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UTILITY TRUST
SEMI-ANNUAL REPORT
JUNE 30, 2002
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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 Trust will invest in companies that provide products,
services or equipment for the generation or distribution of electricity,
gas and water. Additionally, the 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 telephone
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 telephone
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 of 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 as well as 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.
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 502 publicly-traded closed-end funds that are publicly traded in the
U.S., approximately 37% currently trade at premiums to NAV versus 26% five years
ago and 61% 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 2% discount in October 2000 to a 41%
premium in May 2002. The average variance from NAV for the Trust since inception
is an 11.9% premium to NAV. Shortly after the inception of the Trust, the market
price of the Trust exceeded the NAV and this premium has gradually increased
since.
0.1672
0.0816
0.1152
0.0582
0.0117
0.0007
Y2k 0.0375
0.0289
-0.0127
0.0417
-0.0016
0.0403
0.0016
0.0081
0.0064
-0.022
0.0003
0.0658
Year 2001 0.0532
0.1445
0.0728
0.1646
0.1409
0.1223
0.1229
0.1643
0.1572
0.2455
0.2414
0.2746
Year 2002 0.3454
0.3704
0.3101
0.3225
0.1723
0.2561
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-------------------------
JUNE 30, 2002
Net Asset Value $6.95
Market Price $8.73
Premium 25.61%
------------------------
1
"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
returns of 6.9% since inception. 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.
COMPARATIVE RESULTS
--------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 2002 (A)
------------------------------------------------
YEAR SINCE
QUARTER TO DATE 1 YEAR 2 YEAR INCEPTION (B)
------- ------- ------ ------ -------------
Gabelli Utility Trust NAV Return (c) ......... (5.46)% (1.36)% (3.92)% 6.28% 6.87%
Gabelli Utility Trust Investment Return (d) .. (9.74)% (3.73)% 5.73% 15.69% 12.20%
S&P Utility Index ............................ (16.92)% (14.11)% (31.82)% (9.12)% (5.67)%
Lipper Utility Fund Average .................. (13.18)% (14.68)% (25.85)% (14.99)% (8.12)%
--------------------------------------------------------------------------------
(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 are 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 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.
RIGHTS OFFERING 2002 - AN OUTSTANDING SUCCESS - THANK YOU
The Utility Trust Rights Offering proved to be an overwhelming success.
Rights offerings have historically been a fair and efficient method to raise
additional capital. This method is widely used in England. The traditional
rights offering allows an issuer's shareholders to participate directly in the
growth of that issuer by purchasing additional common shares at a set
subscription price.
Shareholders of record on May 22, 2002 were issued one Right for each
share of the Trust. Three Rights were required to purchase one additional share
of the Trust at $7.50 per share without incurring commission costs. Shareholders
remitted $50 million in subscription requests, of which the Trust retained $28
million for the 3,764,965 shares offered.
Furthermore, since these Rights were transferable, shareholders who chose
not to exercise their Rights, could sell their Rights. The market value of the
Rights during the subscription period was such that sellers of the Rights would
have gained a portion of the value of their holdings that resulted from the
Offering. Our subscription agent, EquiServe, sold Rights in the open market
through Gabelli & Company, Inc. at a nominal commission through June 26, 2002.
We appreciate the efforts of the brokerage community in explaining the
offering to their clients, resulting in a high level of participation.
2
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 priced
mid-cap and small-cap utilities that are likely acquisition target for large
utilities seeking to bulk up. One of the Trust's biggest holdings as of the end
of the second quarter was RGS Energy, a small utility in New York State that was
acquired by Energy East in a deal that closed on July 1, 2002. We also like the
beneficiaries of developing trends. This has led to our ongoing focus on natural
gas pipelines and storage operators.
COMMENTARY
During the second quarter of 2002, utility stocks continued to be more
volatile and more exciting, compared with their historic performance. This was
similar to how they performed in the first quarter of 2002. Unfortunately,
volatility and excitement are not what investors generally expect from utility
stocks. However, their performance relative to the overall stock market in each
of the first two quarters of 2002 actually has been quite good and consistent
with the expectation that utilities are good defensive investments.
The meltdown of Enron in late 2001 led to a more rigorous review of
balance sheets and credit quality for all of the companies involved in the
merchant energy business. The result was a chain reaction of increased concern
and in some cases outright panic among investors who discovered that involvement
in merchant energy can be risky business. Fortunately, even though many
utilities have some involvement in energy trading and marketing, these
unregulated businesses typically represent only a small portion of their total
earnings. In addition, unlike the pure play energy merchant stocks, most of the
utility stocks still pay secure and generous dividends. Therefore, the utility
stocks have benefited from yield support that prevented their stock prices from
falling precipitously.
