UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-09243
---------
The Gabelli Utility Trust
--------------------------------------
(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
--------------------------------------
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
--------------------------------------
(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
---------------
Date of fiscal year end: December 31
------------
Date of reporting period: December 31, 2005
------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
[LOGO]
THE GABELLI
UTILITY TRUST
THE GABELLI UTILITY TRUST
Annual Report
December 31, 2005
TO OUR SHAREHOLDERS,
The Sarbanes-Oxley Act requires a fund's principal executive and financial
officers to certify the entire contents of the semi-annual and annual
shareholder reports in a filing with the Securities and Exchange Commission on
Form N-CSR. This certification would cover the portfolio manager's commentary
and subjective opinions if they are attached to or a part of the financial
statements. Many of these comments and opinions would be difficult or impossible
to certify.
Because we do not want our portfolio managers to eliminate their opinions
and/or restrict their commentary to historical facts, we have separated their
commentary from the financial statements and investment portfolio and have sent
it to you separately. Both the commentary and the financial statements,
including the portfolio of investments, will be available on our website at
www.gabelli.com/funds.
Enclosed are the audited financial statements and the investment portfolio
as of December 31, 2005.
COMPARATIVE RESULTS
--------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 2005 (a)
----------------------------------------------------
SINCE
INCEPTION
QUARTER 1 YEAR 3 YEAR 5 YEAR (7/9/99)
------- ------ ------ ------ ---------
GABELLI UTILITY TRUST NAV RETURN (b) .................. (6.02)% 8.02% 14.06% 6.45% 8.79%
GABELLI UTILITY TRUST INVESTMENT RETURN (c) ........... (3.88) 7.79 9.78 9.07 11.96
S&P 500 Utility Index ................................. (5.48) 16.84 22.39 (2.24) 3.58
Lipper Utility Fund Average ........................... (4.40) 13.37 19.96 0.73 3.40
(a) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND THE PRINCIPAL VALUE OF AN INVESTMENT WILL
FLUCTUATE. WHEN SHARES ARE SOLD, THEY MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE
PERFORMANCE DATA PRESENTED. VISIT WWW.GABELLI.COM FOR PERFORMANCE
INFORMATION AS OF THE MOST RECENT MONTH END. PERFORMANCE FIGURES FOR
PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED. INVESTORS SHOULD CONSIDER
THE INVESTMENT OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE TRUST
CAREFULLY BEFORE INVESTING. THE S&P 500 UTILITY INDEX IS AN UNMANAGED
INDICATOR OF ELECTRIC AND GAS UTILITY STOCK PERFORMANCE. THE LIPPER
AVERAGE REFLECTS THE AVERAGE PERFORMANCE OF OPEN-END MUTUAL FUNDS
CLASSIFIED IN THIS PARTICULAR CATEGORY. DIVIDENDS ARE CONSIDERED
REINVESTED.
(b) 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 IS BASED ON AN INITIAL NET ASSET VALUE OF
$7.50.
(c) TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN CLOSING MARKET
VALUES ON THE NEW YORK STOCK EXCHANGE, REINVESTMENT OF DISTRIBUTIONS AND
ADJUSTMENTS FOR RIGHTS OFFERINGS. SINCE INCEPTION RETURN IS BASED ON AN
INITIAL OFFERING PRICE OF $7.50.
--------------------------------------------------------------------------------
Sincerely yours,
/s/ Bruce N. Alpert
Bruce N. Alpert
President
February 13, 2006
THE GABELLI UTILITY TRUST
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total
investments as of December 31, 2005:
Energy and Utilities: Integrated ..................................... 36.4%
Energy and Utilities: Electric ....................................... 21.2%
Energy and Utilities: Natural Gas .................................... 11.1%
Repurchase Agreements ................................................ 9.0%
Telecommunications ................................................... 7.5%
Cable and Satellite .................................................. 3.5%
Energy and Utilities: Water .......................................... 2.8%
Computer Software and Services ....................................... 1.6%
Diversified Industrial ............................................... 1.5%
Communications Equipment ............................................. 1.4%
Wireless Communications .............................................. 1.3%
Entertainment ........................................................ 1.0%
Energy and Utilities: Oil ............................................ 0.7%
Transportation ....................................................... 0.3%
Metals and Mining .................................................... 0.3%
Aviation: Parts and Services ......................................... 0.2%
Equipment and Supplies ............................................... 0.1%
Real Estate .......................................................... 0.1%
Hotels and Gaming .................................................... 0.0%
Agriculture .......................................................... 0.0%
-----
100.0%
=====
THE UTILITY TRUST (THE "TRUST") FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS
WITH THE SEC FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q,
THE LAST OF WHICH WAS FILED FOR THE QUARTER ENDED SEPTEMBER 30, 2005.
SHAREHOLDERS MAY OBTAIN THIS INFORMATION AT WWW.GABELLI.COM OR BY CALLING THE
TRUST AT 800-GABELLI (800-422-3554). THE TRUST'S FORM N-Q IS AVAILABLE ON THE
SEC'S WEBSITE AT WWW.SEC.GOV AND MAY ALSO BE REVIEWED AND COPIED AT THE
COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE
OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING
1-800-SEC-0330.
PROXY VOTING
The Trust files Form N-PX with its complete proxy voting record for the 12
months ended June 30th, no later than August 31st of each year. A description of
the Trust's proxy voting policies, procedures, and how the Fund voted proxies
relating to portfolio securities are available without charge, upon request, (i)
by calling 800-GABELLI (800-422-3554); (ii) by writing to The Gabelli Funds at
One Corporate Center, Rye, NY 10580-1422; and (iii) by visiting the Securities
and Exchange Commission's website at www.sec.gov.
--------------------------------------------------------------------------------
THE GABELLI UTILITY TRUST
AND YOUR PERSONAL PRIVACY
WHO ARE WE?
The Gabelli Utility Trust (the "Trust") is a closed-end investment company
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940. We are managed by Gabelli Funds, LLC, which is affiliated
with GAMCO Investors, Inc. GAMCO Investors, Inc. is a publicly held company that
has subsidiaries that provide investment advisory or brokerage services for a
variety of clients.
WHAT KIND OF NON-PUBLIC INFORMATION DO WE COLLECT ABOUT YOU IF YOU BECOME A
GABELLI CUSTOMER?
When you purchase shares of the Trust on the New York Stock Exchange, you have
the option of registering directly with our transfer agent in order, for
example, to participate in our dividend reinvestment plan.
o INFORMATION YOU GIVE US ON YOUR APPLICATION FORM. This could include your
name, address, telephone number, social security number, bank account
number, and other information.
o INFORMATION ABOUT YOUR TRANSACTIONS WITH US. This would include
information about the shares that you buy or sell, it may also include
information about whether you sell or exercise rights that we have issued
from time to time. If we hire someone else to provide services--like a
transfer agent--we will also have information about the transactions that
you conduct through them.
WHAT INFORMATION DO WE DISCLOSE AND TO WHOM DO WE DISCLOSE IT?
We do not disclose any non-public personal information about our customers or
former customers to anyone, other than our affiliates, our service providers who
need to know such information, and as otherwise permitted by law. If you want to
find out what the law permits, you can read the privacy rules adopted by the
Securities and Exchange Commission. They are in volume 17 of the Code of Federal
Regulations, Part 248. The Commission often posts information about its
regulations on its web site, WWW.SEC.GOV.
WHAT DO WE DO TO PROTECT YOUR PERSONAL INFORMATION?
We restrict access to non-public personal information about you to the people
who need to know that information in order to provide services to you or the
Trust and to ensure that we are complying with the laws governing the securities
business. We maintain physical, electronic, and procedural safeguards to keep
your personal information confidential.
--------------------------------------------------------------------------------
2
THE GABELLI UTILITY TRUST
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2005
MARKET
SHARES COST VALUE
------ ---- -----
COMMON STOCKS -- 89.5%
AGRICULTURE -- 0.0%
800 Cadiz Inc.+ ....................................... $ 3,000 $ 17,200
------------ ------------
AVIATION: PARTS AND SERVICES -- 0.2%
6,000 Sequa Corp., Cl. A+ ............................... 371,619 414,300
------------ ------------
CABLE AND SATELLITE -- 3.5%
120,000 Cablevision Systems Corp.,
Cl. A+ .......................................... 3,367,305 2,816,400
5,000 Cogeco Cable Inc. ................................. 105,008 105,381
20,000 Cogeco Inc. ....................................... 389,461 412,921
15,000 Comcast Corp., Cl. A+ ............................. 483,950 389,400
100,000 DIRECTV Group Inc.+ ............................... 1,648,749 1,412,000
60,000 EchoStar Communications
Corp., Cl. A+ ................................... 1,873,736 1,630,200
32,900 Liberty Global Inc., Cl. A+ ....................... 694,939 740,250
32,900 Liberty Global Inc., Cl. C+ ....................... 667,687 697,480
20,000 Rogers Communications Inc.,
Cl. B ........................................... 553,618 845,200
------------ ------------
9,784,453 9,049,232
------------ ------------
COMMUNICATIONS EQUIPMENT -- 1.4%
280,000 Furukawa Electric Co. Ltd.+ ....................... 1,441,034 2,189,002
30,000 Scientific-Atlanta Inc. ........................... 1,272,629 1,292,100
2,000 Thomas & Betts Corp.+ ............................. 63,595 83,920
------------ ------------
2,777,258 3,565,022
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 1.6%
400,000 Siebel Systems Inc. ............................... 4,195,900 4,232,000
------------ ------------
DIVERSIFIED INDUSTRIAL -- 1.5%
18,000 Catalytica Energy Systems Inc.+ ................... 149,778 18,900
20,000 Cooper Industries Ltd., Cl. A ..................... 1,471,412 1,460,000
70,000 General Electric Co. .............................. 2,341,691 2,453,500
------------ ------------
3,962,881 3,932,400
------------ ------------
ENERGY AND UTILITIES: ELECTRIC -- 21.2%
230,000 AES Corp.+ ........................................ 3,035,423 3,640,900
355,000 Allegheny Energy Inc.+ ............................ 8,225,284 11,235,750
24,000 ALLETE Inc. ....................................... 749,469 1,056,000
60,000 American Electric
Power Co. Inc. .................................. 1,918,567 2,225,400
20,000 Calpine Corp.+ .................................... 52,600 4,160
30,000 Cleco Corp. ....................................... 570,612 625,500
160,000 DPL Inc. .......................................... 3,365,523 4,161,600
24,000 DTE Energy Co. .................................... 978,366 1,036,560
200,000 Duquesne Light Holdings Inc. ...................... 3,488,741 3,264,000
90,000 Edison International .............................. 3,861,403 3,924,900
200,000 El Paso Electric Co.+ ............................. 2,637,085 4,208,000
8,000 Electric Power
Development Co. Ltd. ............................ 240,854 274,728
130,000 FPL Group Inc. .................................... 5,340,409 5,402,800
105,000 Great Plains Energy Inc. .......................... 3,272,187 2,935,800
41,000 Green Mountain Power Corp. ........................ 893,905 1,179,570
22,500 Pepco Holdings Inc. ............................... 449,918 503,325
105,000 TECO Energy Inc. .................................. 1,580,547 1,803,900
28,000 TXU Corp. ......................................... 1,459,500 1,405,320
22,000 UIL Holdings Corp. ................................ 966,711 1,011,780
165,000 Unisource Energy Corp. ............................ 4,059,704 5,148,000
------------ ------------
47,146,808 55,047,993
------------ ------------
ENERGY AND UTILITIES: INTEGRATED -- 35.5%
75,000 Alliant Energy Corp. .............................. 1,824,382 2,103,000
20,000 Ameren Corp. ...................................... 892,320 1,024,800
500,000 Aquila Inc.+ ...................................... 1,515,272 1,800,000
1,500 Areva ............................................. 613,197 720,104
5,000 Avista Corp. ...................................... 85,710 88,550
35,000 Black Hills Corp. ................................. 1,060,967 1,211,350
68,000 Central Vermont Public
Service Corp. ................................... 1,376,424 1,224,680
MARKET
SHARES COST VALUE
------ ---- -----
55,000 CH Energy Group Inc. .............................. $ 2,495,940 $ 2,524,500
8,000 Chubu Electric Power Co. Inc. ..................... 189,551 190,613
8,000 Chugoku Electric Power Co. Inc. ................... 150,761 155,001
85,000 Cinergy Corp. ..................................... 3,004,660 3,609,100
190,000 CMS Energy Corp.+ ................................. 1,473,074 2,756,900
57,000 Consolidated Edison Inc. .......................... 2,257,001 2,640,810
76,000 Constellation Energy Group ........................ 4,076,214 4,377,600
3,000 Dominion Resources Inc. ........................... 152,527 231,600
120,000 Duke Energy Corp. ................................. 2,250,558 3,294,000
180,000 El Paso Corp. ..................................... 1,638,285 2,188,800
12,000 Empire District Electric Co. ...................... 245,171 243,960
54,000 Endesa SA ......................................... 1,381,000 1,420,531
200,000 Enel SpA .......................................... 1,531,070 1,571,028
80,000 Energy East Corp. ................................. 1,767,343 1,824,000
3,000 Entergy Corp. ..................................... 84,249 205,950
55,979 FirstEnergy Corp. ................................. 2,290,333 2,742,411
131,850 Florida Public Utilities Co. ...................... 1,133,947 1,799,752
50,000 Hawaiian Electric
Industries Inc. ................................. 1,321,257 1,295,000
300,000 Hera SpA .......................................... 433,286 801,792
8,000 Hokkaido Electric
Power Co. Inc. .................................. 156,870 162,802
8,000 Hokuriku Electric Power Co. ....................... 146,449 158,053
8,000 Kansai Electric Power Co. Inc. .................... 158,472 171,959
30,000 Korea Electric Power
Corp., ADR ...................................... 445,796 584,700
8,000 Kyushu Electric Power Co. Inc. .................... 167,818 173,655
66,000 Maine & Maritimes Corp. ........................... 2,096,172 1,021,680
66,000 MGE Energy Inc. ................................... 1,951,270 2,238,060
300,000 Mirant Corp.+ ..................................... 88,995 396,000
45,000 NiSource Inc. ..................................... 970,021 938,700
170,000 Northeast Utilities ............................... 3,354,147 3,347,300
215,000 NSTAR ............................................. 4,848,628 6,170,500
101,000 OGE Energy Corp. .................................. 2,429,411 2,705,790
12,000 Ormat Technologies Inc. ........................... 180,000 313,680
25,000 Otter Tail Corp. .................................. 667,745 724,500
50,000 PG&E Corp. ........................................ 1,309,559 1,856,000
20,000 PNM Resources Inc. ................................ 290,976 489,800
100,000 Progress Energy Inc. .............................. 4,383,880 4,392,000
40,000 Progress Energy Inc., CVO+ ........................ 20,800 2,900
25,000 Public Service Enterprise
Group Inc. ...................................... 1,299,329 1,624,250
35,000 Puget Energy Inc. ................................. 795,990 714,700
55,000 SCANA Corp. ....................................... 1,694,645 2,165,900
8,000 Shikoku Electric Power Co. Inc. ................... 155,987 163,141
30,000 Sierra Pacific Resources+ ......................... 227,798 391,200
12,000 Suez SA ........................................... 387,529 373,353
12,000 Suez SA, Strips+ .................................. 0 142
15,000 Tohoku Electric Power Co. Inc. .................... 284,854 305,253
8,000 Tokyo Electric Power Co. Inc. ..................... 191,450 194,344
26,900 Unitil Corp. ...................................... 712,856 675,190
47,000 Vectren Corp. ..................................... 1,162,166 1,276,520
252,500 Westar Energy Inc. ................................ 4,726,887 5,428,750
80,000 Wisconsin Energy Corp. ............................ 2,806,837 3,124,800
52,000 WPS Resources Corp. ............................... 2,658,058 2,876,120
270,000 Xcel Energy Inc. .................................. 4,521,685 4,984,200
------------ ------------
80,537,579 92,191,774
------------ ------------
ENERGY AND UTILITIES: NATURAL GAS -- 11.1%
28,000 AGL Resources Inc. ................................ 692,019 974,680
55,000 Atmos Energy Corp. ................................ 1,349,828 1,438,800
35,000 Cascade Natural Gas Corp. ......................... 748,033 682,850
10,000 Chesapeake Utilities Corp. ........................ 224,112 308,000
29,700 Delta Natural Gas Co. Inc. ........................ 494,549 748,440
40,000 Dynegy Inc., Cl. A+ ............................... 250,000 193,600
18,000 EnergySouth Inc. .................................. 426,946 482,040
100,000 KeySpan Corp. ..................................... 3,586,039 3,569,000
100,000 National Fuel Gas Co. ............................. 2,436,172 3,119,000
90,000 Nicor Inc. ........................................ 3,094,432 3,537,900
See accompanying notes to financial statements.
3
THE GABELLI UTILITY TRUST
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2005
MARKET
SHARES COST VALUE
------ ---- -----
COMMON STOCKS (CONTINUED)
ENERGY AND UTILITIES: NATURAL GAS (CONTINUED)
105,800 ONEOK Inc. ........................................ $ 2,532,299 $ 2,817,454
50,000 Peoples Energy Corp. .............................. 1,981,623 1,753,500
36,000 Piedmont Natural Gas Co. Inc. ..................... 568,829 869,760
6,000 RGC Resources Inc. ................................ 128,344 151,560
140,000 SEMCO Energy Inc.+ ................................ 1,232,605 786,800
115,500 Southern Union Co.+ ............................... 1,848,441 2,729,265
180,000 Southwest Gas Corp. ............................... 4,469,506 4,752,000
------------ ------------
26,063,777 28,914,649
------------ ------------
ENERGY AND UTILITIES: OIL -- 0.7%
2,000 Anadarko Petroleum Corp. .......................... 141,060 189,500
2,645 Chevron Corp. ..................................... 165,259 150,157
20,000 Exxon Mobil Corp. ................................. 1,168,383 1,123,400
4,000 Royal Dutch Shell plc,
Cl. A, ADR ...................................... 237,320 245,960
------------ ------------
1,712,022 1,709,017
------------ ------------
ENERGY AND UTILITIES: WATER -- 2.8%
14,000 American States Water Co. ......................... 312,701 431,200
21,333 Aqua America Inc. ................................. 209,100 582,391
16,500 Artesian Resources Corp., Cl. A ................... 257,250 488,400
20,500 BIW Ltd. .......................................... 385,069 367,975
20,520 California Water Service Group .................... 566,928 784,479
7,500 Connecticut Water Service Inc. .................... 146,455 183,825
51,333 Middlesex Water Co. ............................... 801,882 890,114
24,088 Pennichuck Corp. .................................. 471,751 492,359
60,000 SJW Corp. ......................................... 1,943,658 2,730,000
8,102 Southwest Water Co. ............................... 52,052 115,937
6,000 York Water Co. .................................... 108,269 155,100
------------ ------------
5,255,115 7,221,780
------------ ------------
ENTERTAINMENT -- 1.0%
60,000 Time Warner Inc. .................................. 1,043,038 1,046,400
50,000 Vivendi Universal SA, ADR ......................... 1,566,972 1,571,500
------------ ------------
2,610,010 2,617,900
------------ ------------
EQUIPMENT AND SUPPLIES -- 0.1%
50,000 Capstone Turbine Corp.+ ........................... 83,080 149,500
9,000 Mueller Industries Inc. ........................... 396,568 246,780
------------ ------------
479,648 396,280
------------ ------------
HOTELS AND GAMING -- 0.0%
5,000 La Quinta Corp.+ .................................. 54,950 55,700
------------ ------------
METALS AND MINING -- 0.3%
25,000 Compania de Minas
Buenaventura SA, ADR ............................ 549,835 707,500
------------ ------------
REAL ESTATE -- 0.1%
3,250 Brookfield Asset Management
Inc., Cl. A ..................................... 78,410 163,573
------------ ------------
TELECOMMUNICATIONS -- 6.9%
77,942 AT&T Inc. ......................................... 1,902,440 1,908,799
60,000 BCE Inc. .......................................... 1,302,420 1,437,000
35,000 BellSouth Corp. ................................... 970,977 948,500
33,000 BT Group plc, ADR ................................. 1,146,449 1,266,540
40,000 CenturyTel Inc. ................................... 1,245,986 1,326,400
175,000 Cincinnati Bell Inc.+ ............................. 814,934 614,250
10,200 Commonwealth Telephone
Enterprises Inc. ................................ 394,296 344,454
20,000 D&E Communications Inc. ........................... 190,498 166,600
20,000 Deutsche Telekom AG, ADR .......................... 367,940 332,600
2,000 France Telecom SA, ADR ............................ 22,799 49,680
200 Hutchison Telecommunications
International Ltd.+ ............................. 163 289
150,000 MCI Inc. .......................................... 3,877,515 2,959,500
500 Mobistar SA ....................................... 44,140 39,660
200 PT Indosat Tbk .................................... 128 113
90,000 TDC A/S ........................................... 5,332,171 5,391,146
1,200 Tele2 AB, Cl. B ................................... 14,604 12,877
MARKET
SHARES COST VALUE
------ ---- -----
3,000 Telecom Italia SpA, ADR ........................... $ 99,726 $ 87,630
40,000 Touch America Holdings Inc.+ ...................... 38,488 24
30,000 Verizon Communications Inc. ....................... 1,071,989 903,600
------------ ------------
18,837,663 17,789,662
------------ ------------
TRANSPORTATION -- 0.3%
25,000 GATX Corp. ........................................ 760,113 902,000
------------ ------------
WIRELESS COMMUNICATIONS -- 1.3%
600 America Movil SA de CV,
Cl. L, ADR ...................................... 9,424 17,556
2,000 China Mobile (Hong Kong)
Ltd., ADR ....................................... 33,988 48,080
2,000 China Unicom Ltd., ADR ............................ 16,278 16,360
200 Cosmote Mobile
Telecommunications SA ............................. 3,701 4,447
4,000 Mobile TeleSystems, ADR ........................... 137,612 140,000
190 MobileOne Ltd. .................................... 218 242
380,000 O2 plc ............................................ 1,333,593 1,292,862
2,000 QUALCOMM Inc. ..................................... 78,579 86,160
600 SK Telecom Co. Ltd., ADR .......................... 12,374 12,174
200 SmarTone Telecommunications
Holdings Ltd. ................................... 207 233
1,000 Telefonica Moviles SA, ADR ........................ 11,144 10,460
28,000 United States Cellular Corp.+ ..................... 1,294,140 1,383,200
6,000 Vimpel-Communications, ADR+ ....................... 196,099 265,380
200 Virgin Mobile Holdings plc ........................ 868 1,297
------------ ------------
3,128,225 3,278,451
------------ ------------
TOTAL
COMMON STOCKS .................................... 208,309,266 232,206,433
------------ ------------
CONVERTIBLE PREFERRED STOCKS -- 1.5%
ENERGY AND UTILITIES: INTEGRATED -- 0.9%
2,000 El Paso Corp.,
4.990% Cv. Pfd. (b) ............................. 1,945,987 2,204,580
------------ ------------
TELECOMMUNICATIONS -- 0.6%
31,033 Citizens Communications Co.,
5.000% Cv. Pfd. ................................. 1,542,645 1,649,714
------------ ------------
TOTAL CONVERTIBLE
PREFERRED STOCKS ................................. 3,488,632 3,854,294
------------ ------------
PRINCIPAL
AMOUNT
---------
REPURCHASE AGREEMENTS -- 9.0%
$23,230,000 ABN Amro, 3.300%, dated 12/30/05,
due 01/03/06, proceeds at maturity,
$23,238,518(a) .................................. 23,230,000 23,230,000
------------ ------------
TOTAL INVESTMENTS -- 100.0% .................................... $235,027,898 259,290,727
============
OTHER ASSETS AND LIABILITIES (NET) ............................................ 12,300
------------
PREFERRED STOCK
(1,185,200 preferred shares outstanding) ..................................... (54,605,000)
------------
NET ASSETS COMMON SHARES
(29,307,802 common shares outstanding) ....................................... $204,698,027
============
NET ASSET VALUE PER COMMON SHARE
($204,698,027 / 29,307,802 shares outstanding) ............................... $6.98
=====
----------
(a) Collateralized by U.S. Treasury Note, 2.375%, due 08/15/06, market value
$23,694,600.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At December
31, 2005, the Rule 144A securities are considered liquid and the market
value amounted to $2,204,580 or 0.85% of total investments.
+ Non-income producing security.
ADR American Depository Receipt
CVO Contingent Value Obligation
See accompanying notes to financial statements.
4
THE GABELLI UTILITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS:
Investments, at value (cost $211,797,898) ................. $236,060,727
Repurchase agreements, at value
(cost $23,230,000) ...................................... 23,230,000
Cash ...................................................... 271
Foreign currency, at value (cost $12) ..................... 12
Dividends and interest receivable ......................... 528,181
Unrealized appreciation on swap contracts ................. 744,413
Other assets .............................................. 9,620
------------
TOTAL ASSETS .............................................. 260,573,224
------------
LIABILITIES:
Payable for investment advisory fees ...................... 722,381
Payable for shareholder
communications expenses ................................. 184,684
Payable for offering expenses ............................. 77,991
Payable for payroll expenses .............................. 70,905
Dividends payable ......................................... 35,296
Other accrued expenses and liabilities .................... 178,940
------------
TOTAL LIABILITIES ......................................... 1,270,197
------------
PREFERRED STOCK:
Series A Cumulative Preferred Stock (5.625%,
$25 liquidation value, $0.001 par value,
1,200,000 shares authorized with 1,184,200
shares issued and outstanding) .......................... 29,605,000
Series B Cumulative Preferred Stock (Auction
Rate, $25,000 liquidation value, $0.001 par
value, 1,000 shares authorized with 1,000
shares issued and outstanding) .......................... 25,000,000
------------
TOTAL PREFERRED STOCK ..................................... 54,605,000
------------
NET ASSETS ATTRIBUTABLE TO
COMMON SHAREHOLDERS ..................................... $204,698,027
============
NET ASSETS ATTRIBUTABLE TO COMMON
SHAREHOLDERS CONSIST OF:
Shares of beneficial interest, at $0.001 par value ........ $ 29,308
Additional paid-in capital ................................ 180,514,166
Undistributed net investment income ....................... 326,925
Accumulated distributions in excess of net
realized gain on investments, swap contracts,
and foreign currency transactions ....................... (1,179,604)
Net unrealized appreciation on investments and
swap contracts .......................................... 25,007,242
Net unrealized depreciation on foreign
currency translations ................................... (10)
------------
NET ASSETS ................................................ $204,698,027
============
NET ASSET VALUE PER COMMON SHARE:
($204,698,027 / 29,307,802 shares outstanding;
unlimited number of shares authorized) .................... $ 6.98
============
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME:
Dividends (net of foreign taxes of $48,025) ............... $ 7,550,512
Interest .................................................. 1,427,912
------------
TOTAL INVESTMENT INCOME ................................... 8,978,424
------------
EXPENSES:
Investment advisory fees .................................. 2,648,325
Shareholder communications expenses ....................... 403,340
Payroll expenses .......................................... 218,914
Shareholder services fees ................................. 216,602
Legal and audit fees ...................................... 70,348
Auction agent expenses .................................... 63,440
Trustees' fees ............................................ 56,241
Custodian fees ............................................ 34,509
Miscellaneous expenses .................................... 175,650
------------
TOTAL EXPENSES ............................................ 3,887,369
------------
Less: Custodian fee credits ............................... (2,712)
------------
NET EXPENSES .............................................. 3,884,657
------------
NET INVESTMENT INCOME ..................................... 5,093,767
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, SWAP CONTRACTS, AND
FOREIGN CURRENCY:
Net realized gain on investments .......................... 18,763,905
Net realized loss on foreign currency
transactions ............................................ (4,353)
Net realized loss on swap contracts ....................... (50,173)
------------
Net realized gain on investments, swap contracts,
and foreign currency transactions ....................... 18,709,379
Net change in unrealized appreciation/depreciation
on investments, swap contracts, and foreign
currency translations ................................... (5,614,421)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, SWAP CONTRACTS, AND
FOREIGN CURRENCY ........................................ 13,094,958
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ......................................... 18,188,725
Total Distributions to Preferred
Stock Shareholders ...................................... (2,490,434)
------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO
COMMON SHAREHOLDERS RESULTING
FROM OPERATIONS ......................................... $ 15,698,291
============
See accompanying notes to financial statements.
5
THE GABELLI UTILITY TRUST
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------
OPERATIONS:
Net investment income ..................................................................... $ 5,093,767 $ 3,723,477
Net realized gain on investments, swap contracts, and foreign currency transactions ....... 18,709,379 1,155,173
Net change in unrealized appreciation/depreciation on investments, swap contracts, and
foreign currency translations ........................................................... (5,614,421) 22,003,591
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... 18,188,725 26,882,241
------------ ------------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ..................................................................... (497,129) (1,374,189)
Net realized short-term gains on investments and foreign currency transactions ............ (80,812) (434,680)
Net realized long-term gains on investments and foreign currency transactions ............. (1,912,493) (238,920)
------------ ------------
TOTAL DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS ....................................... (2,490,434) (2,047,789)
------------ ------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS
RESULTING FROM OPERATIONS ............................................................... 15,698,291 24,834,452
------------ ------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Net investment income ..................................................................... (4,186,454) (2,352,322)
Net realized short-term gains on investments and foreign currency transactions ............ (680,540) (744,082)
Net realized long-term gains on investments and foreign currency transactions ............. (16,105,611) (408,981)
Return of capital ......................................................................... -- (13,426,831)
------------ ------------
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS ................................................ (20,972,605) (16,932,216)
------------ ------------
TRUST SHARE TRANSACTIONS:
Net increase in net assets from common shares issued upon reinvestment of
dividends and distributions and rights offering ......................................... 3,037,284 42,537,829
Net increase in net assets from repurchase of preferred shares ............................ -- 30,323
Offering costs for preferred shares charged to paid-in capital ............................ 19,950 15,102
Offering costs for issuance of rights charged to paid-in capital .......................... (43,187) (34,089)
------------ ------------
NET INCREASE IN NET ASSETS FROM TRUST SHARE TRANSACTIONS .................................. 3,014,047 42,549,165
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS ................. (2,260,267) 50,451,401
NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS:
Beginning of period ....................................................................... 206,958,294 156,506,893
------------ ------------
End of period (including undistributed net investment income of $326,925 and $0,
respectively) ........................................................................... $204,698,027 $206,958,294
============ ============
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION. The Gabelli Utility Trust (the "Trust") is a non-diversified
closed-end management investment company organized as a Delaware statutory 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 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 Trust
had a 4 for 3 stock split making the balance of 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 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 Trust for every ten shares of the Equity Trust.
Investment operations commenced on July 9, 1999.
The Trust will invest 80% of its assets, 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 Trust has adopted a policy to provide
shareholders with notice at least 60 days prior to the implementation of any
change in the 80% Policy.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of significant accounting policies
followed by the Trust in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board of Trustees (the "Board") so determines, by such other method as the Board
shall determine in good
6
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
faith, to reflect its fair market value. Portfolio securities traded on more
than one national securities exchange or market are valued according to the
broadest and most representative market, as determined by Gabelli Funds, LLC
(the "Adviser").
Portfolio securities primarily traded on foreign markets are generally
valued at the preceding closing values of such securities on their respective
exchanges or if after the close of the foreign markets, but prior to the close
of business on the day the securities are being valued, market conditions change
significantly, certain foreign securities may be fair valued pursuant to
procedures established by the Board. Debt instruments with remaining maturities
of 60 days or less that are not credit impaired are valued at amortized cost,
unless the Board determines such does not reflect the securities' fair value, in
which case these securities will be valued at their fair value as determined by
the Board. Debt instruments having a maturity greater than 60 days for which
market quotations are readily available are valued at the average of the latest
bid and asked prices. If there were no asked prices quoted on such day, the
security is valued using the closing bid price. Futures contracts are valued at
the closing settlement price of the exchange or board of trade on which the
applicable contract is traded.
Securities and assets for which market quotations are not readily
available are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Board. Fair
valuation methodologies and procedures may include, but are not limited to:
analysis and review of available financial and non-financial information about
the company; comparisons to the valuation and changes in valuation of similar
securities, including a comparison of foreign securities to the equivalent U.S.
dollar value ADR securities at the close of the U.S. exchange; and evaluation of
any other information that could be indicative of the value of the security.
REPURCHASE AGREEMENTS. The Trust may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System, or with other brokers or
dealers that meet credit guidelines established by the Adviser and reviewed by
the Board. Under the terms of a typical repurchase agreement, the Trust takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Trust to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Trust's holding period.
The Trust will always receive and maintain securities as collateral whose market
value, including accrued interest, will be at least equal to 102% of the dollar
amount invested by the Trust in each agreement. The Trust will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer of the collateral to the account of the custodian. To the extent that
any repurchase transaction exceeds one business day, the value of the collateral
is marked-to-market on a daily basis to maintain the adequacy of the collateral.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Trust may be delayed or limited. At
December 31, 2005, there were $23,230,000 of open repurchase agreements.
SWAP AGREEMENTS. The Trust may enter into interest rate swap or cap
transactions. The use of interest rate swaps and caps is a highly specialized
activity that involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. In an interest rate
swap, the Trust would agree to pay to the other party to the interest rate swap
(which is known as the "counterparty") periodically a fixed rate payment in
exchange for the counterparty agreeing to pay to the Trust periodically a
variable rate payment that is intended to approximate the Trust's variable rate
payment obligation on the Series B Preferred Stock. In an interest rate cap, the
Trust would pay a premium to the counterparty and, to the extent that a
specified variable rate index exceeds a predetermined fixed rate, would receive
from the counterparty payments of the difference based on the notional amount of
such cap. Interest rate swap and cap transactions introduce additional risk
because the Trust would remain obligated to pay preferred stock dividends when
due in accordance with the Articles Supplementary even if the counterparty
defaulted. If there is a default by the counterparty to a swap contract, the
Trust will be limited to contractual remedies pursuant to the agreements related
to the transaction. There is no assurance that the swap contract counterparties
will be able to meet their obligations pursuant to the swap contracts or that,
in the event of default, the Trust will succeed in pursuing contractual
remedies. The Trust thus assumes the risk that it may be delayed in or prevented
from obtaining payments owed to it pursuant to the swap contracts. The
creditworthiness of the swap contract counterparties is closely monitored in
order to minimize this risk. Depending on the general state of short-term
interest rates and the returns on the Trust's portfolio securities at that point
in time, such a default could negatively affect the Trust's ability to make
dividend payments for the Series B Preferred Stock. In addition, at the time an
interest rate swap or cap transaction reaches its scheduled termination date,
there is a risk that the Trust will not be able to obtain a replacement
transaction or that the terms of the replacement will not be as favorable as on
the expiring transaction. If this occurs, it could have a negative impact on the
Trust's ability to make dividend payments on the Series B Preferred Stock.
The use of derivative instruments involves, to varying degrees, elements
of market risk in excess of the amount recognized in the Statement of Assets and
Liabilities.
Unrealized gains related to swaps are reported as an asset and unrealized
losses are reported as a liability in the Statement of Assets and Liabilities.
The change in value of swaps, including the accrual of periodic amounts of
interest to be paid or received on swaps is reported as unrealized gains or
losses in the Statement of Operations. A realized gain or loss is recorded upon
payment or
7
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
receipt of a periodic payment or termination of swap agreements. Swap agreements
involve, to varying degrees, elements of market and counterparty risk, and
exposure to loss in excess of the related amounts reflected in the Statement of
Assets and Liabilities.
The Trust has entered into one interest rate swap agreement with Citibank
N.A. Under the agreement the Trust receives a variable rate of interest and pays
a respective fixed rate of interest on the nominal value of the swap. Details of
the swap at December 31, 2005 are as follows:
NOTIONAL FLOATING RATE* TERMINATION UNREALIZED
AMOUNT FIXED RATE (RATE RESET MONTHLY) DATE APPRECIATION
------ ---------- -------------------- ----------- ------------
$25,000,000 4.00% 4.29375% June 2, 2010 $744,413
----------
* Based on Libor (London Interbank Offered Rate).
FUTURES CONTRACTS. The Trust may engage in futures contracts for the
purpose of hedging against changes in the value of its portfolio securities and
in the value of securities it intends to purchase. Such investments will only be
made if they are economically appropriate to the reduction of risks involved in
the management of the Trust's investments. Upon entering into a futures
contract, the Trust is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the "initial margin." Subsequent payments ("variation margin") are made
or received by the Trust each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the contract are included in
unrealized appreciation/depreciation on investments and futures contracts. The
Trust recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as
a hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. These contracts may involve market
risk in excess of the unrealized gain or loss reflected in the Statement of
Assets and Liabilities. In addition, there is the risk that the Trust may not be
able to enter into a closing transaction because of an illiquid secondary
market. At December 31, 2005, there were no open futures contracts.
FORWARD FOREIGN EXCHANGE CONTRACTS. The Trust may engage in forward
foreign exchange contracts for hedging a specific transaction with respect to
either the currency in which the transaction is denominated or another currency
as deemed appropriate by the Adviser. Forward foreign exchange contracts are
valued at the forward rate and are marked-to-market daily. The change in market
value is included in unrealized appreciation/depreciation on investments and
foreign currency translations. When the contract is closed, the Trust records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate
fluctuations in the underlying prices of the Trust's portfolio securities, but
it does establish a rate of exchange that can be achieved in the future.
Although forward foreign exchange contracts limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential gain
that might result should the value of the currency increase. These contracts may
involve market risk in excess of the unrealized gain or loss reflected in the
Statement of Assets and Liabilities. In addition, the Trust could be exposed to
risks if the counterparties to the contracts are unable to meet the terms of
their contracts. At December 31, 2005, there were no open forward foreign
exchange contracts.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the 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 current
exchange rates. Purchases and sales of investment securities, income, and
expenses are translated at the exchange rate prevailing on the respective dates
of such transactions. Unrealized gains and losses that result from changes in
foreign exchange rates and/or changes in market prices of securities have been
included in unrealized appreciation/depreciation on investments and foreign
currency translations. Net realized foreign currency gains and losses resulting
from changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions, and the difference between the amounts of interest and
dividends recorded on the books of the 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.
FOREIGN SECURITIES. The Trust may directly purchase securities of foreign
issuers. Investing in securities of foreign issuers involves special risks not
typically associated with investing in securities of U.S. issuers. The risks
include possible revaluation of currencies, the ability to repatriate funds,
less complete financial information about companies, and possible future adverse
political and economic developments. Moreover, securities of many foreign
issuers and their markets may be less liquid and their prices more volatile than
those of securities of comparable U.S. issuers.
FOREIGN TAXES. The Trust may be subject to foreign taxes on income, gains
on investments, or currency repatriation, a portion of which may be recoverable.
The Trust will accrue such taxes and recoveries as applicable, based upon its
current interpretation of tax rules and regulations that exist in the markets in
which it invests.
8
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 on the accrual
basis. Premiums and discounts on debt securities are amortized using the
effective yield to maturity method. Dividend income is recorded on the
ex-dividend date except for certain dividends which are recorded as soon as the
Trust is informed of the dividend.
CUSTODIAN FEE CREDITS. When cash balances are maintained in the custody
account, the Trust receives credits which are used to offset custodian fees. The
gross expenses paid under the custody arrangement are included in custodian fees
in the Statement of Operations with the corresponding expense offset shown as
"custodian fee credits".
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Distributions to common
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 that determined under U.S. generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities held by the
Trust, foreign currency transactions, timing differences, and differing
characterizations of distributions made by the Trust. These book/tax differences
are either temporary or permanent in nature. To the extent these differences are
permanent, adjustments are made to the appropriate capital accounts in the
period when the differences arise. These reclassifications have no impact on the
NAV of the Trust and the calculation of net investment income per share in the
Financial Highlights includes these adjustments. For the year ended December 31,
2005, reclassifications were made to decrease net investment income by $54,526,
and to decrease accumulated distributions in excess of net realized gain on
investments, swap contracts, and foreign currency transactions by $54,526.
Distributions to Shareholders of the Trust's 5.625% Series A Cumulative
Preferred Stock and Series B Auction Rate Cumulative Preferred Stock
("Cumulative Preferred Stock") are recorded on a daily basis and are determined
as described in Note 5.
The tax character of distributions paid during the years ended December
31, 2005 and December 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
-------------------------- --------------------------
COMMON PREFERRED COMMON PREFERRED
----------- ----------- ----------- -----------
Distributions paid from:
Ordinary income
(inclusive of short-term capital gains) .......... $ 4,866,994 $ 577,941 $ 3,096,404 $ 1,808,869
Net long-term capital gains ........................ 16,105,611 1,912,493 408,981 238,920
Non-taxable return of capital ...................... -- -- 13,426,831 --
----------- ----------- ----------- -----------
Total distributions paid ........................... $20,972,605 $ 2,490,434 $16,932,216 $ 2,047,789
=========== =========== =========== ===========
PROVISION FOR INCOME TAXES. The Trust intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). It is the policy of the Trust to comply with the
requirements of the Code applicable to regulated investment companies and to
distribute substantially all of its net investment company taxable income and
net capital gains. Therefore, no provision for Federal income taxes is required.
As of December 31, 2005, the components of accumulated earnings/(losses)
on a tax basis were as follows:
Net unrealized appreciation on investments ........... $23,083,225
Net unrealized appreciation of foreign currency
and swap contracts ................................. 738,487
Distributions payable ................................ (35,296)
Undistributed ordinary income ........................ 368,137
-----------
Total accumulated earnings ........................... $24,154,553
===========
The following summarizes the tax cost of investments, swap contracts, and
the related unrealized appreciation/depreciation at December 31, 2005:
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ ------------ --------------
Investments ............ $236,207,502 $ 30,194,071 $ (7,110,846) $ 23,083,225
Swap contracts ......... -- 744,413 -- 744,413
------------ ------------ ------------ ------------
$236,207,502 $ 30,938,484 $ (7,110,846) $ 23,827,638
============ ============ ============ ============
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES. The Trust has entered into an
investment advisory agreement (the "Advisory Agreement") with the Adviser which
provides that the Trust will pay the Adviser a fee, computed weekly and paid
monthly, equal on an annual basis to 1.00% of the value of its average weekly
net assets including the liquidation value of the preferred stock. In accordance
with the Advisory Agreement, the Adviser provides a continuous investment
program for the Trust's portfolio and
9
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
oversees the administration of all aspects of the Trust's business and affairs.
The Adviser has agreed to reduce the management fee on the incremental assets
attributable to the Cumulative Preferred Stock if the total return of the net
asset value ("NAV") of the Common Shares of the Trust, including distributions
and advisory fee subject to reduction, does not exceed the stated dividend rate
or corresponding swap rate of the Cumulative Preferred Stock for the fiscal
year.
The Trust's total return on the NAV of the Common Shares is monitored on a
monthly basis to assess whether the total return on the NAV of the Common Shares
exceeds the stated dividend rate of each particular series of Cumulative
Preferred Stock for the period. For the year ended December 31, 2005, the
Trust's total return on the NAV of the Common Shares exceeded the stated
dividend rate or corresponding swap rate of all outstanding Preferred Stock.
Thus, management fees were accrued on these assets.
During the year ended December 31, 2005, Gabelli & Company, Inc. ("Gabelli
& Company"), an affiliate of the Adviser, received $131,324 in brokerage
commissions as a result of executing agency transactions in portfolio securities
on behalf of the Trust.
In connection with the 2004 Rights Offering ("Rights"), holders of
unexercised rights to purchase Common Shares of the Trust were able to instruct
the Subscription Agent (EquiServe Trust Company) to sell such Rights on their
behalf. The Subscription Agent was permitted to effect such sales through
Gabelli & Company, unless the Subscription Agent was able to negotiate a lower
commission rate with an independent broker. Total commissions from sales of
Rights effected by the Subscription Agent through Gabelli & Company amounted to
$21,882 for the year ended December 31, 2004.
The cost of calculating the Trust's NAV per share is a Trust expense
pursuant to the Advisory Agreement. During the year ended December 31, 2005, the
Trust reimbursed the Adviser $45,000 in connection with the cost of computing
the Trust's NAV, which is included in miscellaneous expenses in the Statement of
Operations.
The Trust is assuming its portion of the allocated cost of the Gabelli
Funds' Chief Compliance Officer in the amount of $5,820 for the year ended
December 31, 2005, which is included in payroll expenses in the Statement of
Operations.
4. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities,
other than short-term securities, for the year ended December 31, 2005
aggregated $108,027,441 and $40,478,829, respectively.
5. CAPITAL. The Trust is authorized to issue an unlimited number of shares of
beneficial interest (par value $0.001). The Board has authorized the repurchase
of its shares on the open market when the shares are trading at a discount of
10% or more (or such other percentage as the Board may determine from time to
time) from the NAV of the shares. During the year ended December 31, 2005, the
Trust did not repurchase any shares of beneficial interest in the open market.
Transactions in shares of beneficial interest were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- --------- -----------
Shares issued in rights offering ........ -- -- 5,779,546 $39,981,829
Shares issued upon reinvestment
of dividends and distributions ......... 331,099 $3,037,284 290,925 2,556,000
------- ---------- --------- -----------
Net increase ............................ 331,099 $3,037,284 6,070,471 $42,537,829
======= ========== ========= ===========
The Trust is authorized to issue up to 2,005,000 shares of $0.001 par
value Cumulative Preferred Stock. The Cumulative Preferred Stock is senior to
the Common Shares and results in the financial leveraging of the Common Shares.
Such leveraging tends to magnify both the risks and opportunities to common
shareholders. Dividends on shares of the Cumulative Preferred Stock are
cumulative. The Trust is required by the 1940 Act and by the Articles
Supplementary to meet certain asset coverage tests with respect to the
Cumulative Preferred Stock. If the Trust fails to meet these requirements and
does not correct such failure, the Trust may be required to redeem, in part or
in full, the 5.625% Series A and Series B Auction Rate Cumulative Preferred
Stock at a redemption price of $25.00 and $25,000, respectively, per share plus
an amount equal to the accumulated and unpaid dividends whether or not declared
on such shares in order to meet these requirements. Additionally, failure to
meet the foregoing asset coverage requirements could restrict the Trust's
ability to pay dividends to common shareholders and could lead to sales of
portfolio securities at inopportune times. The income received on the Trust's
assets may vary in a manner unrelated to the fixed and variable rates, which
could have either a beneficial or detrimental impact on net investment income
and gains available to common shareholders.
On October 20, 2004, the Trust distributed one transferable right for each
of the 23,118,091 Common Shares outstanding to shareholders of record on that
date. Four rights were required to purchase one additional common share at the
subscription price of $7.00 per share. Shareholders who exercised their full
primary subscription rights were eligible for an over-subscription privilege
entitling them to subscribe, subject to certain limitations and a pro-rata
allotment, for any additional shares not purchased pursuant
10
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
to the primary subscription plus such additional amounts as authorized by the
Board in accordance with the registration statement. The subscription period
expired on November 24, 2004. The rights offering was fully subscribed, having
received over-subscription requests in excess of the shares available for
primary subscription resulting in the issuance of 5,779,546 Common Shares and
proceeds of $40,456,822 to the Trust, prior to the deduction of estimated
expenses of $475,000. The NAV per share of the Trust common shareholders was
reduced by approximately $0.06 per share as a result of the issuance of shares
below NAV.
On July 31, 2003, the Trust received net proceeds of $28,877,500 (after
underwriting discounts of $945,000 and offering expenses of $159,974) from the
public offering of 1,200,000 shares of 5.625% Series A Cumulative Preferred
Stock. Commencing July 31, 2008 and thereafter, the Trust, at its option, may
redeem the 5.625% Series A Cumulative Preferred Stock in whole or in part at the
redemption price at any time. During the year ended December 31, 2005, the Trust
did not repurchase any shares of 5.625% Series A Cumulative Preferred Stock. All
repurchased shares of 5.625% Series A Cumulative Preferred Stock have been
retired. At December 31, 2005, 1,184,200 shares of the 5.625% Series A
Cumulative Preferred Stock were outstanding and accrued dividends amounted to
$23,129.
On July 31, 2003, the Trust received net proceeds of $24,572,500 (after
underwriting discounts of $250,000 and offering expenses of $159,974) from the
public offering of 1,000 shares of Series B Auction Rate Cumulative Preferred
Stock. The dividend rate, as set by the auction process, which is generally held
every 7 days, is expected to vary with short-term interest rates. The dividend
rates of Series B Auction Rate Cumulative Preferred Stock ranged from 2.24% to
4.38% for the year ended December 31, 2005. Existing shareholders may submit an
order to hold, bid, or sell such shares on each auction date. Series B Auction
Rate Cumulative Preferred Stock shareholders may also trade shares in the
secondary market. The Trust, at its option, may redeem the Series B Auction Rate
Cumulative Preferred Stock in whole or in part at the redemption price at any
time. During the year ended December 31, 2005, the Trust did not redeem any
shares of Series B Auction Rate Cumulative Preferred Stock. At December 31,
2005, 1,000 shares of the Series B Auction Rate Cumulative Preferred Stock were
outstanding with an annualized dividend rate of 4.38% per share and accrued
dividends amounted to $12,167.
The holders of Cumulative Preferred Stock generally are entitled to one
vote per share held on each matter submitted to a vote of shareholders of the
Trust and will vote together with holders of common stock as a single class. The
holders of Cumulative Preferred Stock voting together as a single class also
have the right currently to elect two Directors and under certain circumstances
are entitled to elect a majority of the Board of Directors. In addition, the
affirmative vote of a majority of the votes entitled to be cast by holders of
all outstanding shares of the preferred stock, voting as a single class, will be
required to approve any plan of reorganization adversely affecting the preferred
stock, and the approval of two-thirds of each class, voting separately, of the
Trust's outstanding voting stock must approve the conversion of the Trust from a
closed-end to an open-end investment company. The approval of a majority (as
defined in the 1940 Act) of the outstanding preferred stock and a majority (as
defined in the 1940 Act) of the Trust's outstanding voting securities are
required to approve certain other actions, including changes in the Trust's
investment objectives or fundamental investment policies.
6. INDUSTRY CONCENTRATION. Because the 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.
7. INDEMNIFICATIONS. The Trust enters into contracts that contain a variety of
indemnifications. The Trust's maximum exposure under these arrangements is
unknown. However, the Trust has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
8. OTHER MATTERS. The Adviser and/or affiliates have received subpoenas from the
Attorney General of the State of New York and the Securities and Exchange
Commission ("SEC") requesting information on mutual fund trading practices
involving certain funds managed by the Adviser. GAMCO Investors, Inc., the
Adviser's parent company, is responding to these requests for documents and
testimony. On a separate matter, in September 2005, the Adviser was informed by
the staff of the SEC that the staff may recommend to the Commission that an
administrative remedy and a monetary penalty be sought from the Adviser in
connection with the actions of two of seven closed-end funds managed by the
Adviser relating to Section 19(a) and Rule 19a-1 of the 1940 Act. These
provisions require registered investment companies to provide written statements
to shareholders when a dividend is made from a source other than net investment
income. While the two closed-end funds sent annual statements and provided other
materials containing this information, the funds did not send written statements
to shareholders with each distribution in 2002 and 2003. The Adviser believes
that all of the funds are now in compliance. The Adviser believes that these
matters would have no effect on the Trust or any material adverse effect on the
Adviser or its ability to manage the Trust.
11
THE GABELLI UTILITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD:
YEAR ENDED DECEMBER 31,
--------------------------------------
2005 2004 2003
-------- -------- --------
OPERATING PERFORMANCE:
Net asset value, beginning of period ............................................ $ 7.14 $ 6.83 $ 6.27
-------- -------- --------
Net investment income ........................................................... 0.18 0.16 0.10
Net realized and unrealized gain (loss) on investments .......................... 0.45 0.99 1.17
-------- -------- --------
Total from investment operations ................................................ 0.63 1.15 1.27
-------- -------- --------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:(e)
Net investment income ........................................................... (0.02) (0.06) (0.01)
Net realized gain on investments ................................................ (0.07) (0.03) (0.04)
-------- -------- --------
Total distributions to preferred stock shareholders ............................. (0.09) (0.09) (0.05)
-------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO COMMON
SHAREHOLDERS RESULTING FROM OPERATIONS .......................................... 0.54 1.06 1.22
-------- -------- --------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Net investment income ........................................................... (0.14) (0.10) (0.09)
Net realized gain on investments ................................................ (0.58) (0.05) (0.22)
Paid-in capital ................................................................. -- (0.57) (0.41)
-------- -------- --------
Total distributions to common shareholders ...................................... (0.72) (0.72) (0.72)
-------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Increase in net asset value from common share transactions ...................... 0.02 0.03 0.03
Increase (decrease) in net asset value from shares issued in rights offering .... -- (0.06) 0.12
Increase in net asset value from repurchase of preferred shares ................. -- 0.00(a) --
Offering costs for preferred shares charged to paid-in capital .................. 0.00(a) 0.00(a) (0.09)
Offering costs for issuance of rights charged to paid-in capital ................ (0.00)(a) (0.00)(a) --
-------- -------- --------
Total capital share transactions ................................................ 0.02 (0.03) 0.06
-------- -------- --------
NET ASSET VALUE ATTRIBUTABLE TO COMMON SHAREHOLDERS, END OF PERIOD .............. $ 6.98 $ 7.14 $ 6.83
======== ======== ========
Net asset value total return + .................................................. 5.71% 13.43% 18.60%
======== ======== ========
Market value, end of period ..................................................... $ 9.27 $ 9.30 $ 9.60
======== ======== ========
Total investment return ++ ...................................................... 7.79% 5.11% 19.86%
======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets including liquidation value of preferred shares,
end of period (in 000's) ...................................................... $259,303 $261,563 $211,507
Net assets attributable to common shares, end of period (in 000's) .............. $204,698 $206,958 $156,507
Ratio of net investment income to average net assets attributable
to common shares .............................................................. 2.42% 2.32% 1.52%
Ratio of operating expenses to average net assets attributable to
common shares net of fee reduction (b) ........................................ 1.85% 2.04% 2.04%
Ratio of operating expenses to average net assets including
liquidation value of preferred shares net of fee reduction (b) ................ 1.47% 1.52% 1.68%
Portfolio turnover rate ......................................................... 19% 18% 28%
PREFERRED STOCK:
5.625% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ..................................... $ 29,605 $ 29,605 $ 30,000
Total shares outstanding (in 000's) ............................................. 1,184 1,184 1,200
Liquidation preference per share ................................................ $ 25.00 $ 25.00 $ 25.00
Average market value (c) ........................................................ $ 25.02 $ 24.68 $ 25.12
Asset coverage per share ........................................................ $ 118.72 $ 119.75 $ 96.14
AUCTION RATE CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ..................................... $ 25,000 $ 25,000 $ 25,000
Total shares outstanding (in 000's) ............................................. 1 1 1
Liquidation preference per share ................................................ $ 25,000 $ 25,000 $ 25,000
Average market value (c) ........................................................ $ 25,000 $ 25,000 $ 25,000
Asset coverage per share ........................................................ $118,718 $119,752 $ 96,140
ASSET COVERAGE (d) .............................................................. 475% 479% 385%
YEAR ENDED DECEMBER 31,
-----------------------
2002 2001
-------- --------
OPERATING PERFORMANCE:
Net asset value, beginning of period ............................................ $ 7.32 $ 8.21
-------- --------
Net investment income ........................................................... 0.11 0.12
Net realized and unrealized gain (loss) on investments .......................... (0.62) (0.32)
-------- --------
Total from investment operations ................................................ (0.51) (0.20)
-------- --------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:(e)
Net investment income ........................................................... -- --
Net realized gain on investments ................................................ -- --
-------- --------
Total distributions to preferred stock shareholders ............................. -- --
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO COMMON
SHAREHOLDERS RESULTING FROM OPERATIONS .......................................... (0.51) (0.20)
-------- --------
DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Net investment income ........................................................... (0.11) (0.21)
Net realized gain on investments ................................................ (0.36) (0.49)
Paid-in capital ................................................................. (0.25) --
-------- --------
Total distributions to common shareholders ...................................... (0.72) (0.70)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Increase in net asset value from common share transactions ...................... 0.03 0.01
Increase (decrease) in net asset value from shares issued in rights offering .... 0.15 --
Increase in net asset value from repurchase of preferred shares ................. -- --
Offering costs for preferred shares charged to paid-in capital .................. -- --
Offering costs for issuance of rights charged to paid-in capital ................ -- --
-------- --------
Total capital share transactions ................................................ 0.18 0.01
-------- --------
NET ASSET VALUE ATTRIBUTABLE TO COMMON SHAREHOLDERS, END OF PERIOD .............. $ 6.27 $ 7.32
======== ========
Net asset value total return + .................................................. (6.79)% (3.15)%
======== ========
Market value, end of period ..................................................... $ 8.72 $ 9.33
======== ========
Total investment return ++ ...................................................... 1.70% 15.82%
======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets including liquidation value of preferred shares,
end of period (in 000's) ...................................................... $ 95,111 $ 82,197
Net assets attributable to common shares, end of period (in 000's) .............. $ 95,111 $ 82,197
Ratio of net investment income to average net assets attributable
to common shares .............................................................. 1.65% 1.57%
Ratio of operating expenses to average net assets attributable to
common shares net of fee reduction (b) ........................................ 1.93% 2.00%
Ratio of operating expenses to average net assets including
liquidation value of preferred shares net of fee reduction (b) ................ -- --
Portfolio turnover rate ......................................................... 29% 41%
PREFERRED STOCK:
5.625% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ..................................... -- --
Total shares outstanding (in 000's) ............................................. -- --
Liquidation preference per share ................................................ -- --
Average market value (c) ........................................................ -- --
Asset coverage per share ........................................................ -- --
AUCTION RATE CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ..................................... -- --
Total shares outstanding (in 000's) ............................................. -- --
Liquidation preference per share ................................................ -- --
Average market value (c) ........................................................ -- --
Asset coverage per share ........................................................ -- --
ASSET COVERAGE (d) .............................................................. -- --
----------
+ Based on net asset value per share, adjusted for reinvestment of
distributions at prices dependent upon the relationship of the net asset
value per share and the market value per share on the ex-dividend dates,
including the effect of shares issued pursuant to 2004 and 2003 rights
offering, assuming full subscription by shareholder.
++ Based on market value per share, adjusted for reinvestment of
distributions, including the effect of shares issued pursuant to rights
2004 and 2003 offering, assuming full subscription by shareholder.
(a) Amount represents less than $0.005 per share.
(b) For the fiscal years ended December 31, 2001 through 2005, the effect of
the custodian fee credits was minimal.
(c) Based on weekly prices.
(d) Asset coverage is calculated by combining all series of preferred stock.
(e) Calculated based upon average common shares outstanding on the record
dates throughout the year.
See accompanying notes to financial statements.
12
THE GABELLI UTILITY TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
The Gabelli Utility Trust:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Gabelli Utility Trust
(hereafter referred to as the "Trust") at December 31, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2005 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 28, 2006
13
THE GABELLI UTILITY TRUST
ADDITIONAL FUND INFORMATION (UNAUDITED)
The business and affairs of the Trust are managed under the direction of
the Trust's Board of Trustees. Information pertaining to the Trustees and
officers of the Trust is set forth below. The Fund's Statement of Additional
Information includes additional information about The Gabelli Utility Trust
Trustees and is available, without charge, upon request, by calling 800-GABELLI
(800-422-3554) or by writing to The Gabelli Utility Trust at One Corporate
Center, Rye, NY 10580-1422.
TERM OF NUMBER OF
OFFICE AND FUNDS IN TRUST
NAME, POSITION(S) LENGTH OF COMPLEX
ADDRESS 1 TIME OVERSEEN BY PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE SERVED 2 TRUSTEE DURING PAST FIVE YEARS HELD BY TRUSTEE 4
---------------- ---------- -------------- ---------------------- -------------------
INTERESTED TRUSTEES 3 :
MARIO J. GABELLI Since 1999** 24 Chairman of the Board and Chief Executive Director of Morgan
Trustee and Officer of GAMCO Investors, Inc. and Group Holdings, Inc.
Chief Investment Officer Chief Investment Officer - Value Portfolios (holding company)
Age: 63 of Gabelli Funds, LLC and GAMCO Asset
Management Inc.; Chairman and Chief
Executive Officer of Lynch Interactive
Corporation (multimedia and services)
JOHN D. GABELLI Since 1999* 10 Senior Vice President of Gabelli & Director of GAMCO
Trustee Company, Inc. Investors, Inc.
Age: 61
NON-INTERESTED TRUSTEES:
THOMAS E. BRATTER Since 1999** 3 Director, President and Founder of The John --
Trustee Dewey Academy (residential college
Age: 66 preparatory therapeutic high school)
ANTHONY J. COLAVITA Since 1999*** 34 Partner in the law firm of --
Trustee Anthony J. Colavita, P.C.
Age: 70
JAMES P. CONN Since 1999* 14 Former Managing Director and Chief Investment Director of LaQuinta
Trustee Officer of Financial Security Assurance Holdings Corp. (hotels) and
Age: 67 Ltd. (insurance holding company) (1992-1998) First Republic Bank
(banking)
VINCENT D. ENRIGHT Since 1999** 14 Former Senior Vice President and Chief Director of Aphton
Trustee Financial Officer of KeySpan Energy Corporation
Age: 62 Corporation (biopharmaceuticals)
FRANK J. FAHRENKOPF JR. Since 1999*** 5 President and Chief Executive Officer of the Director of First
Trustee American Gaming Association; Partner in Republic Bank
Age: 66 the law firm of Hogan & Hartson LLP; (banking)
Co-Chairman of the Commission on
Presidential Debates; Former Chairman of
the Republican National Committee
ROBERT J. MORRISSEY Since 1999*** 7 Partner in the law firm of Morrissey, --
Trustee Hawkins & Lynch
Age: 66
ANTHONY R. PUSTORINO Since 1999* 14 Certified Public Accountant; Professor Director of Lynch
Trustee Emeritus, Pace University Corporation
Age: 80 (diversified
manufacturing)
SALVATORE J. ZIZZA Since 1999*** 25 Chairman of Hallmark Electrical Supplies Corp. Director of Hollis-
Trustee Eden Pharmaceuticals
Age: 60 (biotechnology) and
Earl Scheib, Inc.
(automotive services)
14
THE GABELLI UTILITY TRUST
ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED)
TERM OF
OFFICE AND
NAME, POSITION(S) LENGTH OF
ADDRESS 1 TIME PRINCIPAL OCCUPATION(S)
AND AGE SERVED 2 DURING PAST FIVE YEARS
---------------- --------- -----------------------
OFFICERS:
BRUCE N. ALPERT Since 2003 Executive Vice President and Chief Operating
President and Treasurer Officer of Gabelli Funds, LLC since 1988 and
Age: 54 an officer of all of the registered investment
companies in the Gabelli Funds complex.
Director and President of Gabelli Advisers, Inc.
since 1998.
DAVID I. SCHACHTER Since 1999 Vice President of the Trust since 1999.
Vice President Research Analyst at Gabelli & Company, Inc.
Age: 52 since 1999.
JAMES E. MCKEE Since 1999 Vice President, General Counsel and Secretary
Secretary of GAMCO Investors, Inc. since 1999 and
Age: 42 GAMCO Asset Management Inc. since 1993; Secretary
of all of the registered investment companies in
the Gabelli Funds complex.
PETER D. GOLDSTEIN Since 2004 Director of Regulatory Affairs for GAMCO Investors, Inc.
Chief Compliance Officer since 2004; Chief Compliance Officer of all of the registered
Age: 52 investment companies in the Gabelli Funds complex;
Vice President of Goldman Sachs Asset Management from
2000 through 2004.
----------
1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted.
2 The Trust's Board of Trustees is divided into three classes, each class
having a term of three years. Each year the term of office of one class
expires and the successor or successors elected to such class serve for a
three year term. The three year term for each class expires as follows:
* - Term expires at the Trust's 2006 Annual Meeting of Shareholders and
until their successors are duly elected and qualified.
** - Term expires at the Trust's 2007 Annual Meeting of Shareholders and
until their successors are duly elected and qualified.
*** - Term expires at the Trust's 2008 Annual Meeting of Shareholders and
until their successors are duly elected and qualified.
Each officer will hold office for an indefinite term until the date he or
she resigns or retires or until his or her successor is elected and
qualified.
3 "Interested person" of the Trust as defined in the Investment Company Act
of 1940. Messrs. M. Gabelli and J. Gabelli are each considered an
"interested person" because of their affiliation with Gabelli Funds, LLC
which acts as the Trust's investment adviser. Mario J. Gabelli and John D.
Gabelli are brothers. Effective November 16, 2005, Mr. Karl Otto Pohl
resigned from the Board of Trustees and now serves as Trustee Emeritus.
4 This column includes only directorships of companies required to report to
the SEC under the Securities Exchange Act of 1934 (i.e. public companies)
or other investment companies registered under the 1940 Act.
CERTIFICATIONS
The Utility Trust's Chief Executive Officer has certified to the New York
Stock Exchange that, as of June 6, 2005, he was not aware of any violation by
the Utility Trust of applicable NYSE corporate governance listing standards. The
Utility Trust reports to the SEC on Form N-CSR and N-CSRs contain certifications
by the Trust's principal executive officer and principal financial officer that
relate to the Trust's disclosure in such reports and that are required by Rule
30a-2(a) under the Investment Company Act.
15
THE GABELLI UTILITY TRUST
INCOME TAX INFORMATION (UNAUDITED)
DECEMBER 31, 2005
CASH DIVIDENDS AND DISTRIBUTIONS
TOTAL AMOUNT ORDINARY LONG-TERM DIVIDEND
PAYABLE RECORD PAID INVESTMENT CAPITAL REINVESTMENT
DATE DATE PER SHARE (a) INCOME (a) GAINS (a) PRICE
--------- -------- ------------- ----------- --------- ------------
COMMON SHARES
01/25/05 01/17/05 $0.06000 $0.01460 $0.04540 $8.96800
02/22/05 02/14/05 0.06000 0.01460 0.04540 9.21500
03/24/05 03/16/05 0.06000 0.01460 0.04540 8.92050
04/25/05 04/15/05 0.06000 0.01460 0.04540 9.06300
05/24/05 05/16/05 0.06000 0.01460 0.04540 9.32900
06/24/05 06/16/05 0.06000 0.01460 0.04540 9.50000
07/25/05 07/15/05 0.06000 0.01460 0.04540 9.55700
08/25/05 08/17/05 0.06000 0.01460 0.04540 9.47150
09/26/05 09/16/05 0.06000 0.01460 0.04540 9.30050
10/25/05 10/17/05 0.06000 0.01460 0.04540 8.98700
11/23/05 11/15/05 0.06000 0.01460 0.04540 8.83500
12/23/05 12/15/05 0.06000 0.01460 0.04540 9.00600
-------- -------- --------
TOTAL COMMON STOCK $0.72000 $0.17520 $0.54480
5.625% PREFERRED SHARES
03/28/05 03/18/05 $0.35156 $0.08570 $0.26586 --
06/27/05 06/20/05 0.35156 0.08570 0.26586 --
09/26/05 09/19/05 0.35156 0.08570 0.26586 --
12/27/05 12/19/05 0.35156 0.08570 0.26586 --
-------- -------- --------
TOTAL PREFERRED STOCK $1.40624 $0.34280 $1.06344
AUCTION RATE PREFERRED SHARES
Auction rate preferred shares pay dividends weekly based on a rate set at
auction, usually held every seven days. The percentage of 2005 distributions
derived from long-term capital gains was 75.62%.
A Form 1099-DIV has been mailed to all shareholders of record for the
distributions mentioned above, setting forth specific amounts to be included in
the 2005 tax returns. Ordinary income distributions include net investment
income and realized net short-term capital gains. Ordinary income is reported in
box 1a of Form 1099-DIV. Capital gain distributions are reported in box 2a of
Form 1099-DIV.
CORPORATE DIVIDENDS RECEIVED DEDUCTION, QUALIFIED DIVIDEND INCOME AND U.S.
GOVERNMENT SECURITIES INCOME
The Trust paid to common and 5.625% Series A preferred shareholders
ordinary income dividends of $0.17520 and $0.34280 per share, respectively, in
2005. The Trust paid to Series B Auction Rate preferred shareholders an ordinary
income dividend totaling $204.73 per share in 2005. For the fiscal year ended
December 31, 2005, 100% of the ordinary income dividend qualified for the
dividend received deduction available to corporations, and 100% of the ordinary
income distribution was deemed qualified dividend income. The percentage of the
ordinary income dividends paid by the Trust during 2005 derived from U.S.
Government Securities was 8.57%. Such income is exempt from state and local tax
in all states. However, many states, including New York and California, allow a
tax exemption for a portion of the income earned only if a mutual fund has
invested at least 50% of its assets at the end of each quarter of the Trust's
fiscal year in U.S. Government Securities. The Trust did not meet this strict
requirement in 2005. The percentage of U.S. Government Securities held as of
December 31, 2005 was 0.00%.
