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GABELLI UTILITY TRUST
SEMI-ANNUAL REPORT
JUNE 30, 2001
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THE GABELLI UTILITY TRUST
Our cover icon represents the underpinnings of Gabelli. The Teton mountains in
Wyoming represent what we believe in in America -- that creativity, ingenuity,
hard work and a global uniqueness provide enduring values. They also stand out
in an increasingly complex, interconnected and interdependent economic world.
INVESTMENT OBJECTIVE:
The Gabelli Utility Trust is a closed-end, non-diversified management investment
company whose primary objectives are long-term growth of capital and income.
The Trust will invest in companies that provide products, services or equipment
for the generation or distribution of electricity, gas and water. Additionally,
the Trust will invest in companies in telecommunications services or infra-
structure operations.
THIS REPORT IS PRINTED ON RECYCLED PAPER.
[GRAPHIC OMITTED OF MARIO J. GABELLI]
MARIO J. GABELLI
[GRAPHIC OMITTED OF THE GABELLI UTILITY TRUST]
THE GABELLI UTILITY TRUST
[GRAPHIC OMITTED OF TRIANGLE CASH FLOW RESEARCH]
EPS
PMV
MANAGEMENT
CASH FLOW
RESEARCH
TO OUR SHAREHOLDERS,
The quarter just ended was tough for utility investors. In its quarterly
mutual fund review published July 9, 2001, the Wall Street Journal listed the
fifty worst performing mutual funds. Nine of the fifty listed were utility
funds. (No, we weren't on the list).
The political heat has probably peaked. Energy prices have plunged as the
slower U.S. economy has depressed demand and as increased exploration and
development have increased supplies. With the forward price curve for natural
gas no longer backward-dated but now back in contango, gas injections into
storage are surging and natural gas prices are falling rapidly. As this is
written, spot natural gas prices are barely above the psychologically important
$3.00 per mcf (thousand cubic feet) level. If natural gas falls below $3.00 for
any appreciable length of time, exploration and development budgets will be
slashed. Generating capacity is clearly moving from shortage into surplus in
many parts of the country, and wholesale prices continue to decline.
Because of regulatory lag, the utilities still have a rough six months or
so where they are vulnerable to regulatory action. By next year, however, we
should be back to a more benign "business as usual" environment where the
utilities can get off of the front pages. On balance this is positive.
INVESTMENT PERFORMANCE
For the second quarter ended June 30, 2001, The Gabelli Utility Trust's
(the "Trust") net asset value ("NAV") total return rose 3.06% after adjusting
for the reinvestment of the $0.15 per share in distributions. The Standard &
Poor's ("S&P") Utility Index and the Lipper Utility Fund Average declined 5.72%
and 3.26%, respectively, over the same period. The S&P Utility Index is an
unmanaged indicator of electric and gas utility stock performance, while the
Lipper Average reflects the average performance of mutual funds classified in
this particular category.
The Trust was up 17.34% for the trailing twelve-month period after
adjusting for the reinvestment of the $1.00 per share in distributions. The S&P
Utility Index rose 21.28% while the Lipper Utility Fund Average declined 3.30%,
over the same twelve-month period. Since inception on July 9, 1999 through June
30, 2001, the Trust had a cumulative total return of 26.61%, including
adjustments of $1.45 per share in distributions, which equates to an average
annual total return of 12.65%.
The Trust's shares of beneficial interest ended the second quarter at
$8.90 per share on the New York Stock Exchange, a premium to the net asset value
of 12.23% and a total return of 7.82% for the second quarter. The Trust's shares
rose 26.59% for the trailing twelve-month period after adjusting for all
distributions.
OUR APPROACH
There are nearly 80 publicly traded investor-owned electric utilities in
the U.S., and this is at least 50 more than we need from the standpoint of
economic efficiency. The balkanized structure of the industry is inherently
inefficient, and competitive forces are now putting pressure on the marginal
players. The big companies feel the need to get bigger, and the small companies
are selling out as the cost of staying in the game rises. It is only because of
a complex and lengthy merger review and approval process that the industry
remains as fragmented as it is. Our investments in regulated utility companies
have primarily, though not exclusively, focused on fundamentally sound,
reasonably priced mid-cap and small-cap utilities that are likely acquisition
targets for large utilities seeking to bulk up. We also like the beneficiaries
of developing trends. This has led to our ongoing focus on incumbent local
telecommunication companies, natural gas pipelines and storage operators, and
wholesale electric generators, another group that is in our opinion increasingly
ripe for consolidation.
1
INVESTMENT RESULTS (a)
AVERAGE ANNUAL RETURNS - JUNE 30, 2001
--------------------------------------
NAV Average Average Annual
Annual Return (A) Investment Return (C)
----------------- ---------------------
1 Year ................... 17.34% 26.59%
Life of Fund (b) ......... 12.65% 15.61%
(a) Life of Fund return based on initial net asset value of $7.50. Total returns
and average annual returns reflect changes in net asset value and reinvestment
of distributions and are net of expenses. Of course, the returns noted represent
past performance and do not guarantee future results. Investment returns and the
principal value of an investment will fluctuate. When shares are sold they may
be worth more or less than their original cost.
(b) From commencement of investment operations on July 9, 1999.
(c) Life of Fund return based on initial offering price of $7.50. Total returns
and average annual returns reflect changes in closing market values on the New
York Stock Exchange and reinvestment of distributions.
