUSINESS SERVICES -- 0.4%
10,000 Avis Group Holdings Inc.+ ......... 320,500 325,625
----------- -----------
COMMUNICATIONS EQUIPMENT -- 0.7%
34,000 Furukawa Electric Co. Ltd. ........ 632,125 593,958
----------- -----------
ENERGY AND UTILITIES: ELECTRIC -- 22.0%
63,000 Bangor Hydro-Electric Co. ......... 1,129,094 1,618,312
5,000 Cleco Corp. ....................... 153,250 273,750
115,000 Conectiv Inc. ..................... 2,019,821 2,307,187
39,521 DPL Inc. .......................... 767,321 1,311,603
5,000 Edison International .............. 80,000 78,125
213,000 El Paso Electric Co.+ ............. 1,943,427 2,811,600
1,000 FPL Group Inc. .................... 41,113 71,750
30,000 GPU Inc. .......................... 908,715 1,104,375
34,000 IPALCO Enterprises Inc. ........... 697,838 822,375
52,200 Maine Public Service Co. .......... 946,754 1,376,775
250,000 Niagara Mohawk
Power Corp. ..................... 3,680,499 4,171,875
4,000 Orion Power Holdings Inc.+ ........ 77,575 98,500
57,000 SCANA Corp. ....................... 1,455,381 1,685,062
18,000 TECO Energy Inc. .................. 376,025 582,750
25,000 UIL Holdings Corp. ................ 1,096,481 1,243,750
20,000 Unisource Energy Corp. ............ 236,625 376,250
----------- -----------
15,609,919 19,934,039
----------- -----------
ENERGY AND UTILITIES: INTEGRATED -- 22.7%
13,000 Allete ............................ 222,463 322,562
30,000 CH Energy Group Inc. .............. 1,041,019 1,342,500
32,000 Cinergy Corp. ..................... 883,099 1,124,000
32,000 DQE Inc. .......................... 1,049,494 1,048,000
23,500 Entergy Corp. ..................... 659,948 994,344
50,000 Florida Public Utilities Co. ...... 792,675 800,000
26,000 Madison Gas &
Electric Co. .................... 529,437 588,250
80,000 MCN Energy Group Inc. ............. 1,919,874 2,215,000
18,000 Montana Power Co. ................. 484,328 373,500
45,000 NiSource Inc.+ .................... 90,000 123,750
100,000 Northeast Utilities ............... 2,129,198 2,425,000
50,000 NSTAR ............................. 2,146,232 2,143,750
5,000 PG&E Corp. ........................ 99,313 100,000
40,000 Progress Energy Inc. .............. 20,800 18,000
92,000 RGS Energy Group Inc. ............. 2,341,999 2,984,250
150,000 Western Resources Inc. ............ 2,653,245 3,721,875
7,000 WPS Resources Corp. ............... 204,319 257,687
----------- -----------
17,267,443 20,582,468
----------- -----------
ENERGY AND UTILITIES: NATURAL GAS -- 12.0%
40,000 AGL Resources Inc. ................ 734,625 882,500
34,000 Delta Natural Gas Co. Inc. ........ 570,349 663,000
23,000 Dynegy Inc., Cl. A ................ 360,637 1,289,438
5,000 National Fuel Gas Co. ............. 254,037 314,688
12,000 Nicor Inc. ........................ 434,475 518,250
20,000 Peoples Energy Corp. .............. 704,031 895,000
26,500 Piedmont Natural
Gas Co. Inc. .................... 796,784 1,011,969
100,000 SEMCO Energy Inc. ................. 1,554,795 1,556,250
16,433 Southern Union Co. ................ 281,096 435,475
150,000 Southwest Gas Corp. ............... 3,866,219 3,281,250
----------- -----------
9,557,048 10,847,820
----------- -----------
MARKET
SHARES COST VALUE
------ ---- -----
ENERGY AND UTILITIES: WATER -- 9.3%
8,000 American States Water Co. ......... $ 266,713 $ 295,000
11,000 Artesian Resources Corp.,
Cl. A ........................... 257,250 286,688
400,000 Azurix Corp.+ ..................... 2,799,988 3,275,000
23,500 Birmingham Utilities Inc. ......... 474,406 293,750
20,520 California Water
Service Group ..................... 566,928 554,040
12,000 Connecticut Water
Service Inc. .................... 355,489 367,500
17,000 Middlesex Water Co. ............... 485,620 573,750
4,000 Pennichuck Corp. .................. 96,331 114,000
51,000 Philadelphia Suburban Corp. ....... 972,675 1,249,500
13,000 SJW Corp. ......................... 1,380,385 1,326,000
4,000 Southwest Water Co. ............... 52,063 59,500
----------- -----------
7,707,848 8,394,728
----------- -----------
ENVIRONMENTAL SERVICES -- 0.0%
3,000 Catalytica Energy
Systems Inc.+ ................... 48,563 51,750
----------- -----------
SATELLITE -- 0.5%
22,000 General Motors Corp.,
Cl. H+ .......................... 584,028 506,000
----------- -----------
TELECOMMUNICATIONS -- 5.4%
5,000 ALLTEL Corp. ...................... 262,542 312,187
10,000 AT&T Canada Inc., Cl. B+ .......... 300,558 291,875
10,000 BellSouth Corp. ................... 423,441 409,375
1,000 British Telecommunications
plc, ADR ........................ 85,454 86,750
75,000 CenturyTel Inc. ................... 2,810,448 2,681,250
55,000 Citizens Communications Co. 646,813 721,875
4,000 Conestoga Enterprises Inc. ........ 68,313 69,000
5,000 Qwest Communications
International Inc.+ ............. 168,375 205,000
1,500 SBC Communications Inc. ........... 69,263 71,625
2,000 Verizon Communications ............ 98,225 100,250
----------- -----------
4,933,432 4,949,187
----------- -----------
TOTAL COMMON
STOCKS .......................... 56,731,370 66,257,075
----------- -----------
PREFERRED STOCKS -- 0.9%
TELECOMMUNICATIONS -- 0.9%
15,000 Citizens Communications Co.,
5.00% Cv. Pfd. .................. 746,741 795,000
----------- -----------
PRINCIPAL
AMOUNT
---------
U.S. GOVERNMENT OBLIGATIONS -- 27.5%
$25,325,000 U.S. Treasury Bills,
5.45% to 5.47%++,
due 03/22/01 to 05/24/01 ........ 24,909,117 24,895,427
----------- -----------
REPURCHASE AGREEMENTS -- 1.4%
1,316,000 Agreement with State Street Bank &
Trust Co., 5.95%, dated 12/29/00,
due 01/02/01, proceeds
at maturity $1,316,870 (a) ...... 1,316,000 1,316,000
----------- -----------
See accompanying notes to financial statements.
8
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2000
MARKET
COST VALUE
---- -----
TOTAL INVESTMENTS -- 102.9% .................... $83,703,228 $93,263,502
===========
OTHER ASSETS AND LIABILITIES (NET) -- (2.9)% ................ (2,594,308)
-----------
NET ASSETS -- 100.0%
(11,039,419 shares outstanding) ........................... $90,669,194
===========
NET ASSET VALUE
($90,669,194 [DIVIDE] 11,039,419
shares outstanding) ....................................... $8.21
=====
MARKET
SHARES PROCEEDS VALUE
------ -------- -----
SECURITIES SOLD SHORT
3,500 FPL Group Inc. .................... (252,691) $ (251,125)
===========
----------------------
MARKET
VALUE
-----
For Federal tax purposes:
Aggregate cost .................................... $81,499,421
===========
Gross unrealized appreciation ..................... $12,998,291
Gross unrealized depreciation ..................... (1,234,210)
-----------
Net unrealized appreciation ....................... $11,764,081
===========
----------------------
(a) Collateralized by U.S. Treasury Note, 7.50%, due 02/15/05, market value
$1,343,273.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
See accompanying notes to financial statements.
9
THE GABELLI UTILITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2000
ASSETS:
Investments, at value (Cost $83,703,228) . $93,263,502
Foreign currency, at value (Cost $988) ... 930
Dividends and interest receivable ........ 204,853
Receivable for investments sold .......... 252,692
Other assets ............................. 4,005
-----------
TOTAL ASSETS ............................. 93,725,982
-----------
LIABILITIES:
Securities sold short (proceeds $252,691) 251,125
Payable for investments purchased ........ 111,085
Dividend payable ......................... 2,198,461
Payable for investment advisory fees ..... 77,225
Payable to custodian ..................... 251,556
Other accrued expenses ................... 167,336
-----------
TOTAL LIABILITIES ........................ 3,056,788
-----------
NET ASSETS applicable to 11,039,419
shares outstanding .................... $90,669,194
===========
NET ASSETS CONSIST OF:
Shares of beneficial interest, at par value $ 11,039
Additional paid-in capital ............... 75,352,424
Accumulated net investment income ........ 1,003,382
Accumulated net realized gain on investments 4,740,567
Net unrealized appreciation on investments 9,561,782
-----------
TOTAL NET ASSETS $90,669,194
===========
NET ASSET VALUE
($90,669,194 [DIVIDE] 11,039,419 shares
outstanding; unlimited number of shares
authorized of $0.001 par value) ....... $8.21
=====
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
INVESTMENT INCOME:
Dividends (net of foreign taxes of $311) $ 2,401,326
Interest ................................ 884,070
-----------
TOTAL INVESTMENT INCOME ................. 3,285,396
-----------
EXPENSES:
Investment advisory fees ................ 861,678
Shareholder communications expenses ..... 319,299
Shareholder services fees ............... 274,686
Legal and audit fees .................... 97,393
Trustees' fees .......................... 49,369
Custodian fees .......................... 20,017
Miscellaneous expenses .................. 59,879
-----------
TOTAL EXPENSES .......................... 1,682,321
-----------
LESS: CUSTODIAN FEE CREDIT ............. (16,665)
-----------
NET EXPENSES ............................ 1,665,656
-----------
NET INVESTMENT INCOME ................... 1,619,740
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments ........ 8,062,841
Net change in unrealized appreciation
on investments ....................... 7,802,312
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ....................... 15,865,153
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................... $17,484,893
===========
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED PERIOD ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999 (A)
----------------- ---------------------
OPERATIONS:
Net investment income ....................................................... $ 1,619,740 $ 877,430
Net realized gain on investments ............................................ 8,062,841 309,282
Net change in unrealized appreciation on investments ........................ 7,802,312 1,759,470
------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................ 17,484,893 2,946,182
------------ -----------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income ....................................................... (616,358) (877,430)
Net realized gains on investments ........................................... (10,360,503) (309,282)
In excess of net realized gains on investments .............................. -- (448,378)
------------ -----------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ............................ (10,976,861) (1,635,090)
------------ -----------
TRUST SHARE TRANSACTIONS:
Net increase in net assets from Utility Trust
share transactions ........................................................ 831,592 81,918,478
------------ -----------
NET INCREASE IN NET ASSETS .................................................. 7,339,624 83,229,570
NET ASSETS:
Beginning of period ......................................................... 83,329,570 100,000
------------ -----------
End of period (Including undistributed net investment income
of $1,003,382 and $0, respectively) ...................................... $ 90,669,194 $83,329,570
============ ===========
(a) From commencement of investment operations on July 9, 1999 through December
31, 1999.
See accompanying notes to financial statements.
10
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION. The Gabelli Utility Trust ("Utility Trust") is a closed-end,
non-diversified management investment company organized as a Delaware business
trust on February 25, 1999 and registered under the Investment Company Act of
1940, as amended (the "1940 Act"), whose primary objective is long-term growth
of capital and income. The Utility Trust had no operations prior to July 9,
1999, other than the sale of 10,000 shares of common stock for $100,000 to The
Gabelli Equity Trust Inc. (the "Equity Trust") at $10.00 per share. On July 9,
1999, the Utility Trust had a 4 for 3 stock split making the balance of Utility
Trust shares held by the Equity Trust 13,333. On July 9, 1999, the the Equity
Trust contributed $79,487,260 in cash and securities in exchange for shares of
the Utility Trust, and on the same date distributed such shares to holders of
record on July 1, 1999 at the rate of one share of the UtilityTrust for every
ten shares of the EquityTrust. Investment operations commenced on July 9, 1999.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with 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
Utility Trust in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange 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, except for open short positions, which are
valued at the last asked price). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. If there were no asked prices quoted
on that day, then the security is valued at the closing bid price. 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"). Securities and assets for which market
quotations are not readily available are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Board of Trustees. Short term debt securities with remaining
maturities of 60 days or less are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' fair value, in which case these
securities will be valued at their fair value as determined by the Trustees.
Debt instruments having a maturity greater than 60 days are valued at the
highest bid price obtained from a dealer maintaining an active market in those
securities.
REPURCHASE AGREEMENTS. The Utility Trust may enter into repurchase
agreements with primary government securities dealers recognized by the Federal
Reserve Bank of New York, 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 of Trustees. Under the terms of a typical
repurchase agreement, the Utility Trust takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the Utility
Trust to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Utility Trust's holding period. The Utility
Trust will always receive and maintain securities as collateral whose market
value, including accrued interest, will be at least equal to 100% of the dollar
amount invested by the Utility Trust in each agreement. The Utility Trust will
make payment for such securities only upon physical delivery or upon evidence of
book entry transfer of the collateral to the account of the custodian. To the
extent that any repurchase transaction exceeds one business day, the value of
the collateral is marked-to-market on a daily basis to maintain the adequacy of
the collateral. If the seller defaults and the value of the collateral declines
or if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Utility Trust may be delayed or
limited.
SECURITIES SOLD SHORT. A short sale involves selling a security which the
Trust does not own. The proceeds received for short sales are recorded as
liabilities and the Trust records an unrealized gain or loss to the extent of
the difference between the proceeds received and the value of the open short
position on the day of determination. The Trust records a realized gain or loss
when the short position is closed out. By entering into a short sale, the Trust
bears the market risk of an unfavorable change in the price of the security sold
short. Dividends on short sales are recorded as an expense by the Trust on the
ex-dividend date and interest expense is recorded on the accrual basis.
FOREIGN CURRENCY TRANSLATION. The books and records of the Utility Trust
are maintained in United States (U.S.) dollars. Foreign currencies, investments
and other assets and liabilities are translated into U.S. dollars at the
exchange rates prevailing at the end of the period, and purchases and sales of
investment securities, income and expenses are translated at the exchange rate
prevailing on the respective dates of such transactions. Unrealized gains and
losses, which result from changes in foreign exchange rates and/or changes in
market prices of securities, have been included in unrealized
appreciation/depreciation on investments and foreign currency transactions. Net
realized foreign currency gains and losses resulting from changes in exchange
rates include foreign currency gains
11
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 Utility Trust and
the amounts actually received. The portion of foreign currency gains and losses
related to fluctuation in exchange rates between the initial trade date and
subsequent sale trade date is included in realized gain/(loss) on investments.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for as of the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders
are recorded on the ex-dividend date. Income distributions and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments of income and gains on various investment
securities held by the Utility Trust, timing differences and differing
characterization of distributions made by the Utility Trust.
PROVISION FOR INCOME TAXES. The Utility Trust intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
Dividends and interest from non-U.S. sources received by the Utility Trust
are generally subject to non-U.S. withholding taxes at rates ranging up to 30%.
Such withholding taxes may be reduced or eliminated under the terms of
applicable U.S. income tax treaties, and the Utility Trust intends to undertake
any procedural steps required to claim the benefits of such treaties.
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES. The Utility Trust has entered
into an investment advisory agreement (the "Advisory Agreement") with the
Adviser which provides that the Utility Trust will pay the Adviser on the first
business day of each month a fee for the previous month equal on an annual basis
to 1.00% of the value of the Utility Trust's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Utility Trust's portfolio and oversees the
administration of all aspects of the Utility Trust's business and affairs.
During the year ended December 31, 2000, Gabelli & Company, Inc. and its
affiliates received $116,973 in brokerage commissions as a result of executing
agency transactions in portfolio securities on behalf of the Utility Trust.
4. PORTFOLIO SECURITIES. Cost of purchases and proceeds from sales of
securities, other than short-term securities, for the year ended December 31,
2000 aggregated $65,335,609 and $84,406,861, respectively.
5. CAPITAL. The Board of Trustees of the Utility Trust has authorized the
repurchase of its shares on the open market when the shares are trading at a
discount of 10% or more (or such other percentage as the Board of Trustees may
determine from time to time) from the net asset value of the shares. During the
year ended December 31, 2000, the Utility Trust did not repurchase any shares of
its common stock in the open market.
Transactions in shares of beneficial interest were as follows:
YEAR ENDED PERIOD ENDED
DECEMBER 31, 2000 DECEMBER 31, 1999
---------------------- -------------------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares issued immediately prior to
the spin-off from the Equity Trust ...................... -- $ -- 10,598,302 $79,487,260
Shares issued in a secondary offering by the Utility Trust -- -- 301,809 2,262,562
Shares issued upon reinvestment
of dividends and distributions .......................... 103,573 831,592 22,402 168,656
------- -------- ---------- -----------
Net increase .............................................. 103,573 $831,592 10,922,513 $81,918,478
======= ======== ========== ===========
6. INDUSTRY CONCENTRATION. Because the Utility Trust primarily invests in common
stocks and other securities of foreign and domestic companies in the utility
industry, its portfolio may be subject to greater risk and market fluctuations
than a portfolio of securities representing a broad range of investments.
12
THE GABELLI UTILITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UTILITY TRUST COMMON SHARE
OUTSTANDING THROUGHOUT EACH PERIOD:
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
2000 1999 (A)
----- -------
OPERATING PERFORMANCE:
Net asset value, beginning of period .......... $ 7.62 $ 7.50
------- -------
Net investment income ......................... 0.15 0.08
Net realized and unrealized gain on investments 1.44 0.19
------- -------
Total from investment operations .............. 1.59 0.27
------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ......................... (0.06) (0.08)
Net realized gain on investments .............. (0.94) (0.03)
In excess of net realized gain on investments . -- (0.04)
------- -------
Total distributions ........................... (1.00) (0.15)
------- -------
NET ASSET VALUE, END OF PERIOD ................ $ 8.21 $ 7.62
======= =======
Market value, end of period ................... $ 8.75 $ 7.63
======= =======
Net asset value total return+ ................. 22.01% 3.62%
======= =======
Total investment return+ ...................... 29.95% 3.70%
======= =======
RATIOS TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .......... $90,669 $83,330
Ratio of net investment income to
average net assets (c) ...................... 1.88% 2.27%(b)
Ratio of operating expenses to
average net assets (c)(d) ................... 1.95% 1.75%(b)
Portfolio turnover rate ....................... 92% 37%
--------------------------
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends. Total return for the period of less
than one year is not annualized.
(a) From commencement of investment operations on July 9, 1999 through December
31, 1999.