HISTORICAL DISTRIBUTION SUMMARY
SHORT-TERM LONG-TERM ADJUSTMENT
INVESTMENT CAPITAL CAPITAL RETURN OF TOTAL TO COST
INCOME (b) GAINS (b) GAINS CAPITAL (c) DISTRIBUTIONS (a) BASIS (d)
---------- --------- ---------- ----------- ----------------- ---------
COMMON STOCK
2005 ................................ $ 0.15240 $ 0.02280 $ 0.54480 -- $ 0.72000 --
2004(g) ............................. 0.09348 0.02958 0.00229 $0.59465 0.72000 $0.59465
2003(f) ............................. 0.08544 0.01128 0.21240 0.41088 0.72000 0.41088
2002(e) ............................. 0.11175 0.00210 0.35900 0.24690 0.72000 0.24690
2001 ................................ 0.20835 0.33142 0.16023 -- 0.70000 --
2000 ................................ 0.05620 0.14020 0.80360 -- 1.00000 --
1999 ................................ 0.08049 0.00090 0.06861 -- 0.15000 --
5.625% PREFERRED STOCK
2005 ................................ $ 0.29785 $ 0.04494 $ 1.06346 -- $ 1.40625 --
2004 ................................ 1.04873 0.33179 0.02572 -- 1.40625 --
AUCTION RATE PREFERRED SHARES
2005 ................................ $177.88970 $26.83920 $635.15100 -- $839.88000 --
2004 ................................ 280.59420 88.77260 6.88340 -- 376.20000 --
----------
(a) Total amounts may differ due to rounding.
(b) Taxable as ordinary income.
(c) Non-taxable.
(d) Decrease in cost basis.
(e) On May 22, 2002, the Trust distributed Rights equivalent to $0.085 per
share based upon full subscription of all issued shares.
(f) On August 20, 2003, the Trust also distributed Rights equivalent to $0.18
per share based upon full subscription of all issued shares.
(g) On October 20, 2004, the Trust also distributed Rights equivalent to $0.03
per share based upon full subscription of all issued shares.
16
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLANS
ENROLLMENT IN THE PLAN
It is the policy of The Gabelli Utility Trust ("Trust") to automatically
reinvest dividends payable to common shareholders. As a "registered" shareholder
you automatically become a participant in the Trust's Automatic Dividend
Reinvestment Plan (the "Plan"). The Plan authorizes the Trust to issue common
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 Trust. Plan participants may send their share
certificates to Computershare Trust Company, N.A. ("Computershare") to be held
in their dividend reinvestment account. Registered shareholders wishing to
receive their distribution in cash must submit this request in writing to:
The Gabelli Utility Trust
c/o Computershare
P.O. Box 43010
Providence, RI 02940-3010
Shareholders requesting this cash election must include the shareholder's
name and address as they appear on the share certificate. Shareholders with
additional questions regarding the Plan or requesting a copy of the terms of the
Plan may contact Computershare at (800) 336-6983.
If your shares are held in the name of a broker, bank, or nominee, you
should contact such institution. If such institution is not participating in the
Plan, your account will be credited with a cash dividend. In order to
participate in the Plan through such institution, it may be necessary for you to
have your shares taken out of "street name" and reregistered in your own name.
Once registered in your own name your distributions 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 common shares 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 Trust's common shares 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
distributions, participants are issued common shares 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 Trust's common shares. The valuation date is the
dividend or distribution payment date or, if that date is not a New York Stock
Exchange ("NYSE") trading day, the next trading day. If the net asset value of
the common shares at the time of valuation exceeds the market price of the
common shares, participants will receive common shares from the Trust valued at
market price. If the Trust should declare a dividend or capital gains
distribution payable only in cash, Computershare will buy common shares in the
open market, or on the NYSE or elsewhere, for the participants' accounts, except
that Computershare will endeavor to terminate purchases in the open market and
cause the Trust to issue shares at net asset value if, following the
commencement of such purchases, the market value of the common shares 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.
17
VOLUNTARY CASH PURCHASE PLAN
The Voluntary Cash Purchase Plan is yet another vehicle for our
shareholders to increase their investment in the 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 Computershare for investments in the Trust's common
shares at the then current market price. Shareholders may send an amount from
$250 to $10,000. Computershare will use these funds to purchase shares in the
open market on or about the 1st and 15th of each month. Computershare will
charge each shareholder who participates $0.75, plus a pro rata share of the
brokerage commissions. Brokerage charges for such purchases are expected to be
less than the usual brokerage charge for such transactions. It is suggested that
any voluntary cash payments be sent to Computershare, P.O. Box 43010,
Providence, RI 02940-3010 such that Computershare receives such payments
approximately 10 days before the 1st and 15th of the month. Funds not received
at least five days before the investment date shall be held for investment until
the next purchase date. A payment may be withdrawn without charge if notice is
received by Computershare at least 48 hours before such payment is to be
invested.
SHAREHOLDERS WISHING TO LIQUIDATE SHARES HELD AT COMPUTERSHARE must do so
in writing or by telephone. Please submit your request to the above mentioned
address or telephone number. Include in your request your name, address and
account number. The cost to liquidate shares is $2.50 per transaction as well as
the brokerage commission incurred. Brokerage charges are expected to be less
than the usual brokerage charge for such transactions.
For more information regarding the Dividend Reinvestment Plan and
Voluntary Cash Purchase Plan, brochures are available by calling (914) 921-5070
or by writing directly to the Trust.
The 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 Computershare on at least 90 days' written
notice to participants in the Plan.
--------------------------------------------------------------------
The Annual Meeting of the Utility Trust's stockholders will be held
at 11:00 A.M. on Monday, May 15, 2006 at the Greenwich Library in
Greenwich, Connecticut.
--------------------------------------------------------------------
18
TRUSTEES AND OFFICERS
THE GABELLI UTILITY TRUST
ONE CORPORATE CENTER, RYE, NY 10580-1422
TRUSTEES
Mario J. Gabelli, CFA
CHAIRMAN & CHIEF EXECUTIVE OFFICER,
GAMCO INVESTORS, INC.
Dr. Thomas E. Bratter
PRESIDENT, JOHN DEWEY ACADEMY
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
James P. Conn
FORMER CHIEF INVESTMENT OFFICER,
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
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
Anthony R. Pustorino
CERTIFIED PUBLIC ACCOUNTANT,
PROFESSOR EMERITUS, PACE UNIVERSITY
Salvatore J. Zizza
CHAIRMAN, HALLMARK ELECTRICAL SUPPLIES CORP.
OFFICERS
Bruce N. Alpert
PRESIDENT & TREASURER
Peter D. Goldstein
CHIEF COMPLIANCE OFFICER
James E. McKee
SECRETARY
David I. Schachter
VICE PRESIDENT & OMBUDSMAN
INVESTMENT ADVISER
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
CUSTODIAN
Mellon Trust of New England, N.A.
COUNSEL
Skadden, Arps, Slate, Meagher & Flom, LLP
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company, N.A.
STOCK EXCHANGE LISTING
5.625%
COMMON PREFERRED
------ ---------
NYSE-Symbol: GUT GUT PrA
Shares Outstanding: 29,307,802 1,184,200
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) 921-5070.
--------------------------------------------------------------------------------
For general information about the Gabelli Funds, call 800-GABELLI
(800-422-3554), fax us at 914-921-5118, visit Gabelli Funds' Internet homepage
at: WWW.GABELLI.COM or e-mail us at: closedend@gabelli.com
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the 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 Utility
Trust may also, from time to time, purchase shares of its 5.625% Series A
Cumulative Preferred Shares in the open market when the shares are trading at a
discount to the Liquidation Value of $25.00.
--------------------------------------------------------------------------------
THE GABELLI UTILITY TRUST
ONE CORPORATE CENTER, RYE, NY 10580-1422
PHONE: 800-GABELLI (800-422-3554)
FAX: 914-921-5118 INTERNET: WWW.GABELLI.COM
E-MAIL: CLOSEDEND@GABELLI.COM GUT AR 2005
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report,
has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are
employed by the registrant or a third party, and that relates to any
element of the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are
employed by the registrant or a third party, that relates to one or
more of the items set forth in paragraph (b) of this item's
instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's Board of
Trustees has determined that Anthony R. Pustorino is qualified to serve as an
audit committee financial expert serving on its audit committee and that he is
"independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$37,801 in 2005 and $40,691 in 2004.
AUDIT-RELATED FEES
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $13,400 in 2005 and $13,400 in 2004.
Audit-related fees represent services provided in the preparation of
Preferred Shares Reports.
TAX FEES
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $2,880 in 2005 and $2,550
in 2004.
Tax fees represent tax compliance services provided in connection with
the review of the Registrant's tax returns.
ALL OTHER FEES
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are
$0 in 2005 and $0 in 2004.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pre-Approval Policies and Procedures. The Audit Committee
("Committee") of the registrant is responsible for pre-approving (i)
all audit and permissible non-audit services to be provided by the
independent auditors to the registrant and (ii) all permissible
non-audit services to be provided by the independent auditors to the
Adviser, Gabelli Funds, LLC, and any affiliate of Gabelli Funds, LLC
("Gabelli") that provides services to the registrant (a "Covered
Services Provider") if the independent auditors' engagement related
directly to the operations and financial reporting of the registrant.
The Committee may delegate its responsibility to pre-approve any such
audit and permissible non-audit services to the Chairperson of the
Committee, and the Chairperson must report to the Committee, at its
next regularly scheduled meeting after the Chairperson's pre-approval
of such services, his or her decision(s). The Committee may also
establish detailed pre-approval policies and procedures for
pre-approval of such services in accordance with applicable laws,
including the delegation of some or all of the Committee's
pre-approval responsibilities to the other persons (other than Gabelli
or the registrant's officers). Pre-approval by the Committee of any
permissible non-audit services is not required so long as: (i) the
aggregate amount of all such permissible non-audit services provided
to the registrant, Gabelli and any Covered Services Provider
constitutes not more than 5% of the total amount of revenues paid by
the registrant to its independent auditors during the fiscal year in
which the permissible non-audit services are provided; (ii) the
permissible non-audit services were not recognized by the registrant
at the time of the engagement to be non-audit services; and (iii) such
services are promptly brought to the attention of the Committee and
approved by the Committee or Chairperson prior to the completion of
the audit.
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) of this Item that were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) 100%
(c) 100%
(d) N/A
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was zero percent (0%).
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen
by another investment adviser), and any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant for each of the last two fiscal years of
the registrant was $0 in 2005 and $0 in 2004.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately designated audit committee consisting of the
following members: Anthony J Colavita, Vincent D. Enright and Anthony R.
Pustorino.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Proxy Voting Policies are attached herewith.
THE VOTING OF PROXIES ON BEHALF OF CLIENTS
Rules 204(4)-2 and 204-2 under the Investment Advisers Act of 1940 and Rule
30b1-4 under the Investment Company Act of 1940 require investment advisers to
adopt written policies and procedures governing the voting of proxies on behalf
of their clients.
These procedures will be used by GAMCO Asset Management Inc., Gabelli
Funds, LLC, Gabelli Securities, Inc., and Gabelli Advisers, Inc. (collectively,
the "Advisers") to determine how to vote proxies relating to portfolio
securities held by their clients, including the procedures that the Advisers use
when a vote presents a conflict between the interests of the shareholders of an
investment company managed by one of the Advisers, on the one hand, and those of
the Advisers; the principal underwriter; or any affiliated person of the
investment company, the Advisers, or the principal underwriter. These procedures
will not apply where the Advisers do not have voting discretion or where the
Advisers have agreed to with a client to vote the client's proxies in accordance
with specific guidelines or procedures supplied by the client (to the extent
permitted by ERISA).
I. PROXY VOTING COMMITTEE
The Proxy Voting Committee was originally formed in April 1989 for the purpose
of formulating guidelines and reviewing proxy statements within the parameters
set by the substantive proxy voting guidelines originally published by GAMCO
Investors, Inc. in 1988 and updated periodically, a copy of which are appended
as Exhibit A. The Committee will include representatives of Research,
Administration, Legal, and the Advisers. Additional or replacement members of
the Committee will be nominated by the Chairman and voted upon by the entire
Committee.
Meetings are held as needed basis to form views on the manner in which the
Advisers should vote proxies on behalf of their clients.
In general, the Director of Proxy Voting Services, using the Proxy
Guidelines, recommendations of Institutional Shareholder Corporate Governance
Service ("ISS"), other third-party services and the analysts of Gabelli &
Company, Inc., will determine how to vote on each issue. For non-controversial
matters, the Director of Proxy Voting Services may vote the proxy if the vote is
(1) consistent with the recommendations of the issuer's Board of Directors and
not contrary to the Proxy Guidelines; (2) consistent with the recommendations of
the issuer's Board of Directors and is a non-controversial issue not covered by
the Proxy Guidelines; or (3) the vote is contrary to the recommendations of the
Board of Directors but is consistent with the Proxy Guidelines. In those
instances, the Director of Proxy Voting Services or the Chairman of the
Committee may sign and date the proxy statement indicating how each issue will
be voted.
All matters identified by the Chairman of the Committee, the Director of
Proxy Voting Services or the Legal Department as controversial, taking into
account the recommendations of ISS or other third party services and the
analysts of Gabelli & Company, Inc., will be presented to the Proxy Voting
Committee. If the Chairman of the Committee, the Director of Proxy Voting
Services or the Legal Department has identified the matter as one that (1) is
controversial; (2) would benefit from deliberation by the Proxy Voting
Committee; or (3) may give rise to a conflict of interest between the Advisers
and their clients, the Chairman of the Committee will initially determine what
vote to recommend that the Advisers should cast and the matter will go before
the Committee.
