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UTILITY TRUST
FIRST QUARTER REPORT
MARCH 31, 2002
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Our cover icon represents the underpinnings of Gabelli.
The Teton mountains in Wyoming represent what we believe in in America -- that
creativity, ingenuity, hard work and a global uniqueness provide enduring
values. They also stand out in an increasingly complex, interconnected and
interdependent economic world.
INVESTMENT OBJECTIVE:
The Gabelli Utility Trust is a closed-end, non-diversified management investment
company whose primary objectives are long-term growth of capital and income.
The Trust will invest in companies that provide products, services or equipment
for the generation or distribution of electricity, gas and water. Additionally,
the Trust will invest in companies in telecommunications services or
infrasttructure operations.
THIS REPORT IS PRINTED ON RECYCLED PAPER.
TO OUR SHAREHOLDERS,
In our view the major investment theme for electric, gas and telephone
utilities can be summed up in two words: size matters. Electric generators with
a large and geographically diverse portfolio of generating plants can trade
around their structural long positions to enhance returns while avoiding the
risk of asset concentration in a single market 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 seem to have caused 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. Things seem be picking up a bit already, and if Congress
cooperates, which is always a big question mark, we could be off to the races in
a year or less.
PREMIUM / DISCOUNT DISCUSSION
As a refresher to our shareholders, the price of a closed-end mutual fund
is determined in the open market by willing buyers and sellers. Shares of The
Gabelli Utility Trust (the "Trust") trade on the New York Stock Exchange and may
trade at a premium to (higher than) net asset value ("NAV") (the market value of
the Trust's underlying portfolio) or a discount to (lower than) net asset value.
Of the 470 closed-end funds in the U.S., approximately 31% currently trade at
premiums to NAV versus 21% five years ago and 61% ten years ago.
Ideally, the Trust's market price will generally track the NAV. The
Trust's premium or discount to NAV fluctuates over time. Over our Trust's 2 3/4-
year history, the range fluctuated from a 2% discount in October 2000 to a 39%
premium in February 2002. The average variance from NAV for the Trust since
inception is a 10% premium to NAV. Shortly after the inception of the Trust, the
market price of the Trust exceeded the NAV and this premium has gradually
increased since.
[EDGAR REPRESENTATION OF PLOT POINTS]
PREMIUM / DISCOUNT SINCE INCEPTION
0.1672
0.0816
0.1152
0.0582
0.0117
0.0007
Y2k 0.0375
0.0289
-0.0127
0.0417
-0.0016
0.0403
0.0016
0.0081
0.0064
-0.0220
0.0003
0.0658
Year 2001 0.0532
0.1445
0.0728
0.1646
0.1409
0.1223
0.1229
0.1643
0.1572
0.2455
0.2414
0.2746
Year 2002 0.3454
0.3704
0.3101
-----------------------
MARCH 31, 2002
Net Asset Value $7.45
Market Price $9.76
Premium 31.01%
-----------------------
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"Mr. Market" often provides opportunities to invest at a discount. The
Trust has considered various initiatives to narrow the discount when appropriate
through distribution policies, rights offerings, share repurchase programs and
the potential use of leverage.
The Trust's long-term investment goal is growth of capital and income. We
believe that our stock selection process adds to the investment equation. We
have a successful history of investment providing shareholders average annual
returns of 9.8% since inception. However, it is important to remember that "Mr.
Market" is a pendulum that swings both ways. As the market moves away from
momentum investing and back to basics, we believe that an excessive premium for
the Trust is not likely to be sustainable.
COMPARATIVE PERFORMANCE
AVERAGE ANNUAL RETURNS THROUGH MARCH 31, 2002 (A)
-------------------------------------------------
SINCE
QUARTER 1 YEAR 2 YEAR INCEPTION (B)
------- ------- -------- -------------
Gabelli Utility Trust NAV Return (c) .............. 4.33% 4.89% 10.15% 9.75%
Gabelli Utility Trust Investment Return (d) ....... 6.66% 26.30% 25.96% 17.72%
S&P Utility Index ................................. 3.38% (22.62)% 2.56% 0.42%
Lipper Utility Fund Average ....................... (1.72)% (17.07)% (11.21)% (3.92)%
(a) Returns represent past performance and do not guarantee future results.
Investment returns and the principal value of an investment will
fluctuate. When shares are sold, they may be worth more or less than their
original cost. The S&P Utility Index is an unmanaged indicator of electric
and gas utility stock performance, while the Lipper Average reflects the
average performance of open-end mutual funds classified in this particular
category.
(b) From commencement of investment operations on July 9, 1999.
(c) Total returns and average annual returns reflect changes in net asset
value (NAV) and reinvestment of distributions and are net of expenses.