(b) Annualized.
(c) During the period ended December 31, 1999, the Utility Trust's administrator
voluntarily reimbursed certain expenses. If such reimbursement had not
occurred, the annualized ratios of net investment income and operating
expenses to average net assets would have been 1.85% and 2.17%,
respectively.
(d) The ratios do not include a reduction of expenses for custodian fee credits
on cash balances maintained with the custodian. For the year ended December
31, 2000, including such custodian fee credits, the expense ratio would be
1.93%.
See accompanying notes to financial statements.
13
THE GABELLI UTILITY TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
The Gabelli Utility Trust
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Gabelli Utility Trust (the
"Trust") at December 31, 2000, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for the
year then ended and for the period July 9, 1999 (commencement of investment
operations) through December 31, 1999, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Trust's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2000 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
February 14, 2001
14
THE GABELLI UTILITY TRUST
INCOME TAX INFORMATION (UNAUDITED)
DECEMBER 31, 2000
CASH DIVIDENDS AND DISTRIBUTIONS
TOTAL AMOUNT ORDINARY LONG-TERM DIVIDEND
PAYABLE RECORD PAID INVESTMENT CAPITAL REINVESTMENT
DATE DATE PER SHARE INCOME GAINS PRICE
------- ------ ------------ ---------- --------- ------------
COMMON SHARES
01/27/00 01/19/00 $0.05000 $0.00020 $0.04980 $7.46000
02/25/00 02/16/00 0.05000 0.00020 0.04980 7.49224
03/31/00 03/23/00 0.05000 0.00020 0.04980 7.53290
04/26/00 04/17/00 0.05000 0.00020 0.04980 7.73108
05/25/00 05/17/00 0.05000 0.00020 0.04980 7.78358
06/28/00 06/20/00 0.05000 0.00020 0.04980 7.86675
07/27/00 07/19/00 0.05000 0.00020 0.04980 7.77990
08/29/00 08/21/00 0.05000 0.00020 0.04980 8.30474
09/27/00 09/19/00 0.05000 0.01100 0.03900 8.17000
10/27/00 10/19/00 0.05000 0.05000 0.00000 7.99649
11/28/00 11/17/00 0.05000 0.05000 0.00000 8.24268
12/27/00 12/18/00 0.25000 0.08380 0.16620 8.22000
01/08/01 12/29/00 0.20000 0.00000 0.20000 7.83000
-------- -------- --------
$1.00000 $0.19640 $0.80360
A Form 1099-DIV has been mailed to all shareholders of record for the
distributions mentioned above, setting forth specific amounts to be included in
the 2000 tax returns. Ordinary income distributions include net investment
income and realized net short-term capital gains. 100% of the long-term capital
gains paid by the Utility Trust in 2000 was classified as "20% Rate Gains"
subject to a maximum tax rate of 20% (or 10% depending on an individual's tax
bracket). Capital gain distributions are reported in box 2a of Form 1099-DIV.
CORPORATE DIVIDENDS RECEIVED DEDUCTION AND U.S. GOVERNMENT SECURITIES INCOME
The Utility Trust paid to common shareholders an ordinary income dividend of
$0.1964 per share in 2000. The percentage of such dividends that qualifies for
the dividends received deduction available to corporations is 50.16% for all
such dividends paid in 2000. The percentage of the ordinary income dividends
paid by the Utility Trust during 2000 derived from U.S. Government Securities
was 4.43%. However, it should be noted that the Utility Trust did not hold more
than 50% of its assets in U.S. Government Securities at the end of each calendar
quarter during 2000.
HISTORICAL DISTRIBUTION SUMMARY - COMMON STOCK
SHORT- LONG-
TERM TERM
INVESTMENT CAPITAL CAPITAL TOTAL
INCOME GAINS(A) GAINS DISTRIBUTIONS
---------- -------- -------- -------------
2000 ............. $0.05620 $0.14020 $0.80360 $1.00000
1999 ............. 0.08049 0.00090 0.06861 0.15000
--------------------------
(a) Taxable as ordinary income.