COMMENTARY
In California, the war of words continued through the second quarter, and
casualties were inflicted on all sides. The state of California's debt ratings
came under pressure as the burden of state wholesale electricity purchases
continues to mount. The state signed long term power supply contracts with the
wholesale generators and immediately tried to renegotiate them. Wholesale
generating companies continue to deny charges of price gouging but are clearly
going to have to cough up some combination of refunds and discounts. The Bush
administration adamantly opposed wholesale electricity price caps and then
pushed the Federal Energy Regulatory Commission ("FERC") to impose them, which
the FERC did. Price caps are apparently a bad idea whose time has come.
Companies and industries that become political footballs are rarely
rewarding investments, and utility stocks were among the worst performers in the
second quarter. The broad equity market was up, and money was clearly moving out
of traditionally defensive sectors into groups that were viewed as being
oversold. The weakness that utility stocks would have encountered anyway from
sector rotation was exacerbated, in our opinion, by the hot political rhetoric
and the threat of regulatory clawbacks.
In our view, the major investment theme for electric, gas and telephone
utilities can be summed up in two words: size matters. Electric generators with
a large and geographically diverse portfolio of generating plants can trade
around their structural long positions to enhance returns while avoiding the
risk of asset concentration in a single market that experiences a hiccup, as all
markets do from time to time. Electric, gas and telephone distribution companies
can spread their substantial fixed costs over a larger base of customers, and
see the cost per customer decline, enhancing earnings while reducing prices. The
current unsettled market conditions are likely to cause the consolidation
activity seen over the past several years to slow for a while, but the
underlying economics continue to point to continuing merger and acquisition
activity over time. We are in the eye of the hurricane, and the winds are going
to blow again once we have waited out the current lull.
2
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Trust.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time.
AGL RESOURCES INC. (ATG - $23.75 - NYSE) is a regional energy holding company
with principal operations in the natural gas distribution business.
Headquartered in Atlanta, and serving three southeastern states, AGL Resources
has 1.8 million customers. Its recent acquisition of Virginia Natural Gas closed
ahead of schedule in just 5 months and is expected to extend the company's
successful growth in the fast-growing southeastern region.
CINERGY CORP. (CIN - $34.95 - NYSE) serves more than 1.4 million electric
customers and 478,000 gas customers in Indiana, Ohio and Kentucky. The company
owns or operates 21,000 megawatts ("MW's") of generation strategically located
in the most active trading "hub" in the U.S. The opportunity to create earnings
growth through an Energy Merchant business may be significant, as Cinergy's
electricity and gas trading volumes and profits doubled from the previous year.
DTE ENERGY CO. (DTE - $46.44 - NYSE) is a Detroit-based diversified energy
company involved in the development and management of energy-related businesses
and services nationwide. DTE Energy's principal operating subsidiaries are
Detroit Edison, an electric utility serving 2.1 million customers. The company
recently completed the acquisition of MCN Energy, the gas distribution company
serving much of southeastern Michigan. The company expects to exceed its initial
estimate of cost savings. DTE is also one of the nation's largest purchasers,
transporters and marketers of coal.
MAINE PUBLIC SERVICE CO. (MAP - $28.75 - ASE) transmits and distributes
electricity to more than 35,000 retail customers in northern Maine. The company
also supplies large commercial users in the production of agricultural and
forest products. The electrical system has interconnections with New Brunswick,
Canada, allowing support from the New Brunswick system and indirectly from the
Hydro-Quebec system. Maine Public Service is the third and smallest
investor-owned electric utility in Maine; the other two have been acquired by
out-of-state utilities. MAP is a likely acquisition target.
SCANA CORP. (SCG - $28.40 - NYSE) is the parent company of South Carolina
Electric & Gas. It generates and distributes electricity to more than 537,000
South Carolina households and businesses. It provides natural gas to nearly 1.1
million customers in North Carolina, South Carolina and Georgia. The company was
able to monetize its telecommunications ventures this past spring through
Deutsche Telekom's acquisition of VoiceStream Wireless and Powertel. SCANA is a
small company surrounded by much larger utilities: Duke and Progress to the
north, and Southern Company to the south. Either Progress or Southern would
acquire SCANA in a heartbeat if management was willing to sell. Unfortunately,
in our view, the company is determined to remain independent for the foreseeable
future.
SEMCO ENERGY INC. (SEN - $15.00 - NYSE) is a diversified energy and
infrastructure company distributing gas to over 367,000 customers in Michigan
and Alaska. It also has businesses involved in gas engineering services
including pipeline construction and natural gas storage in various regions
throughout the United States. The company's propane division is one of the
largest suppliers in the Upper Peninsula of Michigan.
SHAREHOLDER MEETING - MAY 14, 2001 -- FINAL RESULTS
The Annual Meeting of Shareholders was held on May 14, 2001 at the
Greenwich Public Library in Greenwich, Connecticut. At that meeting,
shareholders elected Mario J. Gabelli, Thomas E. Bratter, Felix J. Christiana
and Vincent D. Enright as Directors of the Trust. A total of 8,387,377 votes,
8,380,684 votes, 8,372,640 votes and 8,366,339 votes were cast in favor of each
Director and 63,980 votes, 70,672 votes, 78,717 votes and 85,018 votes were
withheld for each Director, respectively.
3
Anthony J. Colavita, James P. Conn, Frank J. Fahrenkopf, Jr., John D.
Gabelli, Robert J. Morrissey, Karl Otto Pohl, Anthony R. Pustorino and Salvatore
J. Zizza continue to serve in their capacities as Directors of the Trust.
We thank you for your participation and appreciate your continued support.
SPECIAL NOTE
It is with deep sorrow that we report the passing of our valued friend and
Director, Felix J. Christiana. The Board of Directors acknowledges with great
appreciation the passionate contributions, guidance and friendship given by Mr.
Christiana during his association with The Gabelli Utility Trust. The Board of
Directors and Officers of the Trust will greatly miss Mr. Christiana.
MONTHLY DISTRIBUTIONS
The Gabelli Utility Trust has a $.05 per share monthly distribution policy
in place. The Trust's monthly distribution has been increased by 20% to $.06 per
share beginning in October 2001.
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at http://www.gabelli.com
contains information about Gabelli Asset Management Inc., the Gabelli Mutual
Funds, IRAs, 401(k)s, quarterly reports, closing prices and other current news.
You can send us e-mail at info@gabelli.com.
In our efforts to bring our shareholders more timely portfolio
information, Gabelli Fund's portfolio managers regularly participate in chat
sessions at www.gabelli.com as reflected below.
WHO WHEN
--- ----
Special Chats: Mario J. Gabelli First Monday of each month
Howard Ward First Tuesday of each month
In addition, every Wednesday will feature a different portfolio manager.
The upcoming Wednesday chat schedule is as follows:
AUGUST SEPTEMBER OCTOBER
------ --------- -------
1st Wednesday Caesar Bryan Walter Walsh Ivan Arteaga
2nd Wednesday Ivan Arteaga Caesar Bryan Tim O'Brien
3rd Wednesday Linda Caulkin Hart Woodson Susan Byrne
4th Wednesday Tim O'Brien Barbara Marcin Caesar Bryan
5th Wednesday Barbara Marcin Barbara Marcin
All chat sessions start at 4:15 ET. Please arrive early, as participation
is limited.
You may sign up for our HIGHLIGHTS email newsletter at www.gabelli.com and
receive early notice of chat sessions, closing mutual fund prices, news events
and media sightings.
Sincerely,
/S/ MARIO J. GABELLI
MARIO J. GABELLI, CFA
Portfolio Manager and Chief Investment Officer
August 8, 2001
4
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS
JUNE 30, 2001 (UNAUDITED)
MARKET
SHARES COST VALUE
------ ----------- -----------
COMMON STOCKS -- 70.5%
AGRICULTURE -- 0.1%
10,600 Cadiz Inc.+ .......................... $ 95,339 $ 97,626
----------- -----------
CABLE -- 0.1%
10,000 NTL Inc.+ ............................ 184,732 120,500
----------- -----------
COMMUNICATIONS EQUIPMENT -- 0.6%
65,000 Furukawa Electric
Co. Ltd. ........................... 1,062,811 518,580
----------- -----------
ENERGY AND UTILITIES: ELECTRIC-- 27.6%
15,742 AES Corp.+ ........................... 697,838 677,693
85,000 Bangor Hydro-Electric Co. ............ 1,702,158 2,259,300
35,000 Cinergy Corp. ........................ 1,009,906 1,223,250
10,000 Cleco Corp. .......................... 153,250 227,500
115,000 Conectiv Inc. ........................ 2,019,821 2,484,000
35,000 DPL Inc. ............................. 682,864 1,013,600
16,219 DTE Energy Co. ....................... 713,392 753,210
170,000 El Paso Electric Co.+ ................ 1,552,529 2,718,300
20,000 GPU Inc. ............................. 605,810 703,000
52,200 Maine Public Service Co. ............. 946,754 1,500,750
250,000 Niagara Mohawk
Holdings Inc.+ ..................... 3,680,499 4,422,500
120,000 Northeast Utilities .................. 2,501,764 2,490,000
1,500 Orion Power Holdings Inc.+ ........... 28,106 35,715
57,000 SCANA Corp. .......................... 1,455,381 1,618,800
20,000 TECO Energy Inc. ..................... 434,125 610,000
25,000 UIL Holdings Corp. ................... 1,096,481 1,214,750
20,000 Unisource Energy Corp. ............... 236,625 459,400
----------- -----------
19,517,303 24,411,768
----------- -----------
ENERGY AND UTILITIES: INTEGRATED-- 18.0%
13,000 Allete ............................... 222,463 292,500
40,000 CH Energy Group Inc. ................. 1,481,732 1,758,000
52,000 DQE Inc. ............................. 1,403,460 1,170,000
15,000 Edison International ................. 165,700 167,250
7,000 Empire District Electric Co. ......... 138,350 144,830
18,000 Entergy Corp. ........................ 505,492 691,020