The meltdown of Enron also led to a flight-to-quality in the energy and
utilities sector. The best performing stocks in the electric sector have been
the ones that look mostly like old-fashioned regulated utilities. Despite
promising slower earnings growth, these plain vanilla utilities were the
beneficiaries when investors fled the energy merchant stocks in droves.
Another recent phenomenon has been a rash of new common equity offerings
by utilities during the first half of 2002. This was due to the need by some
companies to strengthen their balance sheets because of tougher standards
imposed by the major credit rating agencies in the post-Enron world. For
investors who were selective, these new equity offerings provided opportunities
to buy good stocks at a time when their prices were under selling pressure.
Even if the Enron debacle had never occurred, a major fundamental change
was occurring during 2001 that continues into 2002. The United States has
quickly moved from a condition of tight power markets and electricity shortages
to a situation in which most regions are over-supplied with power. How did this
happen so fast? The best answer is that deregulation, working in concert with
the capitalist system, led to a surge of investment in new power plants by
merchant energy companies that wanted to take advantage of high power prices.
Many new power plants were completed in the period from early-2000 to mid-2002,
which resulted in the supply/demand imbalance turning
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3
into an over-supply of electricity generation. In the stock market, this caused
the sky-high valuations on the stocks of the pure-play merchant energy companies
to plunge so low that they now trade at lower price/earnings ("P/E") ratios than
the stocks of regulated utilities.
The U.S. economy remains somewhat weak. The long-awaited recovery from the
recession appears to be under way, but it is a very slow recovery. This probably
means that it is unlikely that the Federal Reserve Board ("Fed") will tighten
its monetary policy in the next few quarters. Therefore, with interest rates
likely to remain near their 30-year lows, utility stocks, with their high secure
yields, should remain popular with conservative total return investors.
A major fundamental positive for the utilities sector would be passage by
Congress of the pending energy legislation. President Bush included in his
legislative package the repeal of 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. Although the
Democrats and Republicans in both houses of Congress have found plenty to
disagree about regarding many other issues in the President's broad energy bill,
there appears to be little opposition to PUHCA repeal. Both the
Republican-controlled House and the Democratic-controlled Senate have passed
separate versions of the energy bill, and both versions include the repeal of
PUHCA. We are cautiously optimistic that the House and Senate can work out their
differences and present a compromise energy bill that includes PUHCA repeal to
the President by the end of the summer.
Speaking of M&A, we are watching closely the situation involving German
utility giant E.ON, which completed the acquisition of the U.K.'s PowerGen in
early July. PowerGen owned the largest utility in Kentucky, LG&E Energy. E.ON's
Chairman and CEO has said publicly that he wants to use LG&E and its one million
utility customers as a base for making further U.S. utility acquisitions. Also,
at the end of the second quarter of 2002, Energy East completed its acquisition
of RGS Energy. This is the fifth utility in the Northeast region that Energy
East has acquired in the past four years.
THE MARKET: A CRISIS IN CONFIDENCE
Unfortunately, over the short-term, a recovering economy, a rebound in
corporate profits and more reasonable equity valuations may not do much to
improve investor psychology, which has been battered by geopolitical tensions
and a crisis in confidence in the integrity of corporate America and Wall
Street.
It has become apparent that our quick victory over the Taliban in
Afghanistan has not eliminated the threat of terrorism at home or abroad. The
seemingly never-ending cycle of violence in the Middle East has further unnerved
investors. For a few tense weeks, investors also worried about a nuclear
confrontation between Pakistan and India over Kashmir. Clearly, it's a dangerous
world out there.
Investors have come to believe the stock market is a dangerous place as
well. Not only have they lost a pile of money over the last two years, but
"Enronitis," "Tycosis," "Marthritis" (the insider trading investigation of
Martha Stewart), and most recently "WorldCon" have many investors wondering what
malady will strike their portfolios next. Following the revelations (to some)
that Wall Street research is not what it's cracked up to be, investors are
reluctant to go to their broker for a portfolio check-up, fearing the cure may
be worse than the disease.
REALITY CHECK
At this stage, some perspective on the recent scandals in corporate
America and Wall Street is in order. I've spent nearly 40 years grilling
corporate managers about their businesses. Most have been honest, albeit with a
tendency to "accentuate the positives and de-centuate the negatives." Some have
been disingenuous, doing their best
4
to sweep the bad news under the rug. While I've seen many incompetent
managements run good companies into the ground, I've only encountered a few who
have been outright crooks.
Unfortunately, corporate skullduggery was on the rise, in part due to
"momentum" investing, which focuses on short-term earnings dynamics, as well as
the widespread use of stock options--the cocaine of the corporate elite--that
reward managements on the basis of their companies' stock prices rather than
improving business fundamentals. It is little wonder that some managements are
willing to cook the books to enhance and/or protect the value of these enormous
options packages.