15
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
ENROLLMENT IN THE PLAN
It is the policy of The Gabelli Utility Trust ("Utility Trust") to
automatically reinvest dividends. As a "registered" shareholder you
automatically become a participant in the Utility Trust's Automatic Dividend
Reinvestment Plan (the "Plan"). The Plan authorizes the Utility Trust to issue
shares to participants upon an income dividend or a capital gains distribution
regardless of whether the shares are trading at a discount or a premium to net
asset value. All distributions to shareholders whose shares are registered in
their own names will be automatically reinvested pursuant to the Plan in
additional shares of the Utility Trust. Plan participants may send their stock
certificates to State Street Bank and Trust Company ("State Street") 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 Utility Trust
c/o State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Shareholders requesting this cash election must include the shareholder's
name and address as they appear on the share certificate. Shareholders with
additional questions regarding the Plan may contact State Street at 1 (800)
336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at State Street Bank
must do so in writing or by telephone. Please submit your request to the above
mentioned address or telephone number. Include in your request your name,
address and account number. The cost to liquidate shares is $2.50 per
transaction as well as the brokerage commission incurred. Brokerage charges are
expected to be less than the usual brokerage charge for such transactions.
If your shares are held in the name of a broker, bank or nominee, you should
contact such institution. If such institution is not participating in the Plan,
your account will be credited with a cash dividend. In order to participate in
the Plan through such institution, it may be necessary for you to have your
shares taken out of "street name" and re-registered in your own name. Once
registered in your own name your dividends will be automatically reinvested.
Certain brokers participate in the Plan. Shareholders holding shares in "street
name" at participating institutions will have dividends automatically
reinvested. Shareholders wishing a cash dividend at such institution must
contact their broker to make this change.
The number of shares of Common Stock distributed to participants in the Plan
in lieu of cash dividends is determined in the following manner. Under the Plan,
whenever the market price of the Utility Trust's Common Stock is equal to or
exceeds net asset value at the time shares are valued for purposes of
determining the number of shares equivalent to the cash dividends or capital
gains distribution, participants are issued shares of Common Stock valued at the
greater of (i) the net asset value as most recently determined or (ii) 95% of
the then current market price of the Utility Trust's Common Stock. The valuation
date is the dividend or distribution payment date or, if that date is not a New
York Stock Exchange trading day, the next trading day. If the net asset value of
the Common Stock at the time of valuation exceeds the market price of the Common
Stock, participants will receive shares from the Utility Trust valued at market
price. If the Utility Trust should declare a dividend or capital gains
distribution payable only in cash, State Street will buy Common Stock in the
open market, or on the New York Stock Exchange or elsewhere, for the
participants' accounts, except that State Street will endeavor to terminate
purchases in the open market and cause the Utility Trust to issue shares at net
asset value if, following the commencement of such purchases, the market value
of the Common Stock exceeds the then current net asset value.
The automatic reinvestment of dividends and capital gains distributions will
not relieve participants of any income tax which may be payable on such
distributions. A participant in the Plan will be treated for Federal income tax
purposes as having received, on a dividend payment date, a dividend or
distribution in an amount equal to the cash the participant could have received
instead of shares.
The Utility Trust reserves the right to amend or terminate the Plan as
applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to written notice of the change sent to the members of the Plan
at least 90 days before the record date for such dividend or distribution. The
Plan also may be amended or terminated by State Street 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 Utility Trust. In order to participate in
the Voluntary Cash Purchase Plan, shareholders must have their shares registered
in their own name.