50,000 Florida Public Utilities Co. ......... 792,675 868,000
30,000 Madison Gas &
Electric Co. ......................... 621,679 834,000
25,000 Montana Power Co. .................... 598,189 290,000
52,000 NSTAR ................................ 2,222,019 2,213,120
18,000 PG&E Corp. ........................... 213,987 201,600
40,000 Progress Energy Inc. ................. 20,800 20,200
5,000 Puget Energy Inc. .................... 117,520 131,000
100,000 RGS Energy Group Inc. ................ 2,704,202 3,750,000
5,000 Sierra Pacific Resources+ ............ 68,000 79,950
140,000 Western Resources Inc. ............... 2,460,757 3,010,000
7,000 WPS Resources Corp. .................. 204,319 246,750
----------- -----------
13,941,344 15,868,220
----------- -----------
MARKET
SHARES COST VALUE
------ ----------- -----------
ENERGY AND UTILITIES: NATURAL GAS-- 10.4%
37,000 AGL Resources Inc. ................... $ 678,225 $ 878,750
1,000 Chesapeake Utilities Corp. ........... 18,495 18,880
34,000 Delta Natural Gas Co. Inc. ........... 570,349 666,400
3,000 Dynegy Inc., Cl. A ................... 49,575 139,500
7,000 National Fuel Gas Co. ................ 356,897 363,930
12,000 Nicor Inc. ........................... 434,475 467,760
19,000 Peoples Energy Corp. ................. 665,481 763,800
23,000 Piedmont Natural
Gas Co. Inc. ....................... 687,398 816,960
110,000 SEMCO Energy Inc. .................... 1,693,345 1,650,000
16,433 Southern Union Co. ................... 281,096 335,233
130,000 Southwest Gas Corp. .................. 3,288,133 3,078,400
----------- -----------
8,723,469 9,179,613
----------- -----------
ENERGY AND UTILITIES: WATER -- 5.6%
8,000 American States Water Co. ............ 266,713 272,000
11,000 Artesian Resources Corp.,
Cl. A .............................. 257,250 296,780
26,000 Birmingham Utilities Inc. ............ 508,991 393,900
20,520 California Water
Service Group ...................... 566,928 526,338
5,000 Connecticut Water
Service Inc. ....................... 146,455 172,850
21,200 Middlesex Water Co. .................. 615,486 721,012
45,000 NiSource Inc.+ ....................... 90,000 106,650
4,100 Pennichuck Corp. ..................... 99,335 128,330
35,000 Philadelphia Suburban Corp. .......... 665,982 892,500
15,500 SJW Corp. ............................ 1,580,929 1,325,250
5,000 Southwest Water Co. .................. 52,063 72,750
----------- -----------
4,850,132 4,908,360
----------- -----------
ENVIRONMENTAL SERVICES -- 0.3%
12,000 Catalytica Energy
Systems Inc.+ ...................... 193,205 260,400
----------- -----------
SATELLITE -- 0.6%
25,000 General Motors Corp.,
Cl. H+ ............................. 650,411 506,250
----------- -----------
TELECOMMUNICATIONS -- 5.4%
6,000 ALLTEL Corp. ......................... 324,708 367,560
12,000 AT&T Canada Inc., Cl. B+ ............. 360,683 361,560
30,000 BellSouth Corp. ...................... 1,257,320 1,208,100
2,000 British Telecommunications
plc, ADR ........................... 155,765 129,300
5,000 BroadWing Inc.+ ...................... 104,505 122,250
52,000 CenturyTel Inc. ...................... 1,864,388 1,575,600
20,000 Citizens Communications Co. .......... 234,436 240,600
See accompanying notes to financial statements.
5
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2001 (UNAUDITED)
MARKET
SHARES COST VALUE
------ ----------- -----------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
5,000 Commonwealth Telephone
Enterprises Inc.+ .................. $ 162,505 $ 211,250
12,000 Conestoga Enterprises Inc. ........... 189,790 354,600
10,000 Deutsche Telekom
AG, ADR ............................ 203,385 224,500
----------- -----------
4,857,485 4,795,320
----------- -----------
TRANSPORTATION -- 1.1%
15,000 Newport News
Shipbuilding Inc. 971,656 918,750
----------- -----------
WIRELESS COMMUNICATIONS -- 0.7%
35,000 Nextel Communications
Inc., Cl. A+ ....................... 642,454 612,500
2,000 Nextel Partners Inc., Cl. A+ ......... 24,276 31,040
----------- -----------
666,730 643,540
----------- -----------
TOTAL COMMON
STOCKS ............................. 55,714,617 62,228,927
----------- -----------
PREFERRED STOCKS -- 0.8%
TELECOMMUNICATIONS -- 0.8%
14,000 Citizens Communications Co.,
5.00% Cv. Pfd. ..................... 697,191 700,000
----------- -----------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS -- 2.3%
ENVIRONMENTAL SERVICES -- 2.3%
$2,050,000 Waste Management Inc.,
Sub. Deb. Cv.
