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THE GABELLI
UTILITY TRUST
FIRST QUARTER REPORT
MARCH 31, 2003
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THE GABELLI
UTILITY TRUST
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,
In our view, the major investment theme for electric, gas and water
utilities can be summed up in two words: size matters. Electric generators with
a large and geographically diverse portfolio of generating plants can trade
around their structural long positions to enhance returns while avoiding the
risk of asset concentration in a single market. Electric, gas and water
distribution companies can spread their substantial fixed costs over a larger
base of customers, and see the cost per customer decline, enhancing earnings
while reducing prices. Although the current unsettled market conditions seem to
have caused the consolidation activity seen over the past several years to slow
for a while, the underlying economics continue to support additional merger and
acquisition activity over time. We believe that the recent entry of large
European acquirers, the relatively low stock prices of utility companies and the
potential repeal by Congress of the 1935 Public Utility Holding Company Act,
known as PUHCA, could accelerate the utility consolidation trend in the coming
quarters.
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PICTURE OF MARIO GABELLI
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THE GABELLI
UTILITY TRUST
PREMIUM / DISCOUNT DISCUSSION
As a refresher to our shareholders, the price of a closed-end mutual fund
is determined in the open market by willing buyers and sellers. Shares of The
Gabelli Utility Trust (the "Trust") trade on the New York Stock Exchange and may
trade at a premium to (higher than) net asset value ("NAV") (the market value of
the Trust's underlying portfolio) or a discount to (lower than) net asset value.
Of the 547 closed-end funds that are publicly traded in the U.S., approximately
33% currently trade at premiums to NAV versus 26% five years ago and 60% ten
years ago.
Ideally, the Trust's market price will generally track the NAV. The
Trust's premium or discount to NAV fluctuates over time. Over our Trust's 3-year
history, the range fluctuated from a 3% discount in November 2000 to a 55%
premium in March 2003. Shortly after the inception of the Trust, the market
price of the Trust exceeded the NAV and this premium has gradually increased
since.
PREMIUM/DISCOUNT SINCE INCEPTION
March 31, 2003
--------------
Net Asset Value $5.77
Market Price $8.94
Premium 54.94%
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PLOT POINTS FOLLOW:
7/9/99 0.1672
8/99 0.0816
9/99 0.1152
10/99 0.0582
11/99 0.0117
12/99 0.0007
1/00 0.0375
2/00 0.0289
3/00 -0.0127
4/00 0.0417
5/00 -0.0016
6/00 0.0403
7/00 0.0016
8/00 0.0081
9/00 0.0064
10/00 -0.0220
11/00 0.0003
12/00 0.0658
1/01 0.0532
2/01 0.1445
3/01 0.0728
4/01 0.1646
5/01 0.1409
6/01 0.1223
7/01 0.1229
8/01 0.1643
9/01 0.1572
10/01 0.2455
11/01 0.2414
12/01 0.2746
1/02 0.3454
2/02 0.3704
3/02 0.3101
4/02 0.3225
5/02 0.1723
6/02 0.2561
7/02 0.3297
8/02 0.4065
9/02 0.4262
10/02 0.3246
11/02 0.4400
12/02 0.3907
1/03 0.4670
2/03 0.5500
3/03 0.5500
"Mr. Market" often provides opportunities to invest at a discount. The
Trust has considered various initiatives to narrow the discount when appropriate
through distribution policies, rights offerings, share repurchase programs and
the potential use of leverage.
The Trust's long-term investment goal is growth of capital and income. We
believe that our stock selection process adds to the investment equation. We
have a successful history of investment providing shareholders average annual
NAV returns of 2.69% since inception, and the market price has generated a
12.30% annualized return to investors over the same period. However, it is
important to remember that "Mr. Market" is a pendulum that swings both ways. As
the market moves away from momentum investing and back to basics, we believe
that an excessive premium for the Trust is not likely to be sustainable. Also,
direct registered shareholders who participate in the Trust's dividend
reinvestment program should note that although the reinvestment price is offered
at a discount to the market price when the Trust sells at a premium, they may be
paying more than the current NAV.
COMPARATIVE RESULTS
------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH MARCH 31, 2003 (A)
-------------------------------------------------
SINCE
QUARTER INCEPTION (B) 3 YEAR 1 YEAR
------- ------------- ------ ------
Gabelli Utility Trust NAV Return (c) ............(5.18)% 2.69% 1.28% (14.31)%
Gabelli Utility Trust Investment Return (d) ..... 4.77% 12.30% 16.14% (1.27)%
S&P 500 Utility Index ...........................(3.13)% (10.42)% (11.64)% (34.41)%
Lipper Utility Fund Average .....................(4.12)% (9.76)% (15.78)% (25.25)%
(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. The S&P Utility Index is an unmanaged indicator of electric and gas
utility stock performance, while the Lipper Average reflects the average
performance of open-end mutual funds classified in this particular
category. Dividends are considered reinvested. Performance for periods less
than one year is not annualized.
(b) From commencement of investment operations on July 9, 1999.
(c) Total returns and average annual returns reflect changes in net asset
value ("NAV"), reinvestment of distributions at net asset value on the
ex-dividend date and adjustments for rights offerings, and are net of
expenses. Since inception return based on initial net asset value of $7.50.
(d) 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. Since inception return based on initial
offering price of $7.50.
--------------------------------------------------------------------------------
COMMENTARY
Utility stocks came under selling pressure in the first quarter of 2003,
but this was not due to any fundamental factors unique to the group. Instead,
the group's performance was affected by the anxieties that plagued the overall
stock market during the approach to the war in Iraq. Investors seemed to be
waiting and watching the global news and were not thinking about buying stocks.
In addition, one of the other issues that is still overhanging the stock
market is concern about the continued weakness in the U.S. economy. The recovery
from the recession is occurring at a very slow pace. Therefore, it is likely
that overall corporate earnings growth in 2003 might be disappointingly slow for
investors in some cyclical and technology sectors. However, this is exactly the
type of environment that could encourage more investors to buy stocks in the
utilities sector that have steady and predictable earnings growth and attractive
dividend yields. Furthermore, the typical 3% to 5% earnings per share ("EPS")
growth rate for utility stocks might turn out to be quite competitive in 2003
with the EPS growth that is achieved in many sectors that trade at much higher
price/earnings ("P/E") ratios than the utility group.
An important fundamental turning point has been reached in the utility
sector that bodes well for the future. The back-to-basics trend that started to
gain momentum in early 2002 has now become the strategic theme for most of the
industry. This means that utility companies are giving up on their non-utility
investments -- by divesting them or closing
2
them down -- and are concentrating on improving the returns on their core,
regulated businesses. The final result is that these companies should have much
lower business risk.
However, the trite athletic expression "no pain, no gain" also has meaning
for some of these companies. In order to clean up their balance sheets and exit
from risky businesses like merchant energy, some companies had to endure large
write-offs and dividend cuts. Many of them also had to sell large amounts of
dilutive new common equity in order to rebuild their balance sheets. In the long
run, these actions should make them financially stronger, lower risk companies,
but in the short run, write-offs and large equity offerings tend to depress a
stock's price. In several instances over the past few months, the Trust took
advantage of these buying opportunities to acquire shares of a turnaround
utility at a depressed stock price.
Interest rates in the U.S. are at their lowest levels in 40 years. While
bond yields are incredibly low today, yields on utility stocks have not dropped.
The result is that the yield differential in favor of utility stocks versus
bonds has widened. In other words, utility stocks look very cheap versus bonds.
The utility stocks also look cheap relative to the S&P 500 Index on the basis of
historic P/E ratios.
Low interest rates provide another fundamental benefit to utilities. Many
of the companies have refinanced massive amounts of debt, reaping significant
savings in interest costs.
President Bush has proposed a number of tax reductions in an effort to
stimulate the U.S. economy. The proposal to eliminate the double-taxation of
corporate dividends would essentially make dividend payments tax-free to the
common stock investor. Stocks of companies that typically pay high dividends,
such as utilities, should benefit the most if Congress approves this proposal.
Another major fundamental positive for the utility sector would be the
passage of energy legislation by Congress. A new energy bill is once again being
debated in Congress. We believe that the bill will get passed this year because
Congress spent much of 2002 debating a similar energy bill that never made it to
a final vote. Therefore, the key provisions and areas that require compromise
are already well known by the legislators, and furthermore, the same party
remains in control of both houses of Congress. In the new energy bill, there is
a provision to repeal PUHCA, which has been a major deterrent to mergers and
acquisitions in the utility industry. We believe that the pace of merger
activity would accelerate greatly if PUHCA is repealed. Now that Congress has
had two years to debate an energy bill, we think the likelihood of passage is
greater in 2003.
Speaking of M&A, we expect to see a resurgence of consolidation activity
in the utility sector in the near future. After a flurry of mergers and
takeovers in the mid to late-1990s, the turmoil of deregulation caused many
potential acquirers to step back and wait. We believe the potential buyers are
getting ready to jump back in because the valuations of the utility stocks came
down, but the fundamental problems have been addressed by many companies. The
result is some healthier companies still have cheap valuations, making them ripe
for takeovers. We believe that the next acquirers of a U.S. utility will be
either a large foreign utility or a private equity group from the U.S.
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. Stand-alone natural gas distribution companies make no
economic sense either; the combination utility model is clearly better. 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 be bigger to achieve scale economies, 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 remains
as fragmented as it is. Our investments in regulated companies have primarily,
though not exclusively, focused on fundamentally sound, reasonably
3
priced mid-cap and small-cap utilities that are likely acquisition targets for
large utilities seeking to bulk up. We also like the beneficiaries of developing
trends. This has led to our ongoing focus on natural gas pipelines and storage
operators as a way to take advantage of the growing demand for natural gas in
the U.S.
LET'S TALK STOCKS
The following are stock specifics on selected holdings in our Trust.
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.
CH ENERGY GROUP INC. (CHG - $41.70 - NYSE) is the last small electric utility in
New York State, now that RGS Energy has been acquired by Energy East (EAS -
$17.80 - NYSE). CH Energy serves the territory directly north of New York City
that is mainly rural and suburban. There are several potential buyers for whom
CH Energy would be a good fit, including Consolidated Edison (ED - $38.47 -
NYSE), Energy East, KeySpan (KSE - $32.25 - NYSE), National Grid (NGG - $30.75 -
NYSE) or Public Service Enterprise Group (PEG - $36.69 - NYSE). The buyer could
create significant savings by rationalizing outside plant operations and
eliminating all of the corporate, finance, regulatory and public company
overhead, for the benefit of shareholders and customers. Although it is tough to
predict when a deal might happen, we would point out that National Grid
completed its takeover of Niagara Mohawk several months ago and Grid has
typically waited less than a year between takeovers in the U.S. where it has
already bought three utilities. Con Edison meanwhile, having done a terrific job
in the aftermath of September 11 and with a strong balance sheet and premium
stock price valuation, might be ready to make an offer for CH Energy.
DQE INC. (DQE - $12.19 - NYSE) is a consolidation play whose stock price fell
sharply in mid 2002 when the company came to market with a very large equity
offering. The Trust took advantage of the falling stock price and added
significantly to its position in DQE. The Trust made additional purchases of DQE
stock in the fourth quarter of 2002 and again in early 2003. DQE is the holding
company for the electric utility in Pittsburgh called Duquesne Light. The
company sold off nearly all of its power plants when the state of Pennsylvania
moved toward utility deregulation a few years ago. DQE's back-to-basics strategy
involves divesting non-utility businesses. DQE has an agreement to sell off its
water utility business and plans to use the proceeds to pay down debt. DQE
closed on the sale of its propane business in December 2002. The company is
surrounded by several utilities that are much larger and we think that its
relatively low stock price makes it an attractive takeover target.
