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THIRD QUARTER REPORT
SEPTEMBER 30, 2001
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Our cover icon represents the underpinnings of Gabelli. The
Teton mountains in Wyoming represent what we believe in in
America -- that creativity, ingenuity, hard work and a global
uniqueness provide enduring values. They also stand out in
an increasingly complex, interconnected and interdependent
economic world.
INVESTMENT OBJECTIVE:
The Gabelli Utility Trust is a closed-end, non-diversified management investment
company whose primary objectives are long-term growth of capital and income. The
Trust will invest in companies that provide products, services or equipment for
the generation or distribution of electricity, gas and water. Additionally, the
Trust will invest in companies in telecommunications services or infrastructure
operations.
THIS REPORT IS PRINTED ON RECYCLED PAPER.
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TO OUR SHAREHOLDERS,
In our view, the major investment theme for electric, gas and water
utilities can be summed up in two words: size matters. Electric generators with
a large and geographically diverse portfolio of generating plants can trade
around their structural long positions to enhance returns while avoiding the
risk of asset concentration in a single market that experiences a hiccup, as all
markets do from time to time. Electric, gas and water 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
to 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 to be picking up a bit already, and if Congress cooperates, which is
always a big question mark, we could be off to the races next year.
INVESTMENT PERFORMANCE
For the third quarter ended September 30, 2001, The Gabelli Utility
Trust's (the "Trust") net asset value ("NAV") fell 5.24% 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 17.91% and
12.60%, 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 open-end mutual funds
classified in this particular category.
The Trust was up 0.83% for the trailing twelve-month period after
adjusting for the reinvestment of the $1.00 per share in distributions. The S&P
Utility Index and the Lipper Utility Fund Average fell 24.83% and 22.75%,
respectively, over the same twelve-month period. Since inception on July 9, 1999
through September 30, 2001, the Trust had a cumulative total return of 19.97%,
including adjustments of $1.60 per share in distributions, which equates to an
average annual total return of 8.50%.
The Trust's shares of beneficial interest ended the third quarter at $8.54
per share on the New York Stock Exchange, a premium to the net asset value of
15.72% and a total return decline of 2.30% for the third quarter. The Trust's
common shares rose 15.94% 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. Stand-alone natural gas distribution companies make no
economic sense either; the combination utility model is clearly better. The
balkanized structure of the industry is inherently inefficient, and competitive
forces are now putting pressure on the marginal players. The big companies feel
the need to 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 telecommunications companies,
natural gas pipelines and storage operators, and wholesale electric generators,
another group that is in our opinion increasingly ripe for consolidation.
[PRYAMID GRAPHIC OMITTED]
EDGAR REPRESENTATION OF PYRAMID TEXT AS FOLLOWS:
EPS
PMV
MANAGEMENT
CASH FLOW
RESEARCH
INVESTMENT RESULTS (a)
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------------------------------------------------------------------
Average Annual Returns - September 30, 2001
-------------------------------------------
NAV Average Investment Average
Annual Return (a) Annual Return (b)
----------------- ------------------
1 Year .................. 0.83% 15.94%
Life of Fund (c) ........ 8.50% 12.56%
------------------------------------------------------------------
(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) 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.
(c) From commencement of investment operations on July 9, 1999.
--------------------------------------------------------------------------------
COMMENTARY
The third quarter of 2001 was miserable before September 11, and it only
got worse after that. The economy was already weak and getting weaker. Seven
Federal Reserve Board ("Fed") easings did not seem to be helping. The investment
spending binge of the past decade combined with the sudden economic slowdown
dropped U.S. capacity utilization below 80% for the first time in a decade, and
American businesses slashed capital budgets in response. Lower interest rates
will not bring investment spending up; only higher retail demand can do that
now.
September 11 reduced any lingering doubt about whether or not the U.S. is
in a recession. It is. The payroll number reported on October 5, covering the
period through September 12, was much worse than expected. The number to be
reported on November 2, which will reflect the first month of American life
after the attack, will be awful. Unemployment, currently at 4.9% and up sharply
from less than 4% only a few months ago, seems destined to go up as American
businesses batten down the hatches in the face of the storm that is upon us.
Jobs that seemed secure are suddenly seen to be at risk. This is not an
environment conducive to robust consumer spending. We have seen the onset of
recessions before, and we know what the consumer does. The consumer cuts back
and waits to see just how bad it is going to get. The consumer's need to rebuild
liquidity in the face of economic uncertainty exacerbates the falloff in demand,
and the recession is fully under way. We can't know until after the fact how bad
the recession is going to be. The recessions of 1974-75 and 1981-82 were truly
awful, while that of 1990-91 was broad based but relatively mild. History tells
us that unemployment normally peaks in a recession between 7% and 9%. There is
more pain to come in the months ahead.
Arguing for a relatively mild recession are several factors. Monetary
policy at the moment is highly stimulative, and history tells us that when the
pundits start pontificating about "the Fed pushing on a string" the monetary
stimulus usually starts to kick in. Fiscal policy has turned stimulative as
well. President Bush's summer tax cut, widely derided by columnists and policy
wonks on the left, looks positively prescient. Whether that is by luck or by
design is for history to judge. More tax cuts are coming, sooner rather than
later. In addition, government spending, the third leg of the economic stool, is
set to rise faster than the 4% spending growth that the administration had
targeted. An awful lot of money, much of it from the Federal government, is
going to be spent on security. While this represents a dead loss in terms of
economic efficiency (security spending does not make or produce anything), it is
a lot of money and a lot of jobs.
2
Of course, this means that the U.S. is running a deficit again. So what?
The U.S. has less debt relative to Gross Domestic Product ("GDP") than any major
industrial nation in the world. If a little deficit spending gets the economy
growing again, and eventually it will, it is money well spent. Social Security
reform will just have to wait for another day.
What does this mean for utility stock investors? Utility stocks
historically have performed relatively well during recessions. Electricity, gas
and water usage have some economic sensitivity but not that much. Weather is a
lot more important. People and businesses pay their utility bills in good times
and bad. Utilities, in addition, are in the best financial shape in decades.
Dividend payouts are low, balance sheets are strong, and the quality of earnings
is excellent. The stocks are cheap, with many quality stocks trading at 10 times
earnings or less. One additional point to consider: the 4% to 6% yields that
investors can get on utility stocks looks very attractive compared to what the
banks are paying on CDs as the Fed hammers interest rates lower and lower.
Utilities have long offered equity investors a safe haven in economic downturns,
and this time should be no different.
Fundamental developments for utilities in the third quarter were generally
positive. The lights stayed on in California. The President's energy policy
proposals unveiled in May were going nowhere fast, particularly since the
Democrats took control of the Senate, but post-September 11 they are back on the
front burner in Congress, and we could see legislation on the President's desk
by the end of the year. Since it is Congress, of course, you never know until it
is done. The President's package contains several items of importance to
utilities. The Administration package would substantially reform the Public
Utility Holding Company Act (PUHCA), which would allow non-utility companies to
invest in utilities in a meaningful way for the first time since 1935. This
would be a tremendous spur to utility merger and acquisition activity. The
proposal would also allow electric companies to avoid capital gains tax on
transmission assets transferred to independent regional transmission operators,
and would clarify the tax status of nuclear decommissioning funds. Both
proposals, if enacted, would facilitate utility consolidation activity, an
ongoing focus of the Trust's investment strategy. Consolidation activity saw
some signs of picking up in the third quarter, as German utility giant E.ON
agreed to buy American Water Works for a very rich price. In October, the
independent power producer ("IPP") Reliant Resources paid up to acquire another
IPP, Orion Power. Also in October, Northwest Natural Gas agreed to acquire
Portland General Electric from Enron in a pretty reasonably-priced deal that we
like a lot. So, things seem to be developing as we hoped, as discussed in our
second quarter report: the rhetoric is cooling off, rates are coming down
(except in California, and they did it to themselves) and things in utility-land
are getting back to normal.
One thing that we are watching closely with some concern is the risk that
regulators will reduce allowed rates of return for utilities as interest rates
ratchet down. With interest rates where they are currently, a reasonable allowed
return on equity would be in the range of 9.5% to 10.5%. Some utilities that
have avoided filing rate cases for years still have allowed returns that are
substantially higher. In an economic downturn, industrial and commercial
customers are under a lot of pressure to cut costs, and one way of doing that is
to complain to regulators that utilities are earning too much money. We are
consistently trying to avoid companies that are vulnerable to a regulatory
earnings review that could trigger a general rate case.
3
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Trust.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend that we believe will develop over
time.
BANGOR HYDRO-ELECTRIC CO. (BGR - $26.63 - NYSE) was acquired by Canadian utility
Emera Inc. (EMA.TO - $15.95 - Toronto Stock Exchange) on October 10, 2001. Under
the agreement reached in June 2000, Emera acquired all of the outstanding common
stock of BGR for $26.806 per share in cash. Emera said that the purchase is part
of its strategy to grow its businesses outside of Canada. BGR will operate as a
standalone division within the company and will be the base for Emera to launch
other initiatives in the U.S.
BELLSOUTH CORP. (BLS - $41.55 - NYSE) is the incumbent local exchange carrier
serving most of the southeastern U.S. The stock has been held back by investor
concern that BellSouth is contemplating a significant domestic acquisition,
which we doubt, and by valuation issues in relation to the company's lowered
earnings per share ("EPS") growth expectations. The lower earnings guidance was
in part due to nonrecurring factors, and also due to the acceleration of the
company's digital subscriber line rollout, which will inflate expenses in the
near term. BellSouth's management has shown its aversion to dilution over many
years, which gives us some comfort about the company's acquisition plans. At 16
times consensus 2002 EPS estimates, BellSouth is statistically the cheapest of
the three regional Bells.
CENTURYTEL INC. (CTL - $33.50 - NYSE), based in Monroe, Louisiana, is the eighth
largest local telephone company in the U.S., with over 1.8 million access lines
in the South and Midwest. CenturyTel also has over 740,000 cellular customers.
Through acquisitions, CTL has created clusters of rural telephone and cellular
companies within commuting distance of metropolitan areas in states including
Wisconsin, Michigan, Ohio, Louisiana and Arkansas. With the $2.2 billion
acquisition of Portland-based Pacific Telecom, CenturyTel has added seven
states, ten cellular markets and 640,000 access lines to its customer base. The
acquired operations have nearly doubled Century's revenues. The company has
recently closed acquisitions of 475,000 access lines from Verizon for $1.5
billion. Century recently announced it decision to divest its wireless
operations and focus on growing its rural wireline operations. In July, the
company received an unsolicited bid from ALLTEL (AT - $57.95 - NYSE) to acquire
CenturyTel for $43 per share in cash and ALLTEL stock. CenturyTel management
rejected ALLTEL's initial offer.
CH ENERGY GROUP INC. (CHG - $40.60 - NYSE) is the last small New York State
public electric utility operating, 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 long dominated by IBM. The buyer would almost have to be
Energy East, Consolidated Edison, National Grid or Keyspan. The best fit clearly
is with Energy East. 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. Energy East has a depressed stock price due to
arbitrage pressures, Con Ed is licking its wounds from the Northeast Utilities
fiasco and has its hands full and then some since September 11, and the Grid is
tied down with Niagara Mohawk until 2002. We think it will happen in more than a
year but less than three. Our estimate of the company's private market value
("PMV") is $63, which represents a premium of around 50%.
4
CINERGY CORP. (CIN - $30.87 - NYSE) is another consolidation play. Cinergy has
been to the altar more times than Billy Bob Thornton (or Zsa Zsa Gabor 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. The stock is dirt cheap at 11 times consensus 2002
EPS of $2.90. We think that the stock is cheap because investors have been
waiting so long for the sale that many have given up and moved on. At a 10%
discount multiple for a premier company, we'll wait.
NIAGARA MOHAWK HOLDINGS INC. (NMK - $16.97 - NYSE) agreed to be acquired by the
National Grid of the U.K. in August 2000 for $19 per share in cash and stock.
The acquisition is expected to close by the end of 2001, although the Grid is
pushing hard to move up the closing date. The New York regulators remain the
major hurdle to be cleared. The company's revenue growth prospects are minimal,
but its operations are inefficient and its cost structure is bloated. The Grid
expects to be able to reduce Niagara Mohawk's cost base by 10% or $90 million.
Assuming that the Grid attains its cost reduction targets, which we think are
readily attainable, the acquisition will be accretive to the Grid's EPS in the
first year.
RGS ENERGY GROUP INC. (RGS - $38.70 - 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, its upstate
neighbor, for $39.50 per share. 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 - $14.35 - 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.
Sincerely,
/S/ MARIO J. GABELLI, CFA
MARIO J. GABELLI, CFA
Portfolio Manager and Chief Investment Officer
October 31, 2001
5
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2001 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS -- 71.3%
AGRICULTURE -- 0.1%
10,600 Cadiz Inc.+ .................................... $ 90,842
-----------
BUILDING AND CONSTRUCTION -- 1.2%
15,000 Newport News Shipbuilding Inc. ................. 1,008,000
-----------
COMMUNICATIONS EQUIPMENT -- 0.4%
60,000 Furukawa Electric Co. Ltd. ..................... 326,366
-----------
ENERGY AND UTILITIES: ELECTRIC -- 27.8%
15,742 AES Corp.+ ..................................... 201,812
85,000 Bangor Hydro-Electric Co. ...................... 2,263,550
55,000 Cinergy Corp. .................................. 1,697,850
10,000 Cleco Corp. .................................... 206,100
115,000 Conectiv Inc. .................................. 2,702,500
35,000 DPL Inc. ....................................... 851,200
20,219 DTE Energy Co. ................................. 870,428
164,900 El Paso Electric Co.+ .......................... 2,168,435
2,000 FPL Group Inc. ................................. 107,100
10,000 GPU Inc. ....................................... 403,600
52,200 Maine Public Service Co. ....................... 1,453,770
250,000 Niagara Mohawk Holdings Inc.+ .................. 4,242,500
120,000 Northeast Utilities ............................ 2,247,600
1,500 Orion Power Holdings Inc.+ ..................... 38,250
57,000 SCANA Corp. .................................... 1,446,660
20,000 TECO Energy Inc. ............................... 542,000
25,000 UIL Holdings Corp. ............................. 1,192,250
20,000 Unisource Energy Corp. ......................... 280,000
-----------
22,915,605
-----------
ENERGY AND UTILITIES: INTEGRATED -- 18.1%
13,000 Allete ......................................... 333,320
40,000 CH Energy Group Inc. ........................... 1,624,000
52,000 DQE Inc. ....................................... 1,000,480
15,000 Edison International ........................... 197,400
7,000 Empire District Electric Co. ................... 143,850
18,000 Entergy Corp. .................................. 640,080
50,000 Florida Public Utilities Co. ................... 777,500
30,000 Madison Gas & Electric Co. ..................... 754,500
33,000 Montana Power Co. .............................. 173,250
52,000 NSTAR .......................................... 2,178,800
18,000 PG&E Corp. ..................................... 273,600
40,000 Progress Energy Inc. ........................... 12,000
5,000 Puget Energy Inc. .............................. 107,450
98,700 RGS Energy Group Inc. .......................... 3,819,690
5,000 Sierra Pacific Resources+ ...................... 75,500
140,000 Western Resources Inc. ......................... 2,317,000
7,000 WPS Resources Corp. ............................ 240,800
9,000 Xcel Energy Inc. ............................... 253,350
---------
14,922,570
-----------
MARKET
SHARES VALUE
------ ------
ENERGY AND UTILITIES: NATURAL GAS -- 10.8%
37,000 AGL Resources Inc. ............................. $ 738,890
2,000 Chesapeake Utilities Corp. ..................... 36,700
34,000 Delta Natural Gas Co. Inc. ..................... 680,000
3,000 Dynegy Inc., Cl. A ............................. 103,950
14,000 National Fuel Gas Co. .......................... 322,420
12,000 Nicor Inc. ..................................... 465,000
22,000 ONEOK Inc. ..................................... 364,320
19,000 Peoples Energy Corp. ........................... 755,440
23,000 Piedmont Natural Gas Co. Inc. .................. 716,220
110,000 SEMCO Energy Inc. .............................. 1,578,500
17,254 Southern Union Co. ............................. 361,126
130,000 Southwest Gas Corp. ............................ 2,756,000
-----------
8,878,566
-----------
ENERGY AND UTILITIES: WATER -- 5.7%
8,000 American States Water Co. ...................... 296,000
11,000 Artesian Resources Corp., Cl. A ................ 287,870
26,000 Birmingham Utilities Inc. ...................... 413,400
20,520 California Water Service Group ................. 554,040
7,500 Connecticut Water Service Inc. ................. 207,067
21,200 Middlesex Water Co. ............................ 699,600
45,000 NiSource Inc.+ ................................. 95,400
4,100 Pennichuck Corp. ............................... 131,200
30,000 Philadelphia Suburban Corp. .................... 787,800
14,500 SJW Corp. ...................................... 1,187,550
5,250 Southwest Water Co. ............................ 74,288
---------
4,734,215
-----------
ENVIRONMENTAL SERVICES -- 0.1%
13,000 Catalytica Energy Systems Inc.+ ................ 99,580
-----------
SATELLITE -- 0.5%
30,000 General Motors Corp., Cl. H+ ................... 399,900
-----------
TELECOMMUNICATIONS -- 6.1%
2,000 ALLTEL Corp. ................................... 115,900
15,000 AT&T Canada Inc., Cl. B+ ....................... 435,150
10,000 AT&T Corp. ..................................... 193,000
27,000 BellSouth Corp. ................................ 1,121,850
3,000 British Telecommunications plc, ADR ............ 153,450
30,000 BroadWing Inc.+ ................................ 482,400
52,000 CenturyTel Inc. ................................ 1,742,000
20,000 Citizens Communications Co. .................... 188,000
5,000 Commonwealth Telephone
Enterprises Inc.+ ............................ 183,750
12,000 Conestoga Enterprises Inc. ..................... 275,400
10,000 Deutsche Telekom AG, ADR ....................... 155,000
-----------
5,045,900
-----------
6
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2001 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
WIRELESS COMMUNICATIONS -- 0.5%
44,000 Nextel Communications Inc., Cl. A+ ............ $ 380,160
2,000 Nextel Partners Inc., Cl. A+ .................. 13,460
-----------
393,620
-----------
TOTAL COMMON STOCKS ............................ 58,815,164
-----------
PREFERRED STOCKS -- 0.7%
TELECOMMUNICATIONS -- 0.7%
14,000 Citizens Communications Co.,
5.00% Cv. Pfd. ............................... 609,560
-----------
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
CORPORATE BONDS -- 2.6%
ENVIRONMENTAL SERVICES -- 2.5%
$2,050,000 Waste Management Inc., Sub. Deb. Cv.
4.00%, 02/01/02 .............................. 2,060,250
-----------
TELECOMMUNICATIONS -- 0.1%
100,000 Williams Communications Group Inc.
10.88%, 10/01/09 ............................. 42,000
-----------
TOTAL CORPORATE BONDS .......................... 2,102,250
-----------
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
U.S. GOVERNMENT OBLIGATIONS -- 21.2%
17,500,000 U.S. Treasury Bills,
3.37% to 3.52%++,
due 10/11/01 to 11/15/01 ..................... 17,445,155
-----------
REPURCHASE AGREEMENTS -- 4.2%
$3,495,000 Agreement with State Street
Bank & Trust Co.,
3.05%, dated 09/28/01,
due 10/01/01, proceeds
at maturity $3,495,888 (a) ................... $ 3,495,000
-----------
TOTAL INVESTMENTS -- 100.0%
(Cost $80,833,045) ........................................... 82,467,129
OTHER ASSETS AND
LIABILITIES (NET) -- (0.0)% .................................. (15,050)
-----------
NET ASSETS -- 100.0%
(11,175,126 shares outstanding) .............................. $82,452,079
===========
NET ASSET VALUE
(82,452,079 / 11,175,126 shares outstanding) ................. $7.38
=====
-----------------------------------
For Federal tax purposes:
Aggregate cost ................................. $80,833,045
===========
Gross unrealized appreciation .................. $ 6,566,659
Gross unrealized depreciation .................. (4,932,575)
-----------
Net unrealized appreciation .................... $ 1,634,084
===========
-----------------------------------
(a) Collateralized by U.S. Treasury Bond, 6.625%, due 02/15/27, market
value $3,566,852.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depositary Receipt.
-------------------------------------------------------------------
SELECTED HOLDINGS
SEPTEMBER 30, 2001
------------------
Bangor Hydro-Electric Co. Cinergy Corp.
BellSouth Corp. Niagara Mohawk Holdings Inc.
CenturyTel Inc. RGS Energy Group Inc.
CH Energy Group Inc. SEMCO Energy Inc.
-------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
7
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
ENROLLMENT IN THE PLAN
It is the policy of The Gabelli Utility Trust ("Utility Trust") to
automatically reinvest dividends. As a "registered" shareholder you
automatically become a participant in the Utility Trust's Automatic Dividend
Reinvestment Plan (the "Plan"). The Plan authorizes the Utility Trust to issue
shares to participants upon an income dividend or a capital gains distribution
regardless of whether the shares are trading at a discount or a premium to net
asset value. All distributions to shareholders whose shares are registered in
their own names will be automatically reinvested pursuant to the Plan in
additional shares of the Utility Trust. Plan participants may send their stock
certificates to 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 1st and 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.
8
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
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NYSE-Symbol: GUT
Shares Outstanding: 11,175,126
The Net Asset Value appears in the Publicly Traded
Funds column, under the heading "Specialized Equity Funds," in Sunday's The
New York Times and in Monday's The Wall Street Journal. It is also
listed in Barron's Mutual Funds/Closed End Funds section under the heading
"Specialized Equity Funds."
The Net Asset Value may be obtained each day by calling (914) 921-5071.
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For general information about the Gabelli Funds, call
1-800-GABELLI (1-800-422-3554), fax us at 914-921-5118, visit
Gabelli Funds' Internet homepage at: HTTP://WWW.GABELLI.COM or
e-mail us at: closedend@gabelli.com
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Notice is hereby given in accordance with Section 23(c) of the
Investment Company Act of 1940, as amended, that the Utility
Trust may, from time to time, purchase its shares in the open
market when the Utility Trust shares are trading at a discount
of 10% or more from the net asset value of the shares.
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THE GABELLI UTILITY TRUST
ONE CORPORATE CENTER
RYE, NY 10580-1434
(914) 921-5070
HTTP://WWW.GABELLI.COM
THIRD QUARTER REPORT
SETPEMBER 30, 2001
GBFUF 09/01