4.00%, 02/01/02 .................... 2,026,502 2,032,063
----------- -----------
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ----------- -----------
U.S. GOVERNMENT OBLIGATIONS -- 22.5%
$20,000,000 U.S. Treasury Bills,
3.57% to 3.71%++,
due 07/19/01 to 09/20/01 ........... $19,923,180 $19,923,218
----------- -----------
REPURCHASE AGREEMENT -- 3.9%
3,455,000 Agreement with State Street
Bank & Trust Co., 3.96%,
dated 06/29/01,
due 07/02/01, proceeds at
maturity $3,456,140 (a) ............ 3,455,000 3,455,000
----------- -----------
TOTAL INVESTMENTS -- 100.0% $81,816,490 88,339,208
===========
OTHER ASSETS AND LIABILITIES (NET)-- (0.0)% ..................... (26,602)
-----------
NET ASSETS -- 100.0%
(11,133,129 shares outstanding) ............................... $88,312,606
===========
NET ASSET VALUE
($88,312,606 [DIVIDE] 11,133,129 shares outstanding) .......... $7.93
=====
---------------
For Federal tax purposes:
Aggregate cost ..................................... $81,816,490
===========
Gross unrealized appreciation ...................... $ 8,982,557
Gross unrealized depreciation ...................... (2,459,839)
-----------
Net unrealized appreciation ........................ $ 6,522,718
===========
---------------
(a) Collateralized by U.S. Treasury Note, 7.25%, due 05/15/04,
market value $3,527,513.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depositary Receipt.
See accompanying notes to financial statements.
TOP TEN HOLDINGS
JUNE 30, 2001
=============
Niagara Mohawk Holdings Inc.
RGS Energy Group Inc.
Southwest Gas Corp.
Western Resources Inc.
El Paso Electric Co.
Northeast Utilities
Conectiv Inc.
Bangor Hydro-Electric Co.
NSTAR
Waste Management Inc.
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
6
THE GABELLI UTILITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2001 (UNAUDITED)
ASSETS:
Investments, at value (Cost $81,816,490) ................. $ 88,339,208
Cash ..................................................... 733
Dividends and interest receivable ........................ 278,220
Other assets ............................................. 4,005
------------
TOTAL ASSETS ............................................. 88,622,166
------------
LIABILITIES:
Dividends payable ........................................ 86,995
Payable for investment advisory fees ..................... 72,209
Other accrued expenses ................................... 150,356
------------
TOTAL LIABILITIES ........................................ 309,560
------------
NET ASSETS applicable to 11,133,129
shares outstanding ................................... $ 88,312,606
============
NET ASSETS CONSIST OF:
Shares of beneficial interest, at par value .............. $ 11,133
Additional paid-in capital ............................... 76,107,792
Accumulated net realized gain on investments ............. 5,670,991
Net unrealized appreciation on investments ............... 6,522,690
------------
TOTAL NET ASSETS ......................................... $ 88,312,606
============
NET ASSET VALUE
($88,312,606 [DIVIDE] 11,133,129 shares
outstanding; unlimited number of shares
authorized of $0.001 par value) ....................... $7.93
=====
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED)
INVESTMENT INCOME:
Dividends ................................................ $ 1,073,826
Interest ................................................. 545,335
------------
TOTAL INVESTMENT INCOME .................................. 1,619,161
------------
EXPENSES:
Investment advisory fees ................................. 430,864
Shareholder communications expenses ...................... 126,666
Shareholder services fees ................................ 121,002
Directors' fees .......................................... 25,539
Legal and audit fees ..................................... 20,734
Custodian fees ........................................... 16,104
Miscellaneous expenses ................................... 45,100
------------
TOTAL EXPENSES ........................................... 786,009
------------
LESS: CUSTODIAN FEE CREDIT ............................... (1,262)
------------
NET EXPENSES ............................................. 784,747
------------
NET INVESTMENT INCOME .................................... 834,414
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments ......................... 2,434,044
Net change in unrealized appreciation/
depreciation on investments ........................... (3,039,092)
------------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS ........................................ (605,048)
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ....................................... $ 229,366
============
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 2001 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2000
---------------- -----------------
OPERATIONS:
Net investment income ....................................................... $ 834,414 $1,619,740
Net realized gain on investments ......................................... 2,434,044 8,062,841
Net change in unrealized appreciation/depreciation on investments ........ (3,039,092) 7,802,312
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................... 229,366 17,484,893
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income .................................................... (1,837,796) (616,358)
Net realized gain on investments ......................................... (1,503,620) (10,360,503)
---------- ----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ...................................... (3,341,416) (10,976,861)
---------- ----------
TRUST SHARE TRANSACTIONS:
Net increase in net assets from Utility Trust share transactions ......... 755,462 831,592
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS .................................... (2,356,588) 7,339,624
NET ASSETS:
Beginning of period ...................................................... 90,669,194 83,329,570
---------- ----------
End of period (Including undistributed net investment income of
$0 and $1,003,382, respectively) ...................................... $88,312,606 $90,669,194
========== ==========
See accompanying notes to financial statements.
7
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION. The Gabelli Utility Trust ("Utility Trust") is a closed-end,
non-diversified management investment company organized as a Delaware business
trust on February 25, 1999 and registered under the Investment Company Act of
1940, as amended (the "1940 Act"), whose primary objective is long-term growth
of capital and income. The Utility Trust had no operations prior to July 9,
1999, other than the sale of 10,000 shares of beneficial interest for $100,000
to The Gabelli Equity Trust Inc. (the "Equity Trust") at $10.00 per share. On
July 9, 1999, the Utility Trust had a 4 for 3 stock split making the balance of
Utility Trust shares held by the Equity Trust as 13,333. On July 9, 1999, the
Equity Trust contributed $79,487,260 in cash and securities in exchange for
shares of the Utility Trust, and on the same date distributed such shares to
Equity Trust shareholders of record on July 1, 1999 at the rate of one share of
the Utility Trust for every ten shares of the Equity Trust. Investment
operations commenced on July 9, 1999.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Utility Trust in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day, except for open short positions, which are
valued at the last asked price). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. If there were no asked prices quoted
on that day, then the security is valued at the closing bid price. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser"). Securities and assets for which market
quotations are not readily available are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Board of Directors. Short term debt securities with remaining
maturities of 60 days or less are valued at amortized cost, unless the Directors
determine such does not reflect the securities' fair value, in which case these
securities will be valued at their fair value as determined by the Directors.