A. CONFLICTS OF INTEREST.
The Advisers have implemented these proxy voting procedures
in order to prevent conflicts of interest from influencing their proxy
voting decisions. By following the Proxy Guidelines, as well as the
recommendations of ISS, other third-party services and the analysts of
Gabelli & Company, the Advisers are able to avoid, wherever possible,
the influence of potential conflicts of interest. Nevertheless,
circumstances may arise in which one or more of the Advisers are faced
with a conflict of interest or the appearance of a conflict of
interest in connection with its vote. In general, a conflict of
interest may arise when an Adviser knowingly does business with an
issuer, and may appear to have a material conflict between its own
interests and the interests of the shareholders of an investment
company managed by one of the Advisers regarding how the proxy is to
be voted. A conflict also may exist when an Adviser has actual
knowledge of a material business arrangement between an issuer and an
affiliate of the Adviser.
In practical terms, a conflict of interest may arise, for example,
when a proxy is voted for a company that is a client of one of the
Advisers, such as GAMCO Asset Management Inc. A conflict also may
arise when a client of one of the Advisers has made a shareholder
proposal in a proxy to be voted upon by one or more of the Advisers.
The Director of Proxy Voting Services, together with the Legal
Department, will scrutinize all proxies for these or other situations
that may give rise to a conflict of interest with respect to the
voting of proxies.
A. OPERATION OF PROXY VOTING COMMITTEE.
For matters submitted to the Committee, each member of the Committee
will receive, prior to the meeting, a copy of the proxy statement, any
relevant third party research, a summary of any views provided by the
Chief Investment Officer and any recommendations by Gabelli & Company,
Inc. analysts. The Chief Investment Officer or the Gabelli & Company,
Inc. analysts may be invited to present their viewpoints. IF THE
DIRECTOR OF PROXY VOTING SERVICES or the Legal Department believe that
the matter before the committee is one with respect to which a
conflict of interest may exist between the Advisers and their clients,
counsel will provide an opinion to the Committee concerning the
conflict. If the matter is one in which the interests of the clients
of one or more of Advisers may diverge, counsel will so advise and the
Committee may make different recommendations as to different clients.
For any matters where the recommendation may trigger appraisal rights,
counsel will provide an opinion concerning the likely risks and merits
of such an appraisal action.
Each matter submitted to the Committee will be determined by the vote of a
majority of the members present at the meeting. Should the vote concerning one
or more recommendations be tied in a vote of the Committee, the Chairman of the
Committee will cast the deciding vote. The Committee will notify the proxy
department of its decisions and the proxies will be voted accordingly.
Although the Proxy Guidelines express the normal preferences for the voting
of any shares not covered by a contrary investment guideline provided by the
client, the Committee is not bound by the preferences set forth in the Proxy
Guidelines and will review each matter on its own merits. Written minutes of all
Proxy Voting Committee meetings will be maintained. The Advisers subscribe to
ISS, which supplies current information on companies, matters being voted on,
regulations, trends in proxy voting and information on corporate governance
issues.
If the vote cast either by the analyst or as a result of the deliberations
of the Proxy Voting Committee runs contrary to the recommendation of the Board
of Directors of the issuer, the matter will be referred to legal counsel to
determine whether an amendment to the most recently filed Schedule 13D is
appropriate.
II. SOCIAL ISSUES AND OTHER CLIENT GUIDELINES
If a client has provided special instructions relating to the voting of
proxies, they should be noted in the client's account file and forwarded to the
proxy department. This is the responsibility of the investment professional or
sales assistant for the client. In accordance with Department of Labor
guidelines, the Advisers' policy is to vote on behalf of ERISA accounts in the
best interest of the plan participants with regard to social issues that carry
an economic impact. Where an account is not governed by ERISA, the Advisers will
vote shares held on behalf of the client in a manner consistent with any
individual investment/voting guidelines provided by the client. Otherwise the
Advisers will abstain with respect to those shares.
III. CLIENT RETENTION OF VOTING RIGHTS
If a client chooses to retain the right to vote proxies or if there is any
change in voting authority, the following should be notified by the investment
professional or sales assistant for the client.
- Operations
- Legal Department
- Proxy Department
- Investment professional assigned to the account
In the event that the Board of Directors (or a Committee thereof) of one or
more of the investment companies managed by one of the Advisers has retained
direct voting control over any security, the Proxy Voting Department will
provide each Board Member (or Committee member) with a copy of the proxy
statement together with any other relevant information including recommendations
of ISS or other third-party services.
IV. VOTING RECORDS
The Proxy Voting Department will retain a record of matters voted upon by
the Advisers for their clients. The Advisers' staff may request proxy-voting
records for use in presentations to current or prospective clients. Requests for
proxy voting records should be made at least ten days prior to client meetings.
If a client wishes to receive a proxy voting record on a quarterly,
semi-annual or annual basis, please notify the Proxy Voting Department. The
reports will be available for mailing approximately ten days after the quarter
end of the period. First quarter reports may be delayed since the end of the
quarter falls during the height of the proxy season.
A letter is sent to the custodians for all clients for which the Advisers
have voting responsibility instructing them to forward all proxy materials to:
[Adviser name]
Attn: Proxy Voting Department
One Corporate Center
Rye, New York 10580-1433
The sales assistant sends the letters to the custodians along with the
trading/DTC instructions. Proxy voting records will be retained in compliance
with Rule 204-2 under the Investment Advisers Act.
V. VOTING PROCEDURES
1. Custodian banks, outside brokerage firms and Wexford Clearing Services
Corporation are responsible for forwarding proxies directly to GAMCO.
Proxies are received in one of two forms:
o Shareholder Vote Authorization Forms (VAFs) - Issued by ADP. VAFs must be
voted through the issuing institution causing a time lag. ADP is an outside
service contracted by the various institutions to issue proxy materials.
o Proxy cards which may be voted directly.
2. Upon receipt of the proxy, the number of shares each form represents is
logged into the proxy system according to security.
3. In the case of a discrepancy such as an incorrect number of shares, an
improperly signed or dated card, wrong class of security, etc., the issuing
custodian is notified by phone. A corrected proxy is requested. Any arrangements
are made to insure that a proper proxy is received in time to be voted
(overnight delivery, fax, etc.). When securities are out on loan on record date,
the custodian is requested to supply written verification.
4. Upon receipt of instructions from the proxy committee (see Administrative),
the votes are cast and recorded for each account on an individual basis.
Since January 1, 1992, records have been maintained on the Proxy Edge system.
The system is backed up regularly. From 1990 through 1991, records were
maintained on the PROXY VOTER system and in hardcopy format. Prior to 1990,
records were maintained on diskette and in hardcopy format.
PROXY EDGE records include:
Security Name and Cusip Number
Date and Type of Meeting (Annual, Special, Contest)
Client Name Adviser or Fund Account Number
Directors' Recommendation
How GAMCO voted for the client on each issue
The rationale for the vote when it appropriate
Records prior to the institution of the PROXY EDGE system include:
Security name
Type of Meeting (Annual, Special, Contest)
Date of Meeting Name of Custodian
Name of Client
Custodian Account Number
Adviser or Fund Account Number
Directors' recommendation
How the Adviser voted for the client on each issue
Date the proxy statement was received and by whom
Name of person posting the vote
Date and method by which the vote was cast
o From these records individual client proxy voting records are compiled. It
is our policy to provide institutional clients with a proxy voting record
during client reviews. In addition, we will supply a proxy voting record at
the request of the client on a quarterly, semi-annual or annual basis.
5. VAFs are kept alphabetically by security. Records for the current proxy
season are located in the Proxy Voting Department office. In preparation for the
upcoming season, files are transferred to an offsite storage facility during
January/February.
6. Shareholder Vote Authorization Forms issued by ADP are always sent directly
to a specific individual at ADP.
7. If a proxy card or VAF is received too late to be voted in the conventional
matter, every attempt is made to vote on one of the following manners:
o VAFs can be faxed to ADP up until the time of the meeting. This is followed
up by mailing the original form.
o When a solicitor has been retained, the solicitor is called. At the
solicitor's direction, the proxy is faxed.
8. In the case of a proxy contest, records are maintained for each opposing
entity.
9. Voting in Person
a) At times it may be necessary to vote the shares in person. In this case, a
"legal proxy" is obtained in the following manner:
o Banks and brokerage firms using the services at ADP:
The back of the VAF is stamped indicating that we wish to vote in person.
The forms are then sent overnight to ADP. ADP issues individual legal proxies
and sends them back via overnight (or the Adviser can pay messenger charges). A
lead-time of at least two weeks prior to the meeting is needed to do this.
Alternatively, the procedures detailed below for banks not using ADP may be
implemented.
o Banks and brokerage firms issuing proxies directly:
The bank is called and/or faxed and a legal proxy is requested.
All legal proxies should appoint:
"REPRESENTATIVE OF [ADVISER NAME] WITH FULL POWER OF SUBSTITUTION."
b) The legal proxies are given to the person attending the meeting along with
the following supplemental material:
o A limited Power of Attorney appointing the attendee an Adviser
representative.
o A list of all shares being voted by custodian only. Client names and
account numbers are not included. This list must be presented, along with
the proxies, to the Inspectors of Elections and/or tabulator at least
one-half hour prior to the scheduled start of the meeting. The tabulator
must "qualify" the votes (i.e. determine if the vote have previously been
cast, if the votes have been rescinded, etc. vote have previously been
cast, etc.).
o A sample ERISA and Individual contract.
o A sample of the annual authorization to vote proxies form.
o A copy of our most recent Schedule 13D filing (if applicable).
APPENDIX A
PROXY GUIDELINES
===========================
PROXY VOTING GUIDELINES
===========================
GENERAL POLICY STATEMENT
It is the policy of GAMCO INVESTORS, INC. to vote in the best economic interests
of our clients. As we state in our Magna Carta of Shareholders Rights,
established in May 1988, we are neither for nor against management. We are for
shareholders.
At our first proxy committee meeting in 1989, it was decided that each proxy
statement should be evaluated on its own merits within the framework first
established by our Magna Carta of Shareholders Rights. The attached guidelines
serve to enhance that broad framework.
We do not consider any issue routine. We take into consideration all of our
research on the company, its directors, and their short and long-term goals for
the company. In cases where issues that we generally do not approve of are
combined with other issues, the negative aspects of the issues will be factored
into the evaluation of the overall proposals but will not necessitate a vote in
opposition to the overall proposals.
BOARD OF DIRECTORS
The advisers do not consider the election of the Board of Directors a routine
issue. Each slate of directors is evaluated on a case-by-case basis.
Factors taken into consideration include:
o Historical responsiveness to shareholders
This may include such areas as:
-Paying greenmail
-Failure to adopt shareholder resolutions receiving a majority of
shareholder votes
o Qualifications
o Nominating committee in place
o Number of outside directors on the board
o Attendance at meetings
o Overall performance
SELECTION OF AUDITORS
In general, we support the Board of Directors' recommendation for audit
BLANK CHECK PREFERRED STOCK
We oppose the issuance of blank check preferred stock.
Blank check preferred stock allows the company to issue stock and establish
dividends, voting rights, etc. without further shareholder approval.
CLASSIFIED BOARD
A classified board is one where the directors are divided into classes with
overlapping terms. A different class is elected at each annual meeting.
While a classified board promotes continuity of directors facilitating long
range planning, we feel directors should be accountable to shareholders on an
annual basis. We will look at this proposal on a case-by-case basis taking into
consideration the board's historical responsiveness to the rights of
shareholders.
Where a classified board is in place we will generally not support attempts to
change to an annually elected board.
When an annually elected board is in place, we generally will not support
attempts to classify the board.
INCREASE AUTHORIZED COMMON STOCK
The request to increase the amount of outstanding shares is considered on a
case-by-case basis.
Factors taken into consideration include:
o Future use of additional shares
-Stock split
-Stock option or other executive compensation plan
-Finance growth of company/strengthen balance sheet
-Aid in restructuring
-Improve credit rating
-Implement a poison pill or other takeover defense
o Amount of stock currently authorized but not yet issued or reserved for
stock option plans
o Amount of additional stock to be authorized and its dilutive effect
We will support this proposal if a detailed and verifiable plan for the use of
the additional shares is contained in the proxy statement.
CONFIDENTIAL BALLOT
We support the idea that a shareholder's identity and vote should be treated
with confidentiality.
However, we look at this issue on a case-by-case basis.
In order to promote confidentiality in the voting process, we endorse the use of
independent Inspectors of Election.
CUMULATIVE VOTING
In general, we support cumulative voting.
Cumulative voting is a process by which a shareholder may multiply the number of
directors being elected by the number of shares held on record date and cast the
total number for one candidate or allocate the voting among two or more
candidates.
Where cumulative voting is in place, we will vote against any proposal to
rescind this shareholder right.
Cumulative voting may result in a minority block of stock gaining representation
on the board. When a proposal is made to institute cumulative voting, the
proposal will be reviewed on a case-by-case basis. While we feel that each board
member should represent all shareholders, cumulative voting provides minority
shareholders an opportunity to have their views represented.
DIRECTOR LIABILITY AND INDEMNIFICATION
We support efforts to attract the best possible directors by limiting the
liability and increasing the indemnification of directors, except in the case of
insider dealing.
EQUAL ACCESS TO THE PROXY
The SEC's rules provide for shareholder resolutions. However, the resolutions
are limited in scope and there is a 500 word limit on proponents' written
arguments. Management has no such limitations. While we support equal access to
the proxy, we would look at such variables as length of time required to
respond, percentage of ownership, etc.
FAIR PRICE PROVISIONS
Charter provisions requiring a bidder to pay all shareholders a fair price are
intended to prevent two-tier tender offers that may be abusive. Typically, these
provisions do not apply to board-approved transactions.
We support fair price provisions because we feel all shareholders should be
entitled to receive the same benefits.
Reviewed on a case-by-case basis.
GOLDEN PARACHUTES
Golden parachutes are severance payments to top executives who are terminated or
demoted after a takeover.
We support any proposal that would assure management of its own welfare so that
they may continue to make decisions in the best interest of the company and
shareholders even if the decision results in them losing their job. We do not,
however, support excessive golden parachutes. Therefore, each proposal will be
decided on a case-by- case basis.
Note: Congress has imposed a tax on any parachute that is more than three times
the executive's average annual compensation.
ANTI-GREENMAIL PROPOSALS
We do not support greenmail. An offer extended to one shareholder should be
extended to all shareholders equally across the board.