DUKE ENERGY CORP. (DUK - $14.54 - NYSE) is a fallen angel. A few times over the
past year and a half, Duke Energy's earnings expectations have been revised
lower and as a result the shares fell sharply. The reduction was due to the
decline in profits from energy trading and marketing. In addition, Duke had a
huge common stock offering in the third quarter of 2002 that put additional
pressure on the share price. Duke Energy's primary businesses are low-risk
regulated utilities in North and South Carolina and large interstate natural gas
pipelines that should continue to produce steady earnings growth and stable cash
flows. Duke plans to sell non-core assets in 2003 to reduce its debt load and
already has announced a number of deals that should bring in more than $1
billion of cash proceeds during 2003.
GREAT PLAINS ENERGY INC. (GXP - $23.87 - NYSE) is an excellent value for
dividend yield. GXP has one of the highest safe dividends in the sector. The
company completed a major issuance of common equity in the fourth quarter of
2002 that strengthened its balance sheet. GXP is the holding company that owns
Kansas City Power & Light, an electric utility that operates in two states that
have avoided deregulation entirely. In addition, GXP owns one of the few
successful and profitable retail electricity marketing companies in the U.S. The
relatively small size of GXP's utility operation (less than one million
customers) makes it a potential takeover target.
NICOR INC. (GAS - $27.32 - NYSE) is a natural gas utility that serves the area
around the city of Chicago and surrounding counties. The company has relatively
strong fundamentals and a solid track record of good financial performance.
Nevertheless, the share price fell sharply during the third quarter of 2002 when
state regulators announced a review of the
4
business at a small subsidiary of the company and this over-reaction by the
stock market made the stock very cheap. Nicor has one of the highest yields
among the regulated natural gas distribution stocks.
NSTAR (NST - $40.02 - NYSE) is a consolidation play in the New England region.
NSTAR is primarily an electric transmission and distribution utility serving the
Boston and Cape Cod regions of Massachusetts. NST also owns a small gas utility.
The Northeast region of the U.S. has been the most active area for consolidation
activity among utilities. There are several potential acquirers for NST,
including National Grid, who recently completed a takeover of Niagara Mohawk,
and Consolidated Edison, who could use its relatively high stock price and
strong balance sheet to make another acquisition. KeySpan is another potential
acquirer who already owns a gas utility in the same region.
WESTAR ENERGY INC. (WR - $12.12 - NYSE) is a stock with a very low valuation
relative to the sum of its parts. Westar's share price has fallen sharply over
the past 12 months because the company failed to execute its plans to sell the
electric utility operations to PNM Resources (PNM - $22.49 - NYSE) and also due
to disappointing rate orders from regulators in Kansas. During the fourth
quarter of 2002, Westar's top two officers resigned and the company hired a new
CEO and a new COO. Both of these individuals are experienced utility executives
who we think can turn the company around and will be able to improve Westar's
relationship with state regulators. The new management team has announced a
major financial restructuring plan that involves divesting WR's entire 45%
ownership stake in ONEOK, selling off its ownership in Protection One (POI -
$1.59 - NYSE), the nation's second largest monitored security company, and
reducing the holding company's total debt from $3.4 billion to $1.5 billion by
the end of 2004.
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at www.gabelli.com contains
information about Gabelli Asset Management Inc., the Gabelli Mutual Funds, IRAs,
401(k)s, quarterly reports, closing prices and other current news. You can send
us e-mail at closedend@gabelli.com.
In our efforts to bring our shareholders more timely portfolio
information, Gabelli Fund's portfolio managers regularly participate in chat
sessions at www.gabelli.com as reflected below.
MAY JUNE JULY
--- ---- ----
1st Tuesday Howard Ward Howard Ward Howard Ward
1st Wednesday Henry Van der Eb Susan Byrne Caesar Bryan
2nd Wednesday Caesar Bryan Walter Walsh Charles Minter & Martin Weiner
3rd Wednesday Elizabeth Lilly Ivan Arteaga Hartswell Woodson
4th Wednesday Barbara Marcin Barbara Marcin Ivan Arteaga
5th Wednesday Barbara Marcin
All chat sessions start at 4:15 PM (Eastern Time). Please arrive early, as
participation is limited.
You may sign up for our e-mail alerts at www.gabelli.com and receive early
notice of chat sessions, closing mutual fund prices, news events and media
sightings.
Sincerely,
/S/ MARIO J. GABELLI
MARIO J. GABELLI, CFA
Portfolio Manager and Chief Investment Officer
May 5, 2003
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
5
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS
MARCH 31, 2003 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS -- 80.4%
AGRICULTURE -- 0.0%
20,000 Cadiz Inc.+ ....................$ 2,100
------------
COMMUNICATIONS EQUIPMENT -- 0.2%
70,000 Furukawa Electric Co. Ltd. ..... 145,809
------------
ENERGY AND UTILITIES: ELECTRIC -- 19.9%
165,000 AES Corp.+ ..................... 597,300
20,000 Calpine Corp.+ ................. 66,000
55,000 Cinergy Corp. .................. 1,850,750
20,000 Cleco Corp. .................... 251,000
80,000 DPL Inc. ....................... 996,800
16,000 DTE Energy Co. ................. 618,400
77,000 Edison International+ .......... 1,054,130
160,000 El Paso Electric Co.+ .......... 1,728,000
22,000 FPL Group Inc. ................. 1,296,460
44,000 Great Plains Energy Inc. ....... 1,050,280
51,000 Maine Public Service Co. ....... 1,420,350
170,000 Northeast Utilities ............ 2,366,400
58,000 SCANA Corp. .................... 1,735,360
120,000 TECO Energy Inc. ............... 1,275,600
23,000 UIL Holdings Corp. ............. 798,100
20,000 Unisource Energy Corp. ......... 346,000
------------
17,450,930
------------
ENERGY AND UTILITIES: INTEGRATED -- 31.9%
165,000 Allegheny Energy Inc. .......... 1,024,650
13,000 Allete Inc. .................... 269,880
75,000 Alliant Energy Corp. ........... 1,205,250
120,000 Aquila Inc. .................... 249,600
48,000 CH Energy Group Inc. ........... 2,001,600
177,000 CMS Energy Corp. ............... 780,570
75,000 Constellation Energy
Group Inc. .................... 2,079,750
6,000 Dominion Resources Inc. ........ 332,220
180,000 DQE Inc. ....................... 2,194,200
150,000 Duke Energy Corp. .............. 2,181,000
110,000 El Paso Corp. .................. 665,500
13,000 Empire District Electric Co. ... 228,800
8,000 Entergy Corp. .................. 385,200
8,979 FirstEnergy Corp. .............. 282,838
83,666 Florida Public Utilities Co. ... 1,228,217
1,000 Green Mountain Power Corp. ..... 20,210
30,000 MGE Energy Inc. ................ 794,400
130,000 Mirant Corp.+ .................. 208,000
5,000 NiSource Inc. .................. 91,000
45,000 NiSource Inc.+ ................. 94,950
56,900 NSTAR .......................... 2,277,138
3,500 Otter Tail Corp. ............... 90,650
48,000 PG&E Corp.+ .................... 645,600
10,000 PNM Resources Inc. ............. 224,900
38,000 Progress Energy Inc. ........... 1,487,700
40,000 Progress Energy Inc., CVO+ ..... 5,200
10,000 Puget Energy Inc. .............. 213,100
MARKET
SHARES VALUE
------ ------
30,000 Sierra Pacific Resources .......$ 95,400
30,000 TXU Corp. ...................... 535,500
10,000 Unitil Corp. ................... 250,000
10,000 Vectren Corp. .................. 215,100
225,000 Westar Energy Inc. ............. 2,727,000
10,000 Wisconsin Energy Corp. ......... 254,000
7,000 WPS Resources Corp. ............ 280,000
185,000 Xcel Energy Inc. ............... 2,369,850
------------
27,988,973
------------
ENERGY AND UTILITIES: NATURAL GAS -- 14.3%
35,000 AGL Resources Inc. ............. 827,050
3,000 Atmos Energy Corp. ............. 63,780
13,800 Cascade Natural Gas Corp. ...... 267,720
2,000 Chesapeake Utilities Corp. ..... 37,600
33,000 Delta Natural Gas Co. Inc. ..... 723,690
40,000 Dynegy Inc., Cl. A ............. 104,400
1,000 EnergySouth Inc. ............... 26,450
38,000 National Fuel Gas Co. .......... 831,060
90,000 Nicor Inc. ..................... 2,458,800
15,000 NUI Corp. ...................... 219,000
65,000 ONEOK Inc. ..................... 1,192,100
19,000 Peoples Energy Corp. ........... 679,630
23,000 Piedmont Natural Gas Co. Inc. .. 819,950
3,000 RGC Resources Inc. ............. 58,470
120,000 SEMCO Energy Inc. .............. 422,400
100,566 Southern Union Co.+ ............ 1,221,877
130,000 Southwest Gas Corp. ............ 2,645,500
------------
12,599,477
------------
ENERGY AND UTILITIES: WATER -- 5.5%
12,000 American States Water Co. ...... 286,800
11,000 Artesian Resources
Corp., Cl. A .................. 331,100
20,500 BIW Ltd. ....................... 378,840
20,520 California Water Service Group . 528,390
7,500 Connecticut Water Service Inc. . 199,125
44,000 Middlesex Water Co. ............ 972,840
15,566 Pennichuck Corp. ............... 343,697
15,000 Philadelphia Suburban Corp. .... 329,250
18,000 SJW Corp. ...................... 1,377,000
5,513 Southwest Water Co. ............ 68,906
------------
4,815,948
------------
ENVIRONMENTAL SERVICES -- 0.0%
18,000 Catalytica Energy
Systems Inc.+ ................. 45,900
------------
METALS AND MINING -- 0.6%
6,168 Fording Canadian Coal Trust
(New York) ................... 119,968
19,532 Fording Canadian Coal Trust
(Toronto) .................... 379,767
------------
499,735
------------
6
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 2003 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
SATELLITE -- 0.6%
50,000 General Motors Corp., Cl. H+ ...$ 560,000
------------
TELECOMMUNICATIONS -- 6.5%
50,000 BellSouth Corp. ................ 1,083,500
155,000 Broadwing Inc.+ ................ 620,000
30,000 BT Group plc, ADR .............. 763,200
30,000 CenturyTel Inc. ................ 828,000
18,000 Citizens Communications Co.+ ... 179,640
4,000 Commonwealth Telephone
Enterprises Inc.+ ............ 155,280
14,388 D&E Communications Inc. ........ 167,045
10,000 Deutsche Telekom AG, ADR ....... 110,200
4,000 France Telecom SA, ADR ......... 91,240
50,000 Touch America Holdings Inc.+ ... 4,500
49,000 Verizon Communications Inc. .... 1,732,150
1,045 WilTel Communications Inc.+ .... 13,167
------------
5,747,922
------------
WIRELESS COMMUNICATIONS -- 0.9%
40,000 mm02 plc, ADR+ ................. 281,200
38,000 Nextel Communications
Inc., Cl. A+ .................. 508,820
------------
790,020
------------
TOTAL COMMON STOCKS ............ 70,646,814
------------
PREFERRED STOCKS -- 1.0%
TELECOMMUNICATIONS -- 1.0%
18,000 Citizens Communications Co.,
5.000% Cv. Pfd. .............. 864,000
------------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS -- 0.8%
ENERGY AND UTILITIES: INTEGRATED -- 0.8%
$1,100,000 Mirant Corp., Sub. Deb. Cv.,
2.500%, 06/15/21 ............. 701,250
------------
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
U.S. GOVERNMENT OBLIGATIONS -- 9.1%
$8,000,000 U.S. Treasury Bills,
1.130%++, 04/24/03 ...........$ 7,994,225
------------
REPURCHASE AGREEMENT -- 8.9%
7,821,000 Agreement with State Street Bank and
Trust Co., 1.260%, dated 03/31/03,
due 04/01/03, proceeds at maturity,
$7,821,274 (a) ............... 7,821,000
------------
TOTAL INVESTMENTS -- 100.2%
(Cost $101,959,125) ...................... 88,027,289
OTHER LIABILITIES IN
EXCESS OF ASSETS -- (0.2)% (182,543)
------------
NET ASSETS -- 100.0%
(15,232,926 shares outstanding) ..........$ 87,844,746
============
NET ASSET VALUE
(87,844,746 / 15,232,926
shares outstanding) ...................... $5.77
=====
---------------
For Federal tax purposes:
Aggregate cost ....................$101,959,125
============
Gross unrealized appreciation .....$ 2,967,773
Gross unrealized depreciation ..... (16,899,609)
------------
Net unrealized depreciation .......$(13,931,836)
============
---------------
(a) Collateralized by U.S. Treasury Note, 1.75%, due 12/31/04, market value
$7,895,000.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depository Receipt.
CVO - Contingent Value Obligation.
--------------------------------------------------------------------------------
SELECTED HOLDINGS
MARCH 31, 2003
--------------
CH Energy Group Inc. Great Plains Energy Inc.
Cinergy Corp. Nicor Inc.
DPL Inc. NSTAR
DQE Inc. ONEOK Inc.
Duke Energy Corp. Westar Energy Inc.
--------------------------------------------------------------------------------
7
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 EquiServe Trust Company ("EquiServe") 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 EquiServe
P.O. Box 43011
Providence, RI 02940-3011
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 EquiServe at 1 (800) 336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at EquiServe 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, EquiServe will buy Common Stock in the open
market, or on the New York Stock Exchange or elsewhere, for the participants'
accounts, except that EquiServe 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 EquiServe 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 EquiServe for investments in the Utility Trust's
shares at the then current market price. Shareholders may send an amount from
$250 to $10,000. EquiServe will use these funds to purchase shares in the open
market on or about the 1st and 15th of each month. EquiServe 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 EquiServe, P.O. Box 43011, Providence, RI
02940-3011 such that EquiServe receives such payments approximately 10 days
before the 1st and 15th of the month. Funds not received at least five days
before the investment date shall be held for investment until the next purchase
date. A payment may be withdrawn without charge if notice is received by
EquiServe 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.
8
TRUSTEES AND OFFICERS
THE GABELLI UTILITY TRUST
ONE CORPORATE CENTER, RYE, NY 10580-1422
TRUSTEES
Mario J. Gabelli, CFA
CHAIRMAN & CHIEF INVESTMENT OFFICER,
GABELLI ASSET MANAGEMENT INC.
Dr. Thomas E. Bratter
PRESIDENT, JOHN DEWEY ACADEMY
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
James P. Conn
FORMER MANAGING DIRECTOR & CHIEF INVESTMENT OFFICER,
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
Vincent D. Enright
FORMER SENIOR VICE PRESIDENT &
CHIEF FINANCIAL OFFICER,
KEYSPAN ENERGY CORP.
Frank J. Fahrenkopf, Jr.
PRESIDENT & 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 EMERITUS, PACE UNIVERSITY
Salvatore J. Zizza
CHAIRMAN, HALLMARK ELECTRICAL SUPPLIES CORP.
OFFICERS
Bruce N. Alpert
PRESIDENT
Gus Coutsouros
VICE PRESIDENT & TREASURER
David I. Schachter
VICE PRESIDENT & OMBUDSMAN
James E. McKee
SECRETARY
INVESTMENT ADVISER
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
CUSTODIAN
Boston Safe Deposit and Trust Company
COUNSEL
Skadden, Arps, Slate, Meagher & Flom, LLP
TRANSFER AGENT AND REGISTRAR
EquiServe Trust Company
STOCK EXCHANGE LISTING
COMMON
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NYSE-Symbol: GUT
Shares Outstanding: 15,232,926
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 800-GABELLI
(800-422-3554), fax us at 914-921-5118, visit Gabelli Funds' Internet homepage
at: WWW.GABELLI.COM or e-mail us at: closedend@gabelli.com
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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 10580-1422
(914) 921-5070
WWW.GABELLI.COM
FIRST QUARTER REPORT
MARCH 31, 2003
GBFUF 03/03