Debt instruments having a maturity greater than 60 days are valued at the
highest bid price obtained from a dealer maintaining an active market in those
securities.
REPURCHASE AGREEMENTS. The Utility Trust may enter into repurchase
agreements with primary government securities dealers recognized by the Federal
Reserve Bank of New York, with member banks of the Federal Reserve System or
with other brokers or dealers that meet credit guidelines established by the
Adviser and reviewed by the Board of Directors. Under the terms of a typical
repurchase agreement, the Utility Trust takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the Utility
Trust to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Utility Trust's holding period. The Utility
Trust will always receive and maintain securities as collateral whose market
value, including accrued interest, will be at least equal to 100% of the dollar
amount invested by the Utility Trust in each agreement. The Utility Trust will
make payment for such securities only upon physical delivery or upon evidence of
book entry transfer of the collateral to the account of the custodian. To the
extent that any repurchase transaction exceeds one business day, the value of
the collateral is marked-to-market on a
8
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
daily basis to maintain the adequacy of the collateral. If the seller defaults
and the value of the collateral declines or if bankruptcy proceedings are
commenced with respect to the seller of the security, realization of the
collateral by the Utility Trust may be delayed or limited.
SECURITIES SOLD SHORT. A short sale involves selling a security which the
Utility Trust does not own. The proceeds received for short sales are recorded
as liabilities and the Utility Trust records an unrealized gain or loss to the
extent of the difference between the proceeds received and the value of the open
short position on the day of determination. The Utility Trust records a realized
gain or loss when the short position is closed out. By entering into a short
sale, the Utility Trust bears the market risk of an unfavorable change in the
price of the security sold short. Dividends on short sales are recorded as an
expense by the Utility Trust on the ex-dividend date and interest expense is
recorded on the accrual basis.
FOREIGN CURRENCY TRANSLATION. The books and records of the Utility Trust
are maintained in United States (U.S.) dollars. Foreign currencies, investments
and other assets and liabilities are translated into U.S. dollars at the
exchange rates prevailing at the end of the period, and purchases and sales of
investment securities, income and expenses are translated at the exchange rate
prevailing on the respective dates of such transactions. Unrealized gains and
losses, which result from changes in foreign exchange rates and/or changes in
market prices of securities, have been included in unrealized
appreciation/depreciation on investments and foreign currency transactions. Net
realized foreign currency gains and losses resulting from changes in exchange
rates include foreign currency gains and losses between trade date and
settlement date on investment securities transactions, foreign currency
transactions and the difference between the amounts of interest and dividends
recorded on the books of the Utility Trust and the amounts actually received.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial trade date and subsequent sale trade date is
included in realized gain/(loss) on investments.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for as of the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders
are recorded on the ex-dividend date. Income distributions and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments of income and gains on various investment
securities held by the Utility Trust, timing differences and differing
characterization of distributions made by the Utility Trust.
PROVISION FOR INCOME TAXES. The Utility Trust intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
Dividends and interest from non-U.S. sources received by the Utility Trust
are generally subject to non-U.S. withholding taxes at rates ranging up to 30%.
Such withholding taxes may be reduced or eliminated under the terms of
applicable U.S. income tax treaties, and the Utility Trust intends to undertake
any procedural steps required to claim the benefits of such treaties.
9
THE GABELLI UTILITY TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES. The Utility Trust has entered
into an investment advisory agreement (the "Advisory Agreement") with the
Adviser which provides that the Utility Trust will pay the Adviser on the first
business day of each month a fee for the previous month equal on an annual basis
to 1.00% of the value of the Utility Trust's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Utility Trust's portfolio and oversees the
administration of all aspects of the Utility Trust's business and affairs.
During the six months ended June 30, 2001, Gabelli & Company, Inc. and its
affiliates received $38,726 in brokerage commissions as a result of executing
agency transactions in portfolio securities on behalf of the Utility Trust.
4. PORTFOLIO SECURITIES. Cost of purchases and proceeds from sales of
securities, other than short-term securities, for the six months ended June 30,
2001 aggregated $17,470,488 and $21,189,833, respectively.
5. CAPITAL. The Board of Directors of the Utility Trust has authorized the
repurchase of its shares on the open market when the shares are trading at a
discount of 10% or more (or such other percentage as the Board of Directors may
determine from time to time) from the net asset value of the shares. During the
six months ended June 30, 2001, the Utility Trust did not repurchase any shares
of beneficial interest in the open market.
Transactions in shares of beneficial interest were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2001 DECEMBER 31, 2000
--------------------- ---------------------
Shares Amount Shares Amount
------ -------- ------- ---------
Shares issued upon reinvestment
of dividends and distributions ............ 93,710 $755,462 103,573 $ 831,592
------ -------- ------- ---------
Net increase ................................ 93,710 $755,462 103,573 $ 831,592
====== ======== ======= =========
6. INDUSTRY CONCENTRATION. Because the Utility Trust primarily invests in common
stocks and other securities of foreign and domestic companies in the utility
industry, its portfolio may be subject to greater risk and market fluctuations
than a portfolio of securities representing a broad range of investments.