LIMIT SHAREHOLDERS' RIGHTS TO CALL SPECIAL MEETINGS
We support the right of shareholders to call a special meeting.
CONSIDERATION OF NONFINANCIAL EFFECTS OF A MERGER
This proposal releases the directors from only looking at the financial effects
of a merger and allows them the opportunity to consider the merger's effects on
employees, the community, and consumers.
As a fiduciary, we are obligated to vote in the best economic interests of our
clients. In general, this proposal does not allow us to do that. Therefore, we
generally cannot support this proposal.
Reviewed on a case-by-case basis.
MERGERS, BUYOUTS, SPIN-OFFS, RESTRUCTURINGS
Each of the above is considered on a case-by-case basis. According to the
Department of Labor, we are not required to vote for a proposal simply because
the offering price is at a premium to the current market price. We may take into
consideration the long term interests of the shareholders.
MILITARY ISSUES
Shareholder proposals regarding military production must be evaluated on a
purely economic set of criteria for our ERISA clients. As such, decisions will
be made on a case-by-case basis.
In voting on this proposal for our non-ERISA clients, we will vote according to
the client's direction when applicable. Where no direction has been given, we
will vote in the best economic interests of our clients. It is not our duty to
impose our social judgment on others.
NORTHERN IRELAND
Shareholder proposals requesting the signing of the MacBride principles for the
purpose of countering the discrimination of Catholics in hiring practices must
be evaluated on a purely economic set of criteria for our ERISA clients. As
such, decisions will be made on a case-by-case basis.
In voting on this proposal for our non-ERISA clients, we will vote according to
client direction when applicable. Where no direction has been given, we will
vote in the best economic interests of our clients. It is not our duty to impose
our social judgment on others.
OPT OUT OF STATE ANTI-TAKEOVER LAW
This shareholder proposal requests that a company opt out of the coverage of the
state's takeover statutes. Example: Delaware law requires that a buyer must
acquire at least 85% of the company's stock before the buyer can exercise
control unless the board approves.
We consider this on a case-by-case basis. Our decision will be based on the
following:
o State of Incorporation
o Management history of responsiveness to shareholders
o Other mitigating factors
POISON PILL
In general, we do not endorse poison pills.
In certain cases where management has a history of being responsive to the needs
of shareholders and the stock is very liquid, we will reconsider this position.
REINCORPORATION
Generally, we support reincorporation for well-defined business reasons. We
oppose reincorporation if proposed solely for the purpose of reincorporating in
a state with more stringent anti-takeover statutes that may negatively impact
the value of the stock.
STOCK OPTION PLANS
Stock option plans are an excellent way to attract, hold and motivate directors
and employees. However, each stock option plan must be evaluated on its own
merits, taking into consideration the following:
o Dilution of voting power or earnings per share by more than 10%
o Kind of stock to be awarded, to whom, when and how much
o Method of payment
o Amount of stock already authorized but not yet issued under existing stock
option plans
SUPERMAJORITY VOTE REQUIREMENTS
Supermajority vote requirements in a company's charter or bylaws require a level
of voting approval in excess of a simple majority of the outstanding shares. In
general, we oppose supermajority-voting requirements. Supermajority requirements
often exceed the average level of shareholder participation. We support
proposals' approvals by a simple majority of the shares voting.
LIMIT SHAREHOLDERS RIGHT TO ACT BY WRITTEN CONSENT
Written consent allows shareholders to initiate and carry on a shareholder
action without having to wait until the next annual meeting or to call a special
meeting. It permits action to be taken by the written consent of the same
percentage of the shares that would be required to effect proposed action at a
shareholder meeting.
Reviewed on a case-by-case basis.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
PORTFOLIO MANAGER
-----------------
Mr. Mario J. Gabelli, CFA, is primarily responsible for the day-to-day
management of The Gabelli Utility Trust, (the Trust). Mr. Gabelli has served as
Chairman, Chief Executive Officer, and Chief Investment Officer -Value
Portfolios of GAMCO Investors, Inc. and its affiliates since their organization.
MANAGEMENT OF OTHER ACCOUNTS
----------------------------
The table below shows the number of other accounts managed by Mario J. Gabelli
and the total assets in each of the following categories: registered investment
companies, other paid investment vehicles and other accounts. For each category,
the table also shows the number of accounts and the total assets in the accounts
with respect to which the advisory fee is based on account performance.
# of Accounts
Managed with Total Assets with
Total Advisory Fee Advisory Fee
Name of Portfolio # of Accounts Based on Based on
Manager Type of Accounts Managed Total Assets Performance Performance
-------- ---------------- ------- ------------ ----------- -----------
1. Mario J. Gabelli Registered Investment 24 $12.8B* 5 $4.6B
Companies:
Other Pooled Investment 20 $946.4M* 19 $704.6M
Vehicles:
Other Accounts: 1,882 10.0B 5 $1.3B
* Represents the portion of assets for which the portfolio manager has primary
responsibility in the accounts indicated. The accounts indicated may contain
additional assets under the primary responsibility of other portfolio managers.
POTENTIAL CONFLICTS OF INTEREST
-------------------------------
As reflected above, Mr. Gabelli manages accounts in addition to the Trust.
Actual or apparent conflicts of interest may arise when a Portfolio Manager also
has day-to-day management responsibilities with respect to one or more other
accounts. These potential conflicts include:
ALLOCATION OF LIMITED TIME AND ATTENTION. As indicated above, Mr. Gabelli
manages multiple accounts. As a result, he will not be able to devote all of his
time to management of the Trust. Mr. Gabelli, therefore, may not be able to
formulate as complete a strategy or identify equally attractive investment
opportunities for each of those accounts as might be the case if he were to
devote all of his attention to the management of only the Trust.
ALLOCATION OF LIMITED INVESTMENT OPPORTUNITIES. As indicated above, Mr. Gabelli
manages managed accounts with investment strategies and/or policies that are
similar to the Trust. In these cases, if the he identifies an investment
opportunity that may be suitable for multiple accounts, a Fund may not be able
to take full advantage of that opportunity because the opportunity may be
allocated among all or many of these accounts or other accounts managed
primarily by other Portfolio Managers of the Adviser, and their affiliates. In
addition, in the event Mr. Gabelli determines to purchase a security for more
than one account in an aggregate amount that may influence the market price of
the security, accounts that purchased or sold the security first may receive a
more favorable price than accounts that made subsequent transactions.
SELECTION OF BROKER/DEALERS. Because of Mr. Gabelli's position with the
Distributor and his indirect majority ownership interest in the Distributor, he
may have an incentive to use the Distributor to execute portfolio transactions
for a Fund.
PURSUIT OF DIFFERING STRATEGIES. At times, Mr. Gabelli may determine that an
investment opportunity may be appropriate for only some of the accounts for
which he exercises investment responsibility, or may decide that certain of the
funds or accounts should take differing positions with respect to a particular
security. In these cases, he may execute differing or opposite transactions for
one or more accounts which may affect the market price of the security or the
execution of the transaction, or both, to the detriment of one or more other
accounts.
VARIATION IN COMPENSATION. A conflict of interest may arise where the financial
or other benefits available to Mr. Gabelli differ among the accounts that he
manages. If the structure of the Adviser's management fee or the Portfolio
Manager's compensation differs among accounts (such as where certain accounts
pay higher management fees or performance-based management fees), the Portfolio
Manager may be motivated to favor certain accounts over others. The Portfolio
Manager also may be motivated to favor accounts in which he has an investment
interest, or in which the Adviser, or their affiliates have investment
interests. Similarly, the desire to maintain assets under management or to
enhance a Portfolio Manager's performance record or to derive other rewards,
financial or otherwise, could influence the Portfolio Manager in affording
preferential treatment to those accounts that could most significantly benefit
the Portfolio Manager. For example, as reflected above, if Mr. Gabelli manages
accounts which have performance fee arrangements, certain portions of his
compensation will depend on the achievement of performance milestones on those
accounts. Mr. Gabelli could be incented to afford preferential treatment to
those accounts and thereby by subject to a potential conflict of interest.
The Adviser, and the Funds have adopted compliance policies and procedures that
are designed to address the various conflicts of interest that may arise for the
Adviser and their staff members. However, there is no guarantee that such
policies and procedures will be able to detect and prevent every situation in
which an actual or potential conflict may arise.
COMPENSATION STRUCTURE FOR MARIO J. GABELLI
-------------------------------------------
Mr. Gabelli receives incentive-based variable compensation based on a percentage
of net revenues received by the Adviser for managing the Trust. Net revenues are
determined by deducting from gross investment management fees the firm's
expenses (other than Mr. Gabelli's compensation) allocable to this Trust. Five
closed-end registered investment companies (including this Trust) managed by Mr.
Gabelli have arrangements whereby the Adviser will only receive its investment
advisory fee attributable to the liquidation value of outstanding preferred
stock (and Mr. Gabelli would only receive his percentage of such advisory fee)
if certain performance levels are met. Additionally, he receives similar
incentive based variable compensation for managing other accounts within the
firm and its affiliates. This method of compensation is based on the premise
that superior long-term performance in managing a portfolio should be rewarded
with higher compensation as a result of growth of assets through appreciation
and net investment activity. The level of compensation is not determined with
specific reference to the performance of any account against any specific
benchmark. One of the other registered investment companies managed by Mr.
Gabelli has a performance (fulcrum) fee arrangement for which his compensation
is adjusted up or down based on the performance of the investment company
relative to an index. Mr. Gabelli manages other accounts with performance fees.
Compensation for managing these accounts has two components. One component is
based on a percentage of net revenues to the investment adviser for managing the
account. The second component is based on absolute performance of the account,
with respect to which a percentage of such performance fee is paid to Mr.
Gabelli. As an executive officer of the Adviser's parent company, GBL, Mr.
Gabelli also receives ten percent of the net operating profits of the parent
company. He receives no base salary, no annual bonus, and no stock options.
OWNERSHIP OF SHARES IN THE FUND
-------------------------------
Mario Gabelli owned 590,738.82 shares of the Trust as of December 31, 2005.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
REGISTRANT PURCHASES OF EQUITY SECURITIES
=============================================================================================================================
(C) TOTAL NUMBER OF (D) MAXIMUM NUMBER (OR
SHARES (OR UNITS) APPROXIMATE DOLLAR VALUE) OF
(A) TOTAL NUMBER OF PURCHASED AS PART OF SHARES (OR UNITS) THAT MAY YET
SHARES (OR UNITS) (B) AVERAGE PRICE PAID PUBLICLY ANNOUNCED PLANS BE PURCHASED UNDER THE PLANS
PERIOD PURCHASED PER SHARE (OR UNIT) OR PROGRAMS OR PROGRAMS
=============================================================================================================================
=============================================================================================================================
Month #1 Common - N/A Common - N/A Common - N/A Common - 29,169,262
07/01/05
through Preferred Series A - N/A Preferred Series A - N/A Preferred Series A - N/A Preferred Series A - 1,184,200
07/31/05
=============================================================================================================================
=============================================================================================================================
Month #2 Common - N/A Common - N/A Common - N/A Common - 29,196,113
08/01/05
through Preferred Series A - N/A Preferred Series A - N/A Preferred Series A - N/A Preferred Series A - 1,184,200
08/31/05
=============================================================================================================================
=============================================================================================================================
Month #3 Common - N/A Common - N/A Common - N/A Common - 29,223,444
09/01/05
through Preferred Series A - N/A Preferred Series A - N/A Preferred Series A - N/A Preferred Series A - 1,184,200
09/30/05
=============================================================================================================================
=============================================================================================================================
Month #4 Common - N/A Common - N/A Common - N/A Common - 29,251,346
10/01/05
through Preferred Series A - N/A Preferred Series A - N/A Preferred Series A - N/A Preferred Series A - 1,184,200
10/31/05
=============================================================================================================================
=============================================================================================================================
Month #5 Common - N/A Common - N/A Common - N/A Common - 29,279,783
11/01/05
through Preferred Series A - N/A Preferred Series A - N/A Preferred Series A - N/A Preferred Series A - 1,184,200
11/30/05
=============================================================================================================================
=============================================================================================================================
Month #6 Common - N/A Common - N/A Common - N/A Common - 29,307,802
12/01/05
through Preferred Series A - N/A Preferred Series A - N/A Preferred Series A - N/A Preferred Series A - 1,184,200
12/31/05
=============================================================================================================================
=============================================================================================================================
Total Common - N/A Common - N/A Common - N/A N/A
Preferred Series A - N/A Preferred Series A - N/A Preferred Series A - N/A
=============================================================================================================================
Footnote columns (c) and (d) of the table, by disclosing the following
information in the aggregate for all plans or programs publicly announced:
a. The date each plan or program was announced - The notice of the potential
repurchase of common and preferred shares occurs quarterly in the Fund's
quarterly report in accordance with Section 23(c) of the Investment Company
Act of 1940, as amended.
b. The dollar amount (or share or unit amount) approved - Any or all common
shares outstanding may be repurchased when the Fund's common shares are
trading at a discount of 10% or more from the net asset value of the
shares.
Any or all preferred shares outstanding may be repurchased when the Fund's
preferred shares are trading at a discount to the liquidation value of
$25.00.
c. The expiration date (if any) of each plan or program - The Fund's
repurchase plans are ongoing.
d. Each plan or program that has expired during the period covered by the
table - The Fund's repurchase plans are ongoing.
e. Each plan or program the registrant has determined to terminate prior to
expiration, or under which the registrant does not intend to make further
purchases. - The Fund's repurchase plans are ongoing.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's Board of Trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these
controls and procedures required by Rule 30a-3(b) under the 1940 Act
(17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the
Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject
of disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) The Gabelli Utility Trust
--------------------------------------------------------------------
By (Signature and Title)* /s/ Bruce N. Alpert
-------------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date March 10, 2006
----------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Bruce N. Alpert
-------------------------------------------------------
Bruce N. Alpert, Principal Executive Officer &
Principal Financial Officer
Date March 10, 2006
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.