Participants in the Voluntary Cash Purchase Plan have the option of making
additional cash payments to State Street for investments in the Utility Trust's
shares at the then current market price. Shareholders may send an amount from
$250 to $10,000. State Street will use these funds to purchase shares in the
open market on or about the 15th of each month. State Street 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 State Street Bank and Trust Company, P.O. Box
8200, Boston, MA 02266-8200 such that State Street receives such payments
approximately 10 days before the 15th of the month. Funds not received at least
five days before the investment date shall be held for investment in the
following month. A payment may be withdrawn without charge if notice is received
by State Street at least 48 hours before such payment is to be invested.
For more information regarding the Dividend Reinvestment Plan and Voluntary
Cash Purchase Plan, brochures are available by calling (914) 921-5070 or by
writing directly to the Utility Trust.
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The Annual Meeting of the Utility Trust's stockholders will be held at 11:30
A.M. on Monday, May 14, 2001, at the Greenwich Public Library, 101 West
Putnam Avenue in Greenwich, Connecticut.
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16
DIRECTORS AND OFFICERS
THE GABELLI UTILITY TRUST
ONE CORPORATE CENTER, RYE, NY 10580-1434
DIRECTORS
Mario J. Gabelli, CFA
CHAIRMAN AND CHIEF INVESTMENT OFFICER,
GABELLI ASSET MANAGEMENT INC.
Dr. Thomas E. Bratter
PRESIDENT, JOHN DEWEY ACADEMY
Felix J. Christiana
FORMER SENIOR VICE PRESIDENT,
DOLLAR DRY DOCK SAVINGS BANK
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
James P. Conn
FORMER MANAGING DIRECTOR AND CHIEF INVESTMENT OFFICER,
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
Vincent D. Enright
FORMER SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER,
KEYSPAN ENERGY CORP.
Frank J. Fahrenkopf, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER,
AMERICAN GAMING ASSOCIATION
John D. Gabelli
SENIOR VICE PRESIDENT,
GABELLI & COMPANY, INC.
Robert J. Morrissey
ATTORNEY-AT-LAW
MORRISSEY, HAWKINS &LYNCH
Karl Otto Pohl
FORMER PRESIDENT, DEUTSCHE BUNDESBANK
Anthony R. Pustorino
CERTIFIED PUBLIC ACCOUNTANT,
PROFESSOR, PACE UNIVERSITY
Salvatore J. Zizza
CHAIRMAN, THE BETHLEHEM CORP.
OFFICERS
Mario J. Gabelli, CFA
PRESIDENT & CHIEF INVESTMENT OFFICER
Bruce N. Alpert
VICE PRESIDENT & TREASURER
David I. Schachter
VICE PRESIDENT & OMBUDSMAN
James E. McKee
SECRETARY
INVESTMENT ADVISOR
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1434
CUSTODIAN
Boston Safe Deposit and Trust Company
COUNSEL
Skadden, Arps, Slate, Meagher & Flom, LLP
TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
STOCK EXCHANGE LISTING
Common
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NYSE-Symbol: GUT
Shares Outstanding: 11,039,419
The Net Asset Value appears in the Publicly Traded Funds column, under the
heading "Specialized 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 "Specialized Equity Funds."
The Net Asset Value may be obtained each day by calling (914) 921-5071.
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For general information about the Gabelli Funds, call 1-800-GABELLI
(1-800-422-3554), fax us at 914-921-5118, visit Gabelli Funds' Internet
homepage at: HTTP://WWW.GABELLI.COM or e-mail us at: closedend@gabelli.com
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Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Utility Trust may, from time to
time, purchase its shares in the open market when the Utility Trust shares
are trading at a discount of 10% or more from the net asset value of the
shares.
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THE GABELLI UTILITY TRUST
ONE CORPORATE CENTER, RYE, NY 10580-1434
PHONE: 1-800-GABELLI (1-800-422-3554)
FAX: 1-914-921-5118 INTERNET: WWW.GABELLI.COM
E-MAIL: CLOSEDEND@GABELLI.COM
GBFUF-AR-12/00