10
THE GABELLI UTILITY TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UTILITY TRUST SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD:
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 2001 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 2000 1999 (A)
---------------- ------------ ------------
OPERATING PERFORMANCE:
Net asset value, beginning of period .................................. $ 8.21 $ 7.62 $ 7.50
------- ------- -------
Net investment income ................................................. 0.21 0.15 0.08
Net realized and unrealized gain (loss) on investments ................ (0.19) 1.44 0.19
------- ------- -------
Total from investment operations ...................................... 0.02 1.59 0.27
------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ................................................. (0.17) (0.06) (0.08)
Net realized gain on investments ...................................... (0.13) (0.94) (0.03)
In excess of net realized gain on investments ......................... -- -- (0.04)
------- ------- -------
Total distributions ................................................... (0.30) (1.00) (0.15)
------- ------- -------
NET ASSET VALUE, END OF PERIOD ........................................ $ 7.93 $ 8.21 $ 7.62
======= ======= =======
Net asset value total return+ ......................................... 0.14% 22.01% 3.62%
======= ======= =======
Market value, end of period ........................................... $ 8.90 $ 8.75 $ 7.63
======= ======= =======
Total investment return++ ............................................. 5.46% 29.95% 3.70%
======= ======= =======
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................................. $88,313 $90,669 $83,330
Ratio of net investment income to average net assets .................. 1.94%(b) 1.88% 2.27%(b)(c)
Ratio of operating expenses to average net assets (d) ................. 1.82%(b) 1.95% 1.85%(b)(c)
Portfolio turnover rate ............................................... 26% 92% 37%
--------------------------
+ Based on net asset value per share, adjusted for reinvestment of
distributions. Total return for the period of less than one year is not
annualized.
++ Based on market value per share, adjusted for reinvestment of
distributions. Total return for the period of less than one year is not
annualized.
(a) The Gabelli Utility Trust commenced investment operations on July 9, 1999.
(b) Annualized.
(c) During the period ended December 31, 1999, the Utility Trust's
sub-administrator voluntarily reimbursed certain expenses. If such
reimbursement had not occurred, the annualized ratios of net investment
income and operating expenses to average net assets would have been 1.85%
and 2.17%, respectively.
(d) The ratios do not include a reduction of expenses for custodian fee credits
on cash balances maintained with the custodian. Including such custodian
fee credits for the six months ended June 30, 2001 and the year ended
December 31, 2000, the expense ratios would be 1.82% and 1.93%,
respectively.
See accompanying notes to financial statements.
11
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
ENROLLMENT IN THE PLAN
It is the policy of The Gabelli Utility Trust ("Utility Trust") to
automatically reinvest dividends. As a "registered" shareholder you
automatically become a participant in the Utility Trust's Automatic Dividend
Reinvestment Plan (the "Plan"). The Plan authorizes the Utility Trust to issue
shares to participants upon an income dividend or a capital gains distribution
regardless of whether the shares are trading at a discount or a premium to net
asset value. All distributions to shareholders whose shares are registered in
their own names will be automatically reinvested pursuant to the Plan in
additional shares of the Utility Trust. Plan participants may send their stock
certificates to State Street Bank and Trust Company ("State Street") to be held
in their dividend reinvestment account. Registered shareholders wishing to
receive their distribution in cash must submit this request in writing to:
The Gabelli Utility Trust
c/o State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Shareholders requesting this cash election must include the shareholder's
name and address as they appear on the share certificate. Shareholders with
additional questions regarding the Plan may contact State Street at 1 (800)
336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at State Street Bank
must do so in writing or by telephone. Please submit your request to the above
mentioned address or telephone number. Include in your request your name,
address and account number. The cost to liquidate shares is $2.50 per
transaction as well as the brokerage commission incurred. Brokerage charges are
expected to be less than the usual brokerage charge for such transactions.
If your shares are held in the name of a broker, bank or nominee, you should
contact such institution. If such institution is not participating in the Plan,
your account will be credited with a cash dividend. In order to participate in
the Plan through such institution, it may be necessary for you to have your
shares taken out of "street name" and re-registered in your own name. Once
registered in your own name your dividends will be automatically reinvested.
Certain brokers participate in the Plan. Shareholders holding shares in "street
name" at participating institutions will have dividends automatically
reinvested. Shareholders wishing a cash dividend at such institution must
contact their broker to make this change.
The number of shares of Common Stock distributed to participants in the Plan
in lieu of cash dividends is determined in the following manner. Under the Plan,
whenever the market price of the Utility Trust's Common Stock is equal to or
exceeds net asset value at the time shares are valued for purposes of
determining the number of shares equivalent to the cash dividends or capital
gains distribution, participants are issued shares of Common Stock valued at the
greater of (i) the net asset value as most recently determined or (ii) 95% of
the then current market price of the Utility Trust's Common Stock. The valuation
date is the dividend or distribution payment date or, if that date is not a New
York Stock Exchange trading day, the next trading day. If the net asset value of
the Common Stock at the time of valuation exceeds the market price of the Common
Stock, participants will receive shares from the Utility Trust valued at market
price. If the Utility Trust should declare a dividend or capital gains
distribution payable only in cash, State Street will buy Common Stock in the
open market, or on the New York Stock Exchange or elsewhere, for the
participants' accounts, except that State Street will endeavor to terminate
purchases in the open market and cause the Utility Trust to issue shares at net
asset value if, following the commencement of such purchases, the market value
of the Common Stock exceeds the then current net asset value.