Life of Fund return based on initial net asset value of $7.50.
(d) Total returns and average annual returns reflect changes in closing market
values on the New York Stock Exchange and reinvestment of distributions.
Life of Fund return based on initial offering price of $7.50.
RIGHTS OFFERING 2002
Your Board of Trustees has announced a transferable rights offering for
May and June 2002. The Trust is offering shareholders one transferable right for
each share of common stock held as of the record date. Three rights will be
required to purchase one additional share at a discounted price to the market
value and free of commission. Shareholders who fully exercise their primary
subscription rights may oversubscribe for any additional amount of shares they
wish. These oversubscription shares will be distributed based on a pro-rata
allocation formula.
WHAT'S RIGHT ABOUT RIGHTS
To raise additional capital, rights offerings have historically been a
fair and efficient method. This method is widely used in England. A traditional
rights offering allows an issuer's shareholders to participate directly in the
growth of that issuer by purchasing additional common shares at a set
subscription price. We will discuss some of the basic issues of rights offerings
and how they relate to the Trust in a question and answer format below.
2
RIGHTS OFFERING -- Q&A
Q: WHAT ARE RIGHTS?
Rights are privileges granted to existing shareholders of a corporation
(in our case the Utility Trust) to subscribe to shares of a new issue of common
stock. These rights represent short-term options granted by the corporation
which the shareholder has the option of exercising.
Q: WHAT IS THE HISTORY OF RIGHTS OFFERINGS?
Rights offerings have been used in Europe since the late 17th century
following the commencement of the London Stock Exchange. In England, rights
offerings are commonplace and represent an integral part of its capital markets
and are well-regarded by shareholders. While underwritten public offerings have
been the preferred method of raising capital in the U.S., rights offerings have
become more understood and more widely used. Today, rights offerings are even
more common in the U.S. and we expect that their frequency and effectiveness
will increase.
Q: WHAT IS A RIGHTS OFFERING AS IT RELATES TO CLOSED-END FUNDS?
A rights offering is an opportunity for shareholders to purchase
additional shares of a publicly traded company or mutual fund at a specified
price -- the "subscription price" -- with a nominal commission. To attract
shareholder interest, the subscription price is set at a discount to the current
market price. Although shareholders are not required to purchase additional
shares, they are given the opportunity, or "right", to purchase shares based on
the number of underlying shares they own on the record date. Rights may either
be transferable or non-transferable and the offering may or may not be
underwritten with a commitment by the underwriter to buy what is not subscribed
for.
Q: WHAT ARE TRANSFERABLE RIGHTS VERSUS NON-TRANSFERABLE RIGHTS?
Non-transferable rights have no value other than that they may be
exercised and are not tradable on any exchange.
Transferable rights may trade on an exchange and afford the
non-subscribing shareholder the option of selling their rights on the exchange
or through the transfer agent. Selling the rights allows a non-subscribing
shareholder to recoup much of the dilution that could otherwise occur. A
non-transferable rights offering does not permit such an offset so that
non-subscribing shareholders could experience full dilution.
Q: HOW IS A RIGHTS OFFERING BENEFICIAL TO SHAREHOLDERS?
The Utility Trust shareholder benefits from the opportunity to purchase
additional shares with no commission if shares are held directly with the Trust
or, in some instances, with a nominal charge from their broker. Thus, an
investor is able to put more financial assets to work in an investment
discipline in which she or he believes and which has performed well over an
extended period of time. The additional capital that is raised by the Trust is
used to position the portfolio to more fully take advantage of new investment
opportunities. Increasing the asset size of the Trust may also result in
lowering the Trust's expenses as a percentage of average net assets.
Q: HOW IS THE UTILITY TRUST'S RIGHTS OFFERING BETTER THAN OTHER RIGHTS OFFERINGS
BY CLOSED-END FUNDS?
There are two types of rights offerings a closed-end fund may use to raise
additional capital: the direct offering method and the firm-underwritten method.
The Utility Trust is utilizing a direct offering method to realize the relative
cost advantages associated with this method as compared to a firm-underwritten
method. A direct offering avoids costly underwriting and distribution services
that lessen shareholder value.
3
Q: WHAT IF MY TOTAL NUMBER OF RIGHTS IS NOT EVENLY DIVISIBLE BY THREE?
The Trust will automatically round up shareholders' rights so that the
total number of rights a shareholder is granted is evenly divisible by three.
Q: ARE THE SHAREHOLDERS IN FAVOR OF RIGHTS OFFERINGS?
We have received numerous requests from the shareholders of the Trust for
rights offerings. Our shareholders have been overwhelmingly in favor of rights
offerings and look forward to future ones. This interest was evidenced by the
oversubscribed rights offerings that the Equity Trust had in 1991, 1992, 1993,
1995 and 2001, as well as the Gabelli Multimedia Trust's (which was spun-off
from the Equity Trust in 1994) oversubscribed rights offerings in 1995 and 2000.
This interest was further confirmed with the response to the Gabelli Equity
Trust shareholder vote in 1993 in which shareholders voted 90% in favor to
provide rights offerings.
Q. WERE SHAREHOLDERS ABLE TO SELL THEIR RIGHTS IN THE PAST RIGHTS OFFERING FROM
GABELLI?
Registered shareholders of the Equity Trust and Multimedia Trust had the
option of selling all or a portion of their rights by designating this desire on
the Subscription Certificate which accompanied the Prospectus. The certificate
must have been returned to EquiServe Trust Company by the end of the offering
period at the designated address.
Those who held shares through a broker could simply have made the broker
aware of their desire to sell or exercise the rights. The broker should fulfill
the remainder of the order.
Q. WHAT WERE THE TRANSACTION COSTS ON THE SALE OF THE EQUITY TRUST AND
MULTIMEDIA TRUST RIGHTS?
Equity Trust and Multimedia Trust rights were sold through State Street
Bank and Trust and Equiserve with no fees and only a nominal commission;
however, certain brokerage firms may have charged a transaction fee to sell
rights.
OUR APPROACH
There are nearly 80 publicly traded investor-owned electric utilities in
the U.S., and this is at least 50 more than we need from the standpoint of
economic efficiency. Stand-alone natural gas distribution companies make no
economic sense either; the combination electric and gas utility model is clearly
better. The balkanized structure of the industry is inherently inefficient, and
competitive forces are now putting pressure on the marginal players. The big
companies feel the need to get bigger to achieve scale economies, and the small
companies are selling out as the cost of staying in the game rises. It is only
because of a complex and lengthy merger review and approval process that the
industry remains as fragmented as it is. Our investments in regulated utility
companies have primarily, though not exclusively, focused on fundamentally
sound, reasonably priced mid-cap and small-cap utilities that are likely
acquisition targets for large utilities seeking to bulk up.
COMMENTARY
In the world of fashion it's called retro chic. The old is suddenly new
again. Just as women's hemlines rise and fall, and men's suit lapel and necktie
widths wax and wane, investment fashions come and go. Companies which merely
earned money and paid a good bit of it out to shareholders as dividends, once
prized by investors, were scorned in the late 1990s. Dividends are doubly taxed,
once when the corporation pays income tax on earnings, and then again taxed as
income to investors. How clever, how tax-efficient it would be for corporations
so lacking in
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4
growth prospects that they actually produce free cash flow to use that excess
cash to buy back stock or invest in growth businesses, rather than pay a cash
return to the owners of the business, the stockholders.
It all sounded like a good idea at the time. Growth stories were rewarded
with rich valuations in the equity market. The high equity valuations of the
late 1990s gave favored company managements a richly valued currency -- their
stock -- that they used to make acquisitions by which growth could be further
enhanced. In the process, growth multiples were further bid up by acquirers, and
the remaining public companies were bid up as investors compared them to the
values paid for peers. Growth was all that mattered. Dividends were for losers.
As the emerging growth stock house of cards tumbled over the past couple
of years, it became clear that far too many managements were stretching to show
good results. Some companies, like Enron, apparently resorted to accounting
trickery to manufacture profits. Many telecommunications companies, including
Global Crossing, Winstar and Qwest, used aggressive if perhaps technically legal
accounting methods like "hollow" circuit swaps (don't ask) to inflate revenues
and manufacture non-cash accounting profits. Equity investors came to believe
late in 2001 and early this year that they could not trust the numbers that
companies were reporting. In January and February of this year, stocks sold off
as investor confidence waned. The March rally stemmed the losses as it became
clear that the economy was improving, reforms were going to be implemented and
examples made of the worst of the bad actors in corporate managements.
Well, you can fake profits and you can fake revenues, for a while anyway,
but you can't fake a dividend check. Boring old utilities were sneered at by
investors in the late 1990s when the reported profits (though not the cash flow,
mind you) of the S&P 500 Index were growing at a mid-high teens rate, and nobody
cared about the dividends that utilities paid. Now dividends are cool again.
The income-oriented investor can roll over a twelve-month CD today at
1.65% at the biggest bank in New England. You can do a little better if you shop
around, but not that much better. Electric and gas utility stocks with secure
dividends are paying out 65% or less of current earnings, currently yielding 4%
to 6%, earnings are growing at 4% to 6% on average even in a weak economy, and
dividends are growing slightly slower than earnings. To the income-oriented
investor, utility stocks represent good value.
Utility earnings in the first quarter are likely to be disappointing
because of warm weather and a weak economy. The weather won't always be abnormal
and the economy won't always be weak, so we are looking for stocks that get hit
on weak first quarter results and then buying the stocks. This will provide an
opportunity to deploy our Trust's substantial cash position at what should prove
to be good values.
We indicated in our fourth quarter shareholder report that we planned to
buy shares of beaten-down energy merchants in the first quarter, and we did. The
stocks didn't do much in January and February, but they rebounded nicely in
March as wholesale electricity prices rose in tandem with natural gas prices,
both driven by improving economic growth. The Trust added to positions in AES
Corp., Cinergy Corp., Mirant and FPL Group, Inc. The Trust initiated positions
in the convertible debentures of Orion Power. Energy prices should continue to
improve into the summer as the economy recovers, which should give the energy
merchant stocks a tailwind.
We also opined in our fourth quarter report that we expected natural gas
prices to weaken, dragging down the natural gas stocks and giving us a buying
opportunity. The natural gas commodity price did briefly touch below $2.00 per
mcf (thousand cubic feet) but quickly recovered and currently stands around
$3.35 per mcf. The Trust recently bought shares of several natural gas companies
including Cascade Natural Gas Corp., National Fuel Gas Co. and ONEOK Inc.
5
In summary, the Trust is currently positioned as follows: we are invested
in electric utilities, energy merchants and hybrids. The Trust is also involved
with natural gas utilities and pipelines, and also has invested in several water
utilities as well as some telecommunication companies. We think that posture is
appropriate for the time being and diversifies our portfolio throughout the
utility sector.
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.
CH ENERGY GROUP INC. (CHG - $47.45 - NYSE) is the last small New York State
electric utility left, now that Orange & Rockland and RGS Energy have gone on to
utility heaven, which we define as selling out to bigger companies at a rich
premium. CH Energy serves the territory directly north of New York City, an area
whose economy has long been dominated by IBM. The buyer would almost have to be
Energy East (EAS - $21.75 - NYSE) or Consolidated Edison (ED - $41.91 - NYSE).
The buyer could rationalize outside plant operations, eliminate all of the
corporate, finance, regulatory and public company overhead, and save a lot of
money for the benefit of both shareholders and customers. When the deal happens
is hard to say. We think it happens in more than a year but less than three. The
company's capable CEO, Paul Ganci, is scheduled to retire in May 2003, so do the
math. Our estimate of the company's private market value (PMV) is $63.
CINERGY CORP. (CIN - $35.75 - NYSE) is another consolidation play. Cinergy has
been to the altar more times than Billy Bob Thornton (or Elizabeth Taylor for
our more senior shareholders) but never quite got the deal done. The stumbling
block has been, as always, "social issues." The logjam may be breaking, however,
given the burgeoning stock and option position of Cinergy's senior management
team. Cinergy has a mouthwatering portfolio of very low cost coal-fired
generating plants, an opportunity to make a lot of money in the deregulating
Ohio wholesale generating market, and transmission access that is highly
strategic to a bigger buyer.
CONSTELLATION ENERGY GROUP INC. (CEG - $30.85 - NYSE) is a position that was
initiated in October 2001. The stock is a fallen angel. Constellation had
grandiose plans to split off the competitive generation business as a separate
publicly traded stock. In October, as the generating companies' stocks cratered,
the company reversed its strategy and flushed its entire senior management team.
The new management and strategy were unveiled at an analyst meeting in January
and were well received by investors. The plan focused internally on better
management of operations and costs. The company expects to earn $2.70 per share
in 2002 and should be earning at least $3.00 in 2003. The stock is statistically
cheap but will remain under a cloud until the company starts to deliver results
in line with expectations.
DTE ENERGY CO. (DTE - $45.50 - NYSE) is a combination electric and gas utility
serving metropolitan Detroit. The company completed the acquisition of MCN
Energy, the gas distribution company serving much of southeastern Michigan, last
year. The company expects to exceed its initial estimate of cost savings.
ENTERGY CORP. (ETR - $43.41 - NYSE) is a back-from-the-dead story. Wayne
Leonard, formerly chief operating officer of Cinergy, has been running Entergy
for a few years now after previous management was ousted. Results on Mr.
Leonard's watch have been impressive, with a substantially improved balance
sheet and earnings growth that is among the industry's best.
6
MIRANT CORP. (MIR - $14.45 - NYSE) is one of the largest independent power
producers ("IPP") in the U.S. with some international power projects as well.
The IPP sector has become oversold in recent months due to the precipitous
decline in wholesale electricity prices. This has enabled our Trust to acquire
shares of Mirant at very attractive prices. As Mirant continues with its efforts
to strengthen its balance sheet, we think that the stock's valuation should
recover. In addition, the electric industry's consolidation trend could lead to
takeovers of IPPs if their stock prices do not recover.
ONEOK INC. (OKE - $20.85 - NYSE) is pronounced wun-oke, not oh-nee-ock. One
company, in Oklahoma. Get it? We didn't, either. No matter. The Fund initiated a
position in ONEOK late in the third quarter of 2001. The stock had fallen along
with natural gas prices, and then got shredded when S&P dropped the company from
the S&P 500 Index. The index funds had to sell; we bought on the sell-off. We're
looking for a sale. Western Resources owns 45% of ONEOK and would like to sell.
They have two problems: first, avoiding capital gains taxes and second, keeping
the sale proceeds away from the sticky fingers of the Kansas regulators. Both
problems are difficult but not impossible. We think that ONEOK management would
be amenable to an approach from a buyer willing to structure a bid such that
shareholders, customers and management all benefit. Possible buyers include
Oklahoma Gas & Electric and American Electric Power, among others.
RGS ENERGY GROUP INC. (RGS - $39.25 - NYSE) is a small electric and gas utility
serving metropolitan Rochester, NY, a city that is the economic hub of upstate
New York. In February, RGS agreed to be acquired by Energy East (EAS - $21.75 -
NYSE), its upstate neighbor. The acquisition is expected to close shortly. We
support this deal. RGS got a good premium for its shareholders while mitigating
lingering concerns about the deteriorating outlook for major industrial
customers, including Xerox and Eastman Kodak. Energy East is paying a reasonable
multiple and is acquiring a company with increasingly valuable and strategic
generation assets and a service territory that presents ample scope for cost
reduction over time.
SEMCO ENERGY INC. (SEN - $9.60 - 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.
MONTHLY DISTRIBUTIONS
The Gabelli Utility Trust had a $0.05 per share monthly distribution
policy in place. The Trust's monthly distribution has been increased by 20% to
$0.06 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 closedend@gabelli.com.
7
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:
MAY JUNE JULY
--- ---- ----
1st Wednesday Ivan Arteaga Henry Van der Eb Ivan Arteaga
2nd Wednesday Charles Minter & Martin Weiner Caesar Bryan Caesar Bryan
3rd Wednesday Walter Walsh & Laura Linehan Ivan Arteaga Lynda Calkin
4th Wednesday Hart Woodson Barbara Marcin Henry Van der Eb
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 e-mail 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
May 6, 2002
SELECTED HOLDINGS
MARCH 31, 2002
--------------------------------------------------------------------------------
CH Energy Group Inc. Mirant Corp.
Cinergy Corp. ONEOK Inc.
Constellation Energy Group Inc. RGS Energy Group Inc.
DTE Energy Co. SEMCO Energy Inc.
Entergy Corp. Southwest Gas Corp.
--------------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
8
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS
MARCH 31, 2002 (UNAUDITED)
MARKET
SHARES VALUE
----------- ------------
COMMON STOCKS -- 79.4%
AGRICULTURE -- 0.1%
10,600 Cadiz Inc.+ ....................................... $ 95,400
-----------
COMMUNICATIONS EQUIPMENT -- 0.4%
75,000 Furukawa Electric Co. Ltd. ........................ 363,866
-----------
CONSUMER PRODUCTS -- 1.3%
50,000 Pennzoil-Quaker State Co. ......................... 1,075,500
-----------
ENERGY AND UTILITIES: ELECTRIC -- 24.2%
25,000 AES Corp.+ ........................................ 225,000
14,000 Calpine Corp.+ .................................... 177,800
50,000 Cinergy Corp. ..................................... 1,787,500
10,000 Cleco Corp. ....................................... 239,000
115,000 Conectiv .......................................... 2,862,350
55,000 DPL Inc. .......................................... 1,405,250
20,219 DTE Energy Co. .................................... 919,965
164,900 El Paso Electric Co.+ ............................. 2,580,685
22,000 FPL Group Inc. .................................... 1,310,100
52,200 Maine Public Service Co. .......................... 1,550,340
140,000 Northeast Utilities ............................... 2,781,800
57,000 SCANA Corp. ....................................... 1,744,200
30,000 TECO Energy Inc. .................................. 858,900
25,000 UIL Holdings Corp. ................................ 1,452,500
20,000 Unisource Energy Corp. ............................ 409,200
-----------
20,304,590
-----------
ENERGY AND UTILITIES: INTEGRATED -- 26.8%
13,000 Allete ............................................ 378,170
40,000 CH Energy Group Inc. .............................. 1,898,000
70,000 Constellation Energy Group Inc. ................... 2,159,500
5,000 Dominion Resources Inc. ........................... 325,800
45,000 DQE Inc. .......................................... 958,950
15,000 Edison International .............................. 251,250
5,000 Empire District Electric Co. ...................... 106,950
18,000 Entergy Corp. ..................................... 781,380
3,979 FirstEnergy Corp. ................................. 137,594
50,000 Florida Public Utilities Co. ...................... 937,000
30,000 Madison Gas & Electric Co. ........................ 852,600
100,000 Mirant Corp.+ ..................................... 1,445,000
220,000 NRG Energy Inc.+ .................................. 2,653,200
52,000 NSTAR ............................................. 2,357,680
18,000 PG&E Corp. ........................................ 424,080
40,000 Progress Energy Inc.+ ............................. 11,000
6,000 Puget Energy Inc. ................................. 124,740
95,000 RGS Energy Group Inc. ............................. 3,728,750
5,000 Sierra Pacific Resources+ ......................... 75,450
140,000 Western Resources Inc. ............................ 2,401,000
7,000 WPS Resources Corp. ............................... 276,080
9,000 Xcel Energy Inc. .................................. 228,150
-----------
22,512,324
-----------
MARKET
SHARES VALUE
----------- ------------
ENERGY AND UTILITIES: NATURAL GAS -- 12.8%
35,000 AGL Resources Inc. ................................ $ 822,500
11,000 Cascade Natural Gas Corp. ......................... 233,420
2,000 Chesapeake Utilities Corp. ........................ 38,300
34,000 Delta Natural Gas Co. Inc. ........................ 732,020
5,000 Dynegy Inc., Cl. A ................................ 145,000
1,000 EnergySouth Inc. .................................. 26,000
22,000 National Fuel Gas Co. ............................. 535,700
12,000 Nicor Inc. ........................................ 546,600
60,000 ONEOK Inc. ........................................ 1,251,000
19,000 Peoples Energy Corp. .............................. 748,220
23,000 Piedmont Natural Gas Co. Inc. ..................... 818,800
1,000 RGC Resources Inc. ................................ 19,325
125,000 SEMCO Energy Inc. ................................. 1,200,000
20,254 Southern Union Co. ................................ 371,053
130,000 Southwest Gas Corp. ............................... 3,250,000
-----------
10,737,938
-----------
ENERGY AND UTILITIES: WATER -- 5.8%
8,000 American States Water Co. ......................... 282,000
11,000 Artesian Resources Corp., Cl. A ................... 332,200
24,000 Birmingham Utilities Inc. ......................... 432,000
20,520 California Water Service Group .................... 525,312
7,500 Connecticut Water Service Inc. .................... 205,425
41,000 Middlesex Water Co. ............................... 954,480
45,000 NiSource Inc.+ .................................... 104,400
5,466 Pennichuck Corp. .................................. 136,650
30,000 Philadelphia Suburban Corp. ....................... 705,000
13,500 SJW Corp. ......................................... 1,096,200
5,250 Southwest Water Co. ............................... 84,525
-----------
4,858,192
-----------
ENVIRONMENTAL SERVICES -- 0.1%
20,000 Catalytica Energy Systems Inc.+ ................... 67,400
-----------
SATELLITE -- 0.8%
40,000 General Motors Corp., Cl. H+ ...................... 658,000
-----------
TELECOMMUNICATIONS -- 6.4%
1,000 ALLTEL Corp. ...................................... 55,550
16,000 AT&T Canada Inc., Cl. B+ .......................... 430,880
10,000 AT&T Corp. ........................................ 157,000
20,000 BellSouth Corp. ................................... 737,200
108,000 Broadwing Inc.+ ................................... 754,920
22,000 BT Group plc, ADR+ ................................ 883,960
35,000 CenturyTel Inc. ................................... 1,190,000
25,000 Citizens Communications Co.+ ...................... 268,750
4,000 Commonwealth Telephone
Enterprises Inc.+ ............................... 153,000
12,000 Conestoga Enterprises Inc. ........................ 363,120
14,000 Deutsche Telekom AG, ADR .......................... 209,720
9
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 2002 (UNAUDITED)
MARKET
SHARES VALUE
----------- ------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
4,000 France Telecom SA, ADR ............................ $ 121,640
24,000 Touch America Holdings Inc.+ ...................... 91,440
-----------
5,417,180
-----------
WIRELESS COMMUNICATIONS -- 0.7%
30,000 mm02 plc, ADR+ .................................... 293,700
50,000 Nextel Communications Inc., Cl. A+ ................ 269,000
-----------
562,700
-----------
TOTAL COMMON STOCKS ............................... 66,653,090
-----------
PREFERRED STOCKS -- 0.8%
TELECOMMUNICATIONS -- 0.8%
15,000 Citizens Communications Co.,
5.000% Cv. Pfd. ................................. 705,300
-----------
PRINCIPAL
AMOUNT
--------------
CONVERTIBLE BONDS -- 3.5%
SHORT-TERM AND NET RECEIVABLES -- 3.5%
$3,000,000 Orion Power Holdings Inc., Cv.,
4.500%, 06/01/08 ................................ 2,992,500
-----------
CORPORATE BONDS -- 1.1%
ENERGY AND UTILITIES: INTEGRATED -- 1.1%
1,100,000 Mirant Corp., Sub. Deb. Cv.,
2.500%, 06/15/21 ................................ 891,000
-----------
PRINCIPAL MARKET
AMOUNT VALUE
----------- -----------
TELECOMMUNICATIONS -- 0.0%
$ 100,000 Williams Communications Group Inc.,
10.875%, 10/01/09 ............................... $ 15,500
-----------
TOTAL CORPORATE BONDS ............................. 906,500
-----------
REPURCHASE AGREEMENT -- 16.4%
13,728,000 State Street Bank & Trust Co., 1.770%,
dated 03/28/02, due 04/01/02,\
proceeds at maturity, $2,500,486 (a) ............ 13,728,000
-----------
TOTAL INVESTMENTS -- 101.2%
(Cost $79,062,707) ................................ 84,985,390
OTHER ASSETS AND
LIABILITIES (NET) -- (1.2)% ....................... (1,040,026)
-----------
NET ASSETS -- 100.0%
(11,268,524 shares outstanding) ................... $83,945,364
===========
NET ASSET VALUE
(83,945,364 / 11,268,524 shares outstanding) ...... $ 7.45
====
-------------
For Federal tax purposes:
Aggregate cost ...................................... $79,062,707
===========
Gross unrealized appreciation ....................... $ 9,969,165
Gross unrealized depreciation ....................... (4,044,982)
-----------
Net unrealized appreciation ......................... $ 5,924,183
===========
-------------
(a) Collateralized by U.S. Treasury Note, 5.250%, due 08/15/03,
market value $14,003,434.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR American Depositary Receipt.
10
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
ENROLLMENT IN THE PLAN
It is the Policy of The Gabelli Utility Trust ("Utility Trust") to
automatically reinvest dividends. As a "registered" shareholder you
automatically become a participant in the Utility Trust's Automatic Dividend
Reinvestment Plan (the "Plan"). The Plan authorizes the Utility Trust to issue
shares to participants upon an income dividend or a capital gains distribution
regardless of whether the shares are trading at a discount or a premium to net
asset value. All distributions to shareholders whose shares are registered in
their own names will be automatically reinvested pursuant to the Plan in
additional shares of the Utility Trust. Plan participants may send their stock
certificates to EquiServe Trust Company ("EquiServe") to be held in their
dividend reinvestment account. Registered shareholders wishing to receive their
distribution in cash must submit this request in writing to:
The Gabelli Utility Trust
c/o EquiServe
P.O. Box 43011
Providence, RI 02940-3011
Shareholders requesting this cash election must include the shareholder's
name and address as they appear on the share certificate. Shareholders with
additional questions regarding the Plan or requesting a copy of the terms of the
Plan may contact EquiServe at 1 (800) 336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at EquiServe must do
so in writing or by telephone. Please submit your request to the above mentioned
address or telephone number. Include in your request your name, address and
account number. The cost to liquidate shares is $2.50 per transaction as well as
the brokerage commission incurred. Brokerage charges are expected to be less
than the usual brokerage charge for such transactions.
If your shares are held in the name of a broker, bank or nominee, you should
contact such institution. If such institution is not participating in the Plan,
your account will be credited with a cash dividend. In order to participate in
the Plan through such institution, it may be necessary for you to have your
shares taken out of "street name" and re-registered in your own name. Once
registered in your own name your dividends will be automatically reinvested.
Certain brokers participate in the Plan. Shareholders holding shares in "street
name" at participating institutions will have dividends automatically
reinvested. Shareholders wishing a cash dividend at such institution must
contact their broker to make this change.
The number of shares of Common Stock distributed to participants in the Plan
in lieu of cash dividends is determined in the following manner. Under the Plan,
whenever the market price of the Utility Trust's Common Stock is equal to or
exceeds net asset value at the time shares are valued for purposes of
determining the number of shares equivalent to the cash dividends or capital
gains distribution, participants are issued shares of Common Stock valued at the
greater of (i) the net asset value as most recently determined or (ii) 95% of
the then current market price of the Utility Trust's Common Stock. The valuation
date is the dividend or distribution payment date or, if that date is not a New
York Stock Exchange trading day, the next trading day. If the net asset value of
the Common Stock at the time of valuation exceeds the market price of the Common
Stock, participants will receive shares from the Utility Trust valued at market
price. If the Utility Trust should declare a dividend or capital gains
distribution payable only in cash, EquiServe will buy Common Stock in the open
market, or on the New York Stock Exchange or elsewhere, for the participants'
accounts, except that EquiServe will endeavor to terminate purchases in the open
market and cause the Utility Trust to issue shares at net asset value if,
following the commencement of such purchases, the market value of the Common
Stock exceeds the then current net asset value.
11
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN (CONTINUED)
The automatic reinvestment of dividends and capital gains distributions will
not relieve participants of any income tax which may be payable on such
distributions. A participant in the Plan will be treated for Federal income tax
purposes as having received, on a dividend payment date, a dividend or
distribution in an amount equal to the cash the participant could have received
instead of shares.
The Utility Trust reserves the right to amend or terminate the Plan as
applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to written notice of the change sent to the members of the Plan
at least 90 days before the record date for such dividend or distribution. The
Plan also may be amended or terminated by EquiServe on at least 90 days' written
notice to participants in the Plan.
VOLUNTARY CASH PURCHASE PLAN
The Voluntary Cash Purchase Plan is yet another vehicle for our shareholders
to increase their investment in the Utility Trust. In order to participate in
the Voluntary Cash Purchase Plan, shareholders must have their shares registered
in their own name.
Participants in the Voluntary Cash Purchase Plan have the option of making
additional cash payments to EquiServe for investments in the Utility Trust's
shares at the then current market price. Shareholders may send an amount from
$250 to $10,000. EquiServe will use these funds to purchase shares in the open
market on or about the 1st and 15th of each month. EquiServe will charge each
shareholder who participates $0.75, plus a pro rata share of the brokerage
commissions. Brokerage charges for such purchases are expected to be less than
the usual brokerage charge for such transactions. It is suggested that any
voluntary cash payments be sent to EquiServe, P.O. Box 43011, Providence, RI
02940-3011 such that EquiServe receives such payments approximately 10 days
before the 1st and 15th of the month. Funds not received at least five days
before the investment date shall be held for investment until the next purchase
date. A payment may be withdrawn without charge if notice is received by
EquiServe at least 48 hours before such payment is to be invested.
For more information regarding the Dividend Reinvestment Plan and Voluntary
Cash Purchase Plan, brochures are available by calling (914) 921-5070 or by
writing directly to the Utility Trust.
12
TRUSTEES AND OFFICERS
THE GABELLI UTILITY TRUST
ONE CORPORATE CENTER, RYE, NY 10580-1422
TRUSTEES
Mario J. Gabelli, CFA
CHAIRMAN AND CHIEF INVESTMENT OFFICER,
GABELLI ASSET MANAGEMENT INC.
Dr. Thomas E. Bratter
PRESIDENT, JOHN DEWEY ACADEMY
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
James P. Conn
FORMER MANAGING DIRECTOR AND CHIEF INVESTMENT OFFICER,
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
Vincent D. Enright
FORMER SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER,
KEYSPAN ENERGY CORP.
Frank J. Fahrenkopf, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER,
AMERICAN GAMING ASSOCIATION
John D. Gabelli
SENIOR VICE PRESIDENT,
GABELLI & COMPANY, INC.
Robert J. Morrissey
ATTORNEY-AT-LAW,
MORRISSEY, HAWKINS & LYNCH
Karl Otto Pohl
FORMER PRESIDENT, DEUTSCHE BUNDESBANK
Anthony R. Pustorino
CERTIFIED PUBLIC ACCOUNTANT,
PROFESSOR EMERITUS, PACE UNIVERSITY
Salvatore J. Zizza
CHAIRMAN, HALLMARK ELECTRICAL SUPPLIES CORP.
OFFICERS
Mario J. Gabelli, CFA
PRESIDENT & CHIEF INVESTMENT OFFICER
Bruce N. Alpert
VICE PRESIDENT & TREASURER
David I. Schachter
VICE PRESIDENT & OMBUDSMAN
James E. McKee
SECRETARY
INVESTMENT ADVISOR
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
CUSTODIAN
Boston Safe Deposit and Trust Company
COUNSEL
Skadden, Arps, Slate, Meagher & Flom, LLP
TRANSFER AGENT AND REGISTRAR
EquiServe Trust Company
STOCK EXCHANGE LISTING
COMMON
-----------
NYSE-Symbol: GUT
Shares Outstanding: 11,268,524
The Net Asset Value appears in the Publicly Traded
Funds column, under the heading "Specialized Equity
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 10580-1422
(914) 921-5070
HTTP://WWW.GABELLI.COM
FIRST QUARTER REPORT
MARCH 31, 2002
GBFUF 03/02