We are a little more cynical regarding Wall Street's improprieties. We
have always been wary of Wall Street research, primarily because we feel most
sell-side analysts do not do as thorough a job as we do. Also, although the
conflict of interest between investment banking and equity research may be
front-page news to the investor public, it is old hat to investment
professionals. Writing a negative research report on the stock of one of your
firms' investment banking clients has always been a sure-fire way for sell-side
analysts to end up on the unemployment line.
Although corporate accounting has never been transparent--we have been
fighting our way through pages of footnotes attached to corporate financial
statements for years--we would welcome reform in this area as well. We expect a
certain amount of accounting gimmickry will always be the norm, as the bean
counters figure out how to skirt whatever new rules are put in place. However,
separation of auditors from management consultants would be the first step in
resolving potential conflicts of interest.
Hopefully, we will make some progress on all these fronts. In the coming
quarters, we may continue to see negative headlines further denting investor
confidence. However, we believe that as the economic recovery unfolds and
corporate earnings meet or beat consensus expectations, investors will refocus
on an expanding number of excellent opportunities in the stock market.
LET'S TALK STOCKS
The following are stock specifics on selected holdings of 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 - $49.25 - NYSE) is the last small electric utility in
New York State, now that RGS Energy has been acquired by Energy East. 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 - $41.75 - NYSE), Energy East (EAS -
$22.60 - NYSE), KeySpan (KSE - $37.65 - NYSE), National Grid (NGG - $35.16 -
NYSE) or Public Service Enterprise Group (PEG - $43.30 - 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 acquired 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.
CONSTELLATION ENERGY GROUP INC. (CEG - $29.34 - NYSE) is a fallen angel.
Constellation had grandiose plans to split off the competitive generation
business as a separate publicly traded stock. However, late last year, when the
stock prices of generating companies plummeted, CEG changed its strategy and
brought in a whole new management team. The new strategy is to remain as an
integrated energy company, with the steady earnings and cash flow from the
regulated utility
5
operation complementing the more volatile, higher growth merchant energy
business. As a further repudiation of the old strategy, Constellation Energy
raised its dividend from $0.48 per share annually up to $0.96 in early 2002. The
stock of Constellation is trading at a large P/E discount compared with the
average integrated electric company.
DQE INC. (DQE - $14.00 - NYSE) is a consolidation play whose stock price fell
sharply in the second quarter 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. 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 is in the process of divesting its
water utility business and plans to use the proceeds to pay down debt. 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.
EL PASO ELECTRIC CO. (EE - $13.85 - AMEX) is a financial comeback story. A few
years ago, this small electric utility, serving portions of southwest Texas and
New Mexico, was coming out of bankruptcy. Over the past few years, management
has continued to create shareholder value by utilizing the company's free cash
flow to pay down debt and repurchase large amounts of common stock. Eventually,
due to the company's relatively small size, we believe that El Paso Electric is
a takeover candidate.
NSTAR (NST - $44.78 - 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.
ONEOK INC. (OKE - $21.95 - NYSE) is pronounced "wun-oke" not "oh-nee-ock." The
name is supposed to mean, "One company, in Oklahoma." Hate the name, love the
stock. This is a natural gas utility. Westar Energy (WR - $15.35 - NYSE), an
electric utility holding company in neighboring Kansas, has owned 45% of ONEOK
for the past few years. In June 2002, Westar announced that it plans to sell its
stake in ONEOK. ONEOK has the right to buy back these shares from Westar at a
price of $21.77 per OKE share for a total cost of $971.1 million. This is quite
a lot of cash for a company like ONEOK to come up with, and even if OKE did
repurchase the shares, it would create a huge jump in ONEOK's financial leverage
and threaten its credit ratings. Therefore, a likely scenario is that a buyer
that wants to take control of ONEOK would make an offer to purchase the OKE
shares that Westar now holds.
SCANA CORP. (SCG - $30.87 - NYSE) is a mid-cap electric and gas utility serving
a large portion of South Carolina and small areas of North Carolina and Georgia.
SCANA is either surrounded by or is in close proximity to several of the largest
utilities in the U.S., and any one of them could afford to pay a generous
premium to acquire this well-run, financially strong company.
WESTAR ENERGY INC. (WR - $15.35 - 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 twelve months because the company failed to execute its plans to sell
the electric utility operations to PNM Resources (PNM - $24.20 - NYSE), and also
due to disappointing rate orders from regulators in Kansas. We think that
Westar's newly announced plan to divest its 45% ownership stake in ONEOK is a
smart move. We would expect Westar to use the profits from the ONEOK sale to pay
off a large portion of the holding company's debt. We also think that Westar
might divest its 85% ownership stake in Protection One, the nation's second
largest monitored security company. The loss on the sale of the Protection One
shares could be used to offset Westar's taxable gain on the sale of the ONEOK
shares.
6
SHAREHOLDER MEETING - MAY 20, 2002 - FINAL RESULTS
The Annual Meeting of Shareholders was held on May 20, 2002 at the Bruce
Museum in Greenwich, Connecticut. At that meeting, shareholders elected Anthony
J. Colavita, Frank J. Fahrenkopf, Jr., Robert J. Morrissey and Salvatore J.
Zizza as Trustees of the Trust. A total of 9,646,342 votes, 9,624,169 votes,
9,645,548 votes and 9,649,000 votes were cast in favor of each Trustee and
75,347 votes, 97,520 votes, 76,142 votes and 72,689 votes were withheld for each
Trustee, respectively.
Mario J. Gabelli, Thomas E. Bratter, James P. Conn, Vincent D. Enright,
John D. Gabelli, Karl Otto Pohl and Anthony R. Pustorino continue to serve in
their capacities as Trustees of the Trust.
We thank you for your participation and appreciate your continued support.
MONTHLY DISTRIBUTIONS
The Trust has a $0.06 per share monthly distribution policy in place.
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 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.
WHO WHEN
--- ----
Special Chats: Mario J. Gabelli First Monday of each month
Howard Ward First Tuesday of each month
In addition, every Wednesday will feature a different portfolio manager.
The upcoming Wednesday chat schedule is as follows:
AUGUST SEPTEMBER OCTOBER
------ --------- -------
1st Wednesday Susan Byrne Caesar Bryan Walter Walsh & Laura Linehan
2nd Wednesday Lynda Calkin Hart Woodson Caesar Bryan
3rd Wednesday Walter Walsh & Laura Linehan Charles Minter & Martin Weiner Henry Van der Eb
4th Wednesday Barbara Marcin Barbara Marcin Lynda Calkin
5th Wednesday Barbara Marcin
7
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
August 1, 2002
--------------------------------------------------------------------------------
SELECTED HOLDINGS
JUNE 30, 2002
-------------
CH Energy Group Inc. NSTAR
Constellation Energy Group Inc. ONEOK Inc.
DQE Inc. SCANA Corp.
El Paso Electric Co. Westar Energy 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.
8
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS
JUNE 30, 2002 (UNAUDITED)
MARKET
SHARES COST VALUE
------ ---- -----
COMMON STOCKS -- 63.1%
AGRICULTURE -- 0.1%
12,000 Cadiz Inc.+ ........................ $ 107,393 $ 101,988
----------- ------------
COMMUNICATIONS EQUIPMENT -- 0.3%
70,000 Furukawa Electric Co. Ltd. ......... 702,424 268,071
----------- ------------
CONSUMER PRODUCTS -- 1.0%
50,000 Pennzoil-Quaker State Co. .......... 1,077,000 1,076,500
------------ ------------
ENERGY AND UTILITIES: ELECTRIC -- 19.3%
100,000 AES Corp.+ ......................... 924,098 542,000
18,000 Calpine Corp.+ ..................... 224,646 126,540
50,000 Cinergy Corp. ...................... 1,553,487 1,799,500
10,000 Cleco Corp. ........................ 153,250 219,000
120,000 Conectiv ........................... 2,150,402 3,097,200
55,000 DPL Inc. ........................... 1,152,088 1,454,750
20,219 DTE Energy Co. ..................... 886,992 902,576
160,000 El Paso Electric Co.+ .............. 1,462,191 2,216,000
22,000 FPL Group Inc. ..................... 1,192,216 1,319,780
51,000 Maine Public Service Co. ........... 925,394 1,521,840
145,000 Northeast Utilities ................ 2,968,426 2,727,450
57,000 SCANA Corp. ........................ 1,455,381 1,759,590
30,000 TECO Energy Inc. ................... 696,545 742,500
25,000 UIL Holdings Corp. ................. 1,096,481 1,361,500
20,000 Unisource Energy Corp. ............. 236,625 372,000
------------ ------------
17,078,222 20,162,226
------------ ------------
ENERGY AND UTILITIES: INTEGRATED -- 20.7%
13,000 Allete ............................. 222,463 352,300
38,000 CH Energy Group Inc. ............... 1,396,707 1,871,500
12,000 CMS Energy Corp. ................... 161,225 131,760
70,000 Constellation Energy
Group Inc. ....................... 1,721,293 2,053,800
2,000 Dominion Resources Inc. ............ 121,600 132,400
100,000 DQE Inc. ........................... 2,012,033 1,400,000
15,000 Edison International ............... 165,700 255,000
17,000 El Paso Corp. ...................... 408,716 350,370
10,000 Empire District Electric Co. ....... 205,736 205,000
15,000 Entergy Corp. ...................... 421,243 636,600
3,979 FirstEnergy Corp. .................. 137,371 132,819
50,000 Florida Public Utilities Co. ....... 792,675 911,000
30,000 Madison Gas & Electric Co. ......... 621,679 835,500
110,000 Mirant Corp.+ ...................... 1,184,142 803,000
52,000 NSTAR .............................. 2,222,019 2,328,560
1,000 Otter Tail Corp. ................... 30,600 31,520
18,000 PG&E Corp. ......................... 213,988 322,020
40,000 Progress Energy Inc.+ .............. 20,800 12,000
8,000 Puget Energy Inc. .................. 178,550 165,200
MARKET
SHARES COST VALUE
------ ---- -----
95,000 RGS Energy Group Inc. .............. $ 2,522,402 $ 3,724,000
21,000 Sierra Pacific Resources+ .......... 171,508 163,800
6,000 Unitil Corp. ....................... 163,525 179,280
145,000 Westar Energy Inc. ................. 2,536,757 2,225,750
5,000 Wisconsin Energy Corp. ............. 129,570 126,350
7,000 WPS Resources Corp. ................ 204,319 285,810
122,000 Xcel Energy Inc. ................... 2,816,216 2,045,940
------------ ------------
20,782,837 21,681,279
------------ ------------
ENERGY AND UTILITIES: NATURAL GAS -- 10.3%
35,000 AGL Resources Inc. ................. 640,625 812,000
12,000 Cascade Natural Gas Corp. .......... 260,037 250,800
2,000 Chesapeake Utilities Corp. ......... 36,525 38,020
33,000 Delta Natural Gas Co. Inc. ......... 552,849 716,430
25,000 Dynegy Inc., Cl. A ................. 339,475 180,000
1,000 EnergySouth Inc. ................... 26,780 32,040
26,000 National Fuel Gas Co. .............. 644,176 585,260
12,000 Nicor Inc. ......................... 434,475 549,000
60,000 ONEOK Inc. ......................... 1,024,914 1,317,000
19,000 Peoples Energy Corp. ............... 665,481 692,740
23,000 Piedmont Natural Gas
Co. Inc. ......................... 687,398 850,540
3,000 RGC Resources Inc. ................. 59,164 54,570
123,000 SEMCO Energy Inc. .................. 1,654,569 1,113,150
21,267 Southern Union Co. ................. 336,801 361,534
130,000 Southwest Gas Corp. ................ 3,288,133 3,217,500
------------ ------------
10,651,402 10,770,584
------------ ------------
ENERGY AND UTILITIES: WATER -- 4.8%
12,000 American States Water Co. .......... 266,713 318,000
11,000 Artesian Resources Corp.,
Cl. A ............................ 257,250 318,879
21,000 Birmingham Utilities Inc. 396,335 389,550
20,520 California Water
Service Group .................... 566,928 517,104
7,500 Connecticut Water
Service Inc. ..................... 146,455 228,600
40,000 Middlesex Water Co. ................ 808,263 1,050,800
45,000 NiSource Inc.+ ..................... 90,000 93,600
11,466 Pennichuck Corp. ................... 285,503 331,367
30,000 Philadelphia Suburban Corp. ........ 457,092 606,000
13,000 SJW Corp. .......................... 1,340,829 1,053,000
5,250 Southwest Water Co. 52,062 99,383
------------ ------------
4,667,430 5,006,283
------------ ------------
See accompanying notes to financial statements.
9
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2002 (UNAUDITED)
MARKET
SHARES COST VALUE
------ ---- -----
ENVIRONMENTAL SERVICES -- 0.0%
18,000 Catalytica Energy
Systems Inc.+ .................... $ 179,986 $ 56,880
------------ ------------
SATELLITE -- 0.4%
42,000 General Motors Corp., Cl. H+ ....... 891,207 436,800
------------ ------------
TELECOMMUNICATIONS -- 5.8%
1,000 ALLTEL Corp. ....................... 53,560 47,000
3,000 AT&T Canada Inc., Cl. B+ ........... 82,810 95,370
20,000 AT&T Corp. ......................... 329,166 214,000
40,000 BellSouth Corp. .................... 1,452,491 1,260,000
125,000 Broadwing Inc.+ .................... 1,134,153 325,000
20,000 BT Group plc, ADR+ ................. 794,714 762,400
30,000 CenturyTel Inc. .................... 1,147,440 885,000
10,000 Citizens Communications
Co.+ ............................. 100,359 83,600
4,000 Commonwealth Telephone
Enterprises Inc.+ ................ 130,004 160,960
8,388 D&E Communications Inc. ............ 116,174 88,158
13,000 Deutsche Telekom AG, ADR ........... 243,502 121,030
3,000 France Telecom SA, ADR ............. 83,768 28,140
13,000 Touch America
Holdings Inc.+ ................... 118,249 35,750
50,000 Verizon Communications Inc. ........ 2,023,204 2,007,500
------------ ------------
7,809,594 6,113,908
------------ ------------
WIRELESS COMMUNICATIONS -- 0.4%
40,000 mm02 plc, ADR+ ..................... 422,427 252,000
50,000 Nextel Communications
Inc., Cl. A+ ..................... 792,253 160,500
------------ ------------
1,214,680 412,500
------------ ------------
TOTAL COMMON
STOCKS ............................ 65,162,175 66,087,019
------------ ------------
PREFERRED STOCKS -- 0.6%
TELECOMMUNICATIONS -- 0.6%
16,000 Citizens Utilities Trust,
5.000% Cv. Pfd. .................. 784,566 646,400
------------ ------------
PRINCIPAL MARKET
AMOUNT COST VALUE
------ ---- -----
CORPORATE BONDS -- 0.8%
ENERGY AND UTILITIES: INTEGRATED -- 0.8%
$ 1,100,000 Mirant Corp., Sub. Deb. Cv.,
2.500%, 06/15/21 ................. $ 823,462 $ 804,375
------------ ------------
TELECOMMUNICATIONS -- 0.0%
100,000 Williams Communications Group Inc.,
10.875%, 10/01/09 ................ 42,438 8,750
------------ ------------
TOTAL CORPORATE
BONDS ............................. 865,900 813,125
------------ ------------
REPURCHASE AGREEMENT -- 9.3%
9,698,000 State Street Bank & Trust Co.,
1.870%, dated 06/28/02,
due 07/01/02,
proceeds at maturity,
$9,699,511 (a) ................... 9,698,000 9,698,000
------------ ------------
TOTAL INVESTMENTS -- 73.8% ...................... $ 76,510,641 $ 77,244,544
============
OTHER ASSETS AND LIABILITIES (NET) -- 26.2% ..... 27,466,167
------------
NET ASSETS -- 100.0%
(15,074,184 shares outstanding) .............. $104,710,711
============
NET ASSET VALUE
(104,710,711 / 15,074,184 shares outstanding) .............. $6.95
=====
-------------
For Federal tax purposes:
Aggregate cost ................................... $ 75,548,322
============
Gross unrealized appreciation .................... $ 8,594,523
Gross unrealized depreciation .................... (7,860,620)
------------
Net unrealized appreciation ...................... $ 733,903
============
-------------
(a) Collateralized by U.S. Treasury Note, 1.870%, due 04/30/03,
market value $9,893,094.
+ Non-income producing security.
ADR - American Depository Receipt.
See accompanying notes to financial statements.
10
THE GABELLI UTILITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2002 (UNAUDITED)
ASSETS:
Investments, at value (Cost $76,510,641) ................... $ 77,244,544
Cash ....................................................... 482
Dividends and interest receivable .......................... 215,219
Receivable for Fund shares sold ............................ 28,237,239
Other assets ............................................... 104
------------
TOTAL ASSETS ............................................... 105,697,588
------------
LIABILITIES:
Payable for investments purchased .......................... 127,411
Payable for investment advisory fees ....................... 59,468
Other accrued expenses. .................................... 799,998
------------
TOTAL LIABILITIES .......................................... 986,877
------------
NET ASSETS applicable to 15,074,184
shares outstanding ...................................... $104,710,711
============
NET ASSETS CONSIST OF:
Shares of beneficial interest, at par value ................ $ 15,074
Additional paid-in capital ................................. 103,961,629
Net unrealized appreciation on investments ................. 734,008
------------
TOTAL NET ASSETS ........................................... $104,710,711
============
NET ASSET VALUE
($104,710,711 / 15,074,184 shares
outstanding; unlimited number of shares
authorized of $0.001 par value) ......................... $6.95
=====
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of foreign taxes $1,729) .................... $ 1,088,785
Interest ................................................... 166,997
------------
TOTAL INVESTMENT INCOME .................................... 1,255,782
------------
EXPENSES:
Investment advisory fees ................................... 397,978
Shareholder services fees .................................. 122,399
Shareholder communications expenses ........................ 116,889
Payroll .................................................... 71,335
Legal and audit fees ....................................... 39,803
Trustees' fees ............................................. 27,907
Custodian fees ............................................. 21,848
Miscellaneous expenses ..................................... 40,006
------------
TOTAL EXPENSES ............................................. 838,165
------------
LESS: CUSTODIAN FEE CREDIT ................................. (1,572)
------------
NET EXPENSES ............................................... 836,593
------------
NET INVESTMENT INCOME ...................................... 419,189
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments ........................... 496,174
Net change in unrealized appreciation/
depreciation on investments ............................. (2,794,930)
------------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS .......................................... (2,298,756)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ......................................... $ (1,879,567)
============
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 2002 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2001
-------------- ----------------
OPERATIONS:
Net investment income .................................................... $ 419,189 $ 1,341,543
Net realized gain on investments ......................................... 496,174 2,449,730
Net change in unrealized appreciation/depreciation on investments ........ (2,794,930) (6,032,844)
------------ -----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................... (1,879,567) (2,241,571)
------------ -----------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income .................................................... (445,576) (2,323,380)
Net realized gain on investments ......................................... (2,192,853) (5,488,776)
Paid-in capital .......................................................... (1,415,787) --
------------ -----------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ......................... (4,054,216) (7,812,156)
------------ ----------
FUND SHARE TRANSACTIONS:
Net increase in net assets from common shares issued in rights offering .. 27,737,239 --
Net increase in net assets from Fund common shares issued upon
reinvestment of dividends and distributions ........................... 709,865 1,581,923
------------ -----------
NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS .................. 28,447,104 1,581,923
------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS .................................... 22,513,321 (8,471,804)
NET ASSETS:
Beginning of period ...................................................... 82,197,390 90,669,194
------------ -----------
End of period (including undistributed net investment income of
$0 and $26,387, respectively) ......................................... $104,710,711 $82,197,390
============ ===========
See accompanying notes to financial statements.
11
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION. The Gabelli Utility Trust (the "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 beneficial
interest 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 as 13,333.
On July 9, 1999, 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 Equity Trust shareholders of record on July 1, 1999 at the rate
of one share of the Utility Trust 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 in the U.S.
over-the-counter market for which market quotations are readily available are
valued at the last quoted sale price on that exchange or market as of the close
of business on the day the securities are being valued. If there were no sales
that day, the security is valued at the average of the closing bid and asked
prices or, if there were no asked prices quoted on that day, then the security
is valued at the closing bid price on that day. If no bid or asked prices are
quoted on such day, the security is valued at the most recently available price
or, if the Board of Trustees so determines, by such other method as the Board of
Trustees shall determine in good faith, to reflect its fair market value.
Portfolio securities traded on more than one national securities exchange or
market are valued according to the broadest and most representative market, as
determined by Gabelli Funds, LLC (the "Adviser"). Portfolio securities primarily
traded in foreign markets are generally valued at the preceding closing values
of such securities on their respective exchanges or markets. 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 Board of Trustees determines such does not reflect the securities
fair value, in which case these securities will be valued at their fair value as
determined by the Board of Trustees. Debt instruments having a maturity greater
than 60 days for which 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 such day, the security is valued using the closing bid price on that day.
Options are valued at the last sale price on the exchange on which they are
listed. If no sales of such options have taken place that day, they will be
valued at the mean between their closing bid and asked prices.
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
12
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
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
Utility Trust does not own. The proceeds received for short sales are recorded
as liabilities and the Utility 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 Utility Trust records a realized
gain or loss when the short position is closed out. By entering into a short
sale, the Utility 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 Utility 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 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 Federal income tax regulations,
which may differ from accounting principles generally accepted in the United
States.
For the fiscal year ended December 31, 2001, the tax character of
distributions paid did not materially differ from accounting principles
generally accepted in the United States.
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.
13
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
During the six months ended June 30, 2002, Gabelli & Company, Inc. and its
affiliates received $48,620 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 six months ended June 30,
2002 aggregated $18,599,441 and $8,245,038, 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
six months ended June 30, 2002, the Utility Trust did not repurchase any shares
of beneficial interest in the open market.
Transactions in shares of beneficial interest were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2002 DECEMBER 31, 2001
------------------------ ----------------------
Shares Amount Shares Amount
--------- ----------- ------- ----------
Shares issued in rights offering ............................ 3,764,965 $27,737,239 -- --
Shares issued upon reinvestment
of dividends and distributions ............................ 79,422 $ 709,865 190,378 $1,581,923
--------- ----------- ------- ----------
Net increase ................................................ 3,844,387 $28,447,104 190,378 $1,581,923
========= =========== ======= ==========
6. RIGHTS OFFERING. On May 22, 2002, the Utility Trust distributed one
transferable right for each of the 11,294,893 common shares outstanding to
shareholders of record on that date. Three rights were required to purchase one
additional common share at the subscription price of $7.50 per share. The
subscription period expired on June 27, 2002. The rights offering was fully
subscribed resulting in the issuance of 3,764,965 common shares and proceeds of
$28,237,239 to the Utility Trust, prior to the deduction of estimated expenses
of $500,000. The net asset value per share of the Utility Trust common
shareholders was enhanced by approximately $0.09 per share as a result of the
issuance.
7. 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.
8. SUBSEQUENT EVENT. Effective August 1, 2002, the Fund modified its
non-fundamental investment policy to increase, from 65% to 80%, the portion of
its assets that it will invest, under normal market conditions, in common stocks
and other securities of foreign and domestic companies involved in providing
products, services or equipment for (i) the generation or distribution of
electricity, gas and water and (ii) telecommunications services or
infrastructure operations (the "80% Policy").
The 80% Policy may be changed without shareholder approval. However, the
Fund has adopted a policy to provide shareholders with at least 60 days' notice
of the implementation of any change in the 80% Policy.
14
THE GABELLI UTILITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UTILITY TRUST SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD:
SIX MONTHS ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 2002 DECEMBER 31, DECEMBER 31, DECEMBER 31,
(UNAUDITED) 2001 2000 1999(A)
----------- ------ ------- -------
OPERATING PERFORMANCE:
Net asset value, beginning of period ................... $ 7.32 $ 8.21 $ 7.62 $ 7.50
-------- ------- ------- -------
Net investment income .................................. 0.12 0.61 0.15 0.08
Net realized and unrealized gain (loss) on investments . (0.22) (0.81) 1.44 0.19
-------- ------- ------- -------
Total from investment operations ....................... (0.10) (0.20) 1.59 0.27
-------- ------- ------- -------
CHANGE IN NET ASSET VALUE FROM TRANSACTIONS IN
SHARES OF BENEFICIAL INTEREST:
Increase in net asset value from
shares issued in rights offering ....................... 0.12 -- -- --
Offering expenses charged to capital surplus ........... (0.03) -- -- --
Increase in net asset value from Fund share transactions 0.09 0.01 -- --
-------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income .................................. (0.04) (0.21) (0.06) (0.08)
Net realized gain on investments ....................... (0.19) (0.49) (0.94) (0.07)
Paid in capital ........................................ (0.13) -- -- --
-------- ------- ------- -------
Total distributions .................................... (0.36) (0.70) (1.00) (0.15)
-------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ......................... $ 6.95 $ 7.32 $ 8.21 $ 7.62
======== ======= ======= =======
Net asset value total return+ .......................... (1.36)% (3.15)% 22.01% 3.62%
======== ======= ======= =======
Market value, end of period ............................ $ 8.73 $ 9.33 $ 8.75 $ 7.63
======== ======= ======= =======
Total investment return++ .............................. (3.73)% 15.82% 29.95% 3.70%
======== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ................... $104,711 $82,197 $90,669 $83,330
Ratio of net investment income to average net assets (c) 1.05%(b) 1.57% 1.88% 2.27%(b)
Ratio of operating expenses to average net assets (c) (d) 2.10%(b) 2.00% 1.95% 1.85%(b)
Portfolio turnover rate 12% 41% 92% 37%
--------------------------
+ Based on net asset value per share, adjusted for reinvestment of
distributions, including the effect of shares issued pursuant to rights
offering, assuming full subscription by shareholder. Total return for the
period of less than one year is not annualized.
++ Based on market value per share, adjusted for reinvestment of
distributions, including the effect of shares issued pursuant to rights
offering, assuming full subscription by shareholder. Total return for the
period of less than one year is not annualized.
(a) The Gabelli Utility Trust commenced operations on July 9, 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. Including such
custodian fee credits for the six months ended June 30, 2002, the year
ended December 31, 2001, and the year ended December 31, 2000, the expense
ratios would be 2.10%, 2.00% and 1.93%, respectively.
See accompanying notes to financial statements.
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 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.
16
TRUSTEES AND OFFICERS
THE GABELLI UTILITY TRUST
ONE CORPORATE CENTER, RYE, NY 10580-1422
TRUSTEES
Mario J. Gabelli, CFA
CHAIRMAN AND 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 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 EMERITUS, PACE UNIVERSITY
Salvatore J. Zizza
CHAIRMAN, HALLMARK ELECTRICAL SUPPLIES 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 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: 15,074,184
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.
--------------------------------------------------------------------------------
THE GABELLI UTILITY TRUST
ONE CORPORATE CENTER
RYE, NY 10580-1422
(914) 921-5070
HTTP://WWW.GABELLI.COM
SEMI-ANNUAL REPORT
JUNE 30, 2002
GBFUF 06/02