The automatic reinvestment of dividends and capital gains distributions will
not relieve participants of any income tax which may be payable on such
distributions. A participant in the Plan will be treated for Federal income tax
purposes as having received, on a dividend payment date, a dividend or
distribution in an amount equal to the cash the participant could have received
instead of shares.
The Utility Trust reserves the right to amend or terminate the Plan as
applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to written notice of the change sent to the members of the Plan
at least 90 days before the record date for such dividend or distribution. The
Plan also may be amended or terminated by State Street on at least 90 days'
written notice to participants in the Plan.
VOLUNTARY CASH PURCHASE PLAN
The Voluntary Cash Purchase Plan is yet another vehicle for our shareholders
to increase their investment in the Utility Trust. In order to participate in
the Voluntary Cash Purchase Plan, shareholders must have their shares registered
in their own name.
Participants in the Voluntary Cash Purchase Plan have the option of making
additional cash payments to State Street for investments in the Utility Trust's
shares at the then current market price. Shareholders may send an amount from
$250 to $10,000. State Street will use these funds to purchase shares in the
open market on or about the 15th of each month. State Street will charge each
shareholder who participates $0.75, plus a pro rata share of the brokerage
commissions. Brokerage charges for such purchases are expected to be less than
the usual brokerage charge for such transactions. It is suggested that any
voluntary cash payments be sent to State Street Bank and Trust Company, P.O. Box
8200, Boston, MA 02266-8200 such that State Street receives such payments
approximately 10 days before the 15th of the month. Funds not received at least
five days before the investment date shall be held for investment in the
following month. A payment may be withdrawn without charge if notice is received
by State Street at least 48 hours before such payment is to be invested.
For more information regarding the Dividend Reinvestment Plan and Voluntary
Cash Purchase Plan, brochures are available by calling (914) 921-5070 or by
writing directly to the Utility Trust.
12
DIRECTORS AND OFFICERS
THE GABELLI UTILITY TRUST
ONE CORPORATE CENTER, RYE, NY 10580-1434
DIRECTORS
Mario J. Gabelli, CFA
CHAIRMAN AND CHIEF INVESTMENT OFFICER,
GABELLI ASSET MANAGEMENT INC.
Dr. Thomas E. Bratter
PRESIDENT, JOHN DEWEY ACADEMY
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
James P. Conn
FORMER MANAGING DIRECTOR AND CHIEF INVESTMENT OFFICER,
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
Vincent D. Enright
FORMER SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER,
KEYSPAN ENERGY CORP.
Frank J. Fahrenkopf, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER,
AMERICAN GAMING ASSOCIATION
John D. Gabelli
SENIOR VICE PRESIDENT,
GABELLI & COMPANY, INC.
Robert J. Morrissey
ATTORNEY-AT-LAW,
MORRISSEY, HAWKINS &LYNCH
Karl Otto Pohl
FORMER PRESIDENT, DEUTSCHE BUNDESBANK
Anthony R. Pustorino
CERTIFIED PUBLIC ACCOUNTANT,
PROFESSOR EMERITUS, PACE UNIVERSITY
Salvatore J. Zizza
CHAIRMAN, HALLMARK ELECTRICAL SUPPLIES CORP.
OFFICERS
Mario J. Gabelli, CFA
PRESIDENT & CHIEF INVESTMENT OFFICER
Bruce N. Alpert
VICE PRESIDENT & TREASURER
David I. Schachter
VICE PRESIDENT & OMBUDSMAN
James E. McKee
SECRETARY
INVESTMENT ADVISOR
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1434
CUSTODIAN
Boston Safe Deposit and Trust Company
COUNSEL
Skadden, Arps, Slate, Meagher & Flom, LLP
TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
STOCK EXCHANGE LISTING
COMMON
------
NYSE-Symbol: GUT
Shares Outstanding: 11,133,129
The Net Asset Value appears in the Publicly Traded Funds column, under the
heading "Specialized Equity Funds," in Sunday's The New York Times and in
Monday's The Wall Street Journal. It is also listed in Barron's Mutual
Funds/Closed End Funds section under the heading "Specialized Equity Funds."
The Net Asset Value may be obtained each day by calling (914) 921-5071.
--------------------------------------------------------------------------------
For general information about the Gabelli Funds, call 1-800-GABELLI
(1-800-422-3554), fax us at 914-921-5118, visit Gabelli Funds' Internet homepage
at: HTTP://WWW.GABELLI.COM or e-mail us at: closedend@gabelli.com
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Utility Trust may, from time to time,
purchase its shares in the open market when the Utility Trust shares are trading
at a discount of 10% or more from the net asset value of the shares.
--------------------------------------------------------------------------------
THE GABELLI UTILITY TRUST
ONE CORPORATE CENTER
RYE, NY 10580-1434
(914) 921-5070
HTTP://WWW.GABELLI.COM
SEMI-ANNUAL REPORT
JUNE 30, 2001
GBFUF 06/01