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THE GABELLI
UTILITY TRUST
THIRD QUARTER REPORT
SEPTEMBER 30, 2002
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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 infrastructure operations.
THIS REPORT IS PRINTED ON RECYCLED PAPER.
TO OUR SHAREHOLDERS,
In our view, the major investment theme for electric, gas and telephone
utilities can be summed up in two words: size matters. Electric generators with
a large and geographically diverse portfolio of generating plants can trade
around their structural long positions to enhance returns while avoiding the
risk of asset concentration in a single market. Electric, gas and telephone
distribution companies can spread their substantial fixed costs over a larger
base of customers and see the cost per customer decline, enhancing earnings
while reducing prices. Although the current unsettled market conditions seem to
have caused the consolidation activity seen over the past several years to slow
for a while, the underlying economics continue to support additional merger and
acquisition activity over time. We believe that the recent entry of large
European acquirers, the relatively low stock prices of utility companies and the
potential repeal by Congress of the 1935 Public Utility Holding Company Act,
known as PUHCA, could accelerate the utility consolidation trend in the coming
quarters.
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MARIO J. GABELLI
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THE GABELLI
UTILITY TRUST
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 519 closed-end funds that are publicly traded in the U.S., approximately
27% currently trade at premiums to NAV versus 26% five years ago and 58% ten
years ago.
Ideally, the Trust's market price will generally track the NAV. The
Trust's premium or discount to NAV fluctuates over time. Over our Trust's 3-year
history, the range fluctuated from a 3% discount in November 2000 to a 44%
premium in September 2002. The average variance from NAV for the Trust since
inception is a 13.9% premium to NAV. Shortly after the inception of the Trust,
the market price of the Trust exceeded the NAV and this premium has gradually
increased since.
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----------------------------
SEPTEMBER 30, 2002
------------------
Net Asset Value $6.03
Market Price $8.60
Premium 42.62%
----------------------------
EDGAR REPRESENTATION OF PLOT POINTS:
0.1672
0.0816
0.1152
0.0582
0.0117
0.0007
2000 0.0375
0.0289
-0.0127
0.0417
-0.0016
0.0403
0.0016
0.0081
0.0064
-0.0220
0.0003
0.0658
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
2002 0.3454
0.3704
0.3101
0.3225
0.1723
0.2561
0.3297
0.4065
9/30/2002 0.4262
COMPARATIVE RESULTS
--------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2002 (A)
-----------------------------------------------------
SINCE
QUARTER INCEPTION (B) 3 YEAR 1 YEAR
------- ------------- ------ ------
Gabelli Utility Trust NAV Return (c) ............... (10.70)% 2.66% 2.82% (9.61)%
Gabelli Utility Trust Investment Return (d) ........ 0.71% 11.44% 10.66% 8.99%
S&P Utility Index .................................. (22.28)% (12.36)% (11.54)% (35.42)%
Lipper Utility Fund Average ........................ (17.60)% (12.77)% (12.37)% (30.19)%
(a) Returns represent past performance and do not guarantee future results.
Investment returns and the principal value of an investment will
fluctuate. When shares are sold, they may be worth more or less than
their original cost. The S&P Utility Index is an unmanaged indicator of
electric and gas utility stock performance, while the Lipper Average
reflects the average performance of open-end mutual funds classified in
this particular category. Dividends are considered reinvested.
Performance for periods less than one year are not annualized.
(b) From commencement of investment operations on July 9, 1999.
(c) Total returns and average annual returns reflect changes in net asset
value ("NAV"), reinvestment of distributions and adjustments for rights
offerings, and are net of expenses. Since inception return based on
initial net asset value of $7.50.
(d) Total returns and average annual returns reflect changes in closing
market values on the New York Stock Exchange, reinvestment of
distributions and adjustments for rights offerings. Since inception
return based on initial offering price of $7.50.
--------------------------------------------------------------------------------
"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 2.7% 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.
OUR APPROACH
There are nearly 80 publicly traded investor-owned electric utilities in
the U.S., and this is at least 50 more than we need from the standpoint of
economic efficiency. Stand-alone natural gas distribution companies make no
economic sense either; the combination utility model is clearly better. The
balkanized structure of the industry is inherently inefficient, and competitive
forces are now putting pressure on the marginal players. The big companies feel
the need to be bigger to achieve scale economies, and the small companies are
selling out as the cost of staying in the game rises. It is only because of a
complex and lengthy merger review and approval process that the industry remains
as fragmented as it is. Our investments in regulated companies have primarily,
though not exclusively, focused on fundamentally sound, reasonably priced
mid-cap and small-cap utilities that are likely acquisition targets for large
utilities seeking to bulk up. We also like the beneficiaries of developing
trends. This has led to our ongoing focus on natural gas pipelines and storage
operators as a way to take advantage of the growing demand for natural gas in
the U.S.
COMMENTARY
The third quarter of 2002 was one of the most challenging periods in
history for utility stocks. Despite relatively solid fundamentals at many
utility companies, the well-publicized financial problems of a small number of
companies seemed to weigh heavily upon the whole group. In addition, the third
quarter of 2002 was one of the few times when utility stocks did not exhibit
their typical defensive characteristics during a bear market.
2
In previous quarters, utility stocks, with their high and relatively
secure dividends, were able to avoid the panic selling that engulfed stocks of
the more risky merchant energy companies. However, during the third quarter,
dividends did not seem to matter. When the stock market learned about a problem
at a utility company, the share price was driven down even after the CEO
reassured investors about the safety of the dividend.
Only a handful of utility stocks were able to swim against the tide. The
winners in the quarter were the stocks of the safest, plain vanilla,
transmission and distribution companies that have no merchant energy exposure
and also that have no balance sheet problems.
The trend of credit rating downgrades for utilities and merchant energy
companies accelerated during the third quarter. A number of utilities were
attracted by the potential for higher earnings growth from the merchant energy
sector and they borrowed too heavily in 1999 and 2000 in an effort to quickly
construct new unregulated power plants. When wholesale power prices plunged in
2001 and remained low in 2002, the earnings from these new power plants were
disappointing and debt coverage was weaker than expected. The response by many
utilities to credit rating downgrades was to strengthen the balance sheet by
issuing large amounts of new common equity. The near term impact was dilutive to
earnings and also the supply of so much new stock had a depressing effect on
utility stock prices.
Fundamentally, we are encouraged by the fact that many companies in the
electric utility sector have decided to get back to basics and have
significantly reduced or eliminated their involvement in risky energy trading.
Many companies also have cancelled the construction of merchant power plants
that were scheduled to begin construction during 2002 and 2003, thereby reducing
their external financing requirements. The result should be a more stable
earnings outlook as these companies concentrate on improving their utility
earnings and stop trying to hit a home run in the risky merchant energy sector.
The U.S. economy remains somewhat weak. The long-awaited recovery from the
recession appears to be under way, but it is a very slow recovery. This probably
means that it is unlikely that the Federal Reserve Board ("Fed") will tighten
its monetary policy in the next few quarters. Some forecasters, who worry about
a double-dip recession, want the Fed to ease up further on interest rates.
Therefore, with interest rates likely to remain near their 40-year lows, utility
stocks, with their high and relatively secure yields, should remain popular with
conservative total return investors.
We believe that investors will rediscover the importance of yield. In a
world of high uncertainty, cash in hand has more value than the promise of
future earnings. The future earnings stream of stocks that pay no dividends but
promise very high earnings growth must be discounted at a much higher rate in
today's investment world. This effectively raises the value of stocks with a
high up-front current return, such as utilities.
A major fundamental positive for the utilities sector would be the passage
by Congress of the pending energy legislation. President Bush included in his
legislative package the repeal of the 1935 Public Utility Holding Company Act,
known as PUHCA, which has been a major deterrent to mergers and acquisitions in
the utility industry. We believe that the pace of merger activity would
accelerate greatly if PUHCA is repealed. Although the Democrats and Republicans
in both houses of Congress have found plenty to disagree about regarding many
other issues in the President's broad energy bill, there appears to be little
opposition to PUHCA repeal. We are cautiously optimistic that the
Republican-controlled House and the Democrat-controlled Senate can pass a
compromise energy bill that includes PUHCA repeal before the end of this year.
Speaking of mergers and acquisitions, we believe that the recent decline
in stock prices for many utilities should make them more attractive as takeover
targets. Many cash-rich European utilities are shopping around for U.S.
acquisitions. We are watching closely the situation involving German utility
giant E.ON, which completed the
3
acquisition of the U.K.'s PowerGen in early July. PowerGen owned the largest
utility in Kentucky, LG&E Energy. E.ON's Chairman and CEO has said publicly that
he wants to use LG&E and its one million utility customers as a base for making
further U.S. utility acquisitions. In addition, we are watching National Grid of
the U.K. because we expect the company to make another acquisition in the U.S.
In recent years, National Grid has acquired three utilities in the northeastern
region of the U.S., including New England Electric, EUA and Niagara Mohawk
Power.
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.
CINERGY CORP. (CIN - $31.43 - NYSE) is another consolidation play. Cinergy has
terrific physical assets (low-cost generating plants) in a strategic location.
Cinergy's Midwest location enables it to market its low-cost power into several
different regions. Furthermore, many of the utilities around Cinergy have gotten
much bigger in recent years through acquisitions while Cinergy has remained
relatively the same size. Cinergy's power plants in the state of Ohio are
deregulated, giving the company an opportunity to earn higher returns. In
addition, over the past few years, Cinergy's senior management team has
accumulated a hefty position in the common stock and in its options. This should
make them more willing to talk with potential acquirers. Just to the south of
Cinergy's territory is the state of Kentucky, where the giant German utility
E.ON has just acquired the largest utility in Kentucky, the former LG&E. E.ON
has stated its intention to acquire other U.S. utilities and Cinergy would be a
great fit with LG&E.
DPL INC. (DPL - $16.45 - NYSE) is another consolidation play in the Midwest. DPL
is the holding company for the small utility, Dayton Power & Light. DPL shares
have fallen recently after the management lowered earnings per share ("EPS")
guidance and also indicated that it would write down the value of some of its
non-utility investment portfolio. The Trust took advantage of the falling stock
price and added to its holdings in DPL. As one of the smallest utilities in the
region, and one whose state (Ohio) has deregulated its low-cost generating
plants, we believe that DPL is a prime target for acquisition by a larger
electric company.
DQE INC. (DQE - $15.00 - NYSE) is a consolidation play whose stock price fell
sharply in the second quarter when the company came to market with a very large
equity offering. The Trust took advantage of the falling stock price and added
significantly to its position in DQE. DQE is the holding company for the
electric utility in Pittsburgh called Duquesne Light. The company sold off
nearly all of its power plants when the state of Pennsylvania moved toward
utility deregulation a few years ago. DQE has an agreement to sell off its water
utility business and plans to use the proceeds to pay down debt. The company is
surrounded by several utilities that are much larger and we think that its
relatively low stock price makes it an attractive takeover target.
DUKE ENERGY CORP. (DUK - $19.55 - NYSE) is a fallen angel. Duke Energy announced
a major reduction in earnings per share expectations and the shares fell
sharply. The reduction was due to the decline in profits from energy trading and
marketing. In addition, Duke had a huge common stock offering in the third
quarter that put additional pressure on the share price. The Trust used the
decline in the share price of DUK as an opportunity to add shares. Duke Energy's
primary businesses are low-risk regulated utilities in North and South Carolina
and large interstate natural gas pipelines that should continue to produce
steady earnings growth and stable cash flows.
NICOR INC. (GAS - $28.20 - NYSE) is a natural gas utility that serves the area
around the city of Chicago and surrounding counties. The company has relatively
strong fundamentals and a solid track record of good financial performance.
Nevertheless, the share price fell sharply during the third quarter when state
regulators announced a review of the business at a small subsidiary of the
company. This over-reaction by the stock market made the stock very cheap and
the Trust added more shares to its portfolio when this buying opportunity arose.
Nicor has one of the highest yields among the regulated natural gas distribution
stocks.
4
NSTAR (NST - $39.55 - NYSE) is a consolidation play in the New England region.
NSTAR is primarily an electric transmission and distribution utility serving the
Boston and Cape Cod regions of Massachusetts. NST also owns a small gas utility.
The Northeast region of the U.S. has been the most active area for consolidation
activity among utilities. There are several potential acquirers for NST,
including National Grid, who recently completed a takeover of Niagara Mohawk,
and Consolidated Edison, who could use its relatively high stock price and
strong balance sheet to make another acquisition. KeySpan is another potential
acquirer who already owns a gas utility in the same region.
SCANA CORP. (SCG - $26.02 - NYSE) is a midcap electric and gas utility serving a
large portion of South Carolina and small areas of North Carolina and Georgia.
SCANA is either surrounded by or is in close proximity to several of the largest
utilities in the U.S. and any one of them could afford to pay a generous premium
to acquire this well-run, financially strong company.
MONTHLY DISTRIBUTIONS
The Trust has a $0.06 per share monthly distribution policy in place.
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at http://www.gabelli.com
contains information about Gabelli Asset Management Inc., the Gabelli Mutual
Funds, IRAs, 401(k)s, quarterly reports, closing prices and other current news.
You can send us e-mail at closedend@gabelli.com.
In our efforts to bring our shareholders more timely portfolio
information, Gabelli Fund's portfolio managers regularly participate in chat
sessions at www.gabelli.com as reflected below.
WHO WHEN
--- ----
Special Chats: Mario J. Gabelli First Monday of each month
Howard Ward First Tuesday of each month
In addition, every Wednesday will feature a different portfolio manager.
The upcoming Wednesday chat schedule is as follows:
NOVEMBER DECEMBER JANUARY
-------- -------- -------
1st Wednesday Charles Minter & Martin Weiner Charles Minter & Martin Weiner Ivan Arteaga
2nd Wednesday Caesar Bryan Walter Walsh & Laura Linehan Charles Minter & Martin Weiner
3rd Wednesday Walter Walsh & Laura Linehan Hart Woodson Walter Walsh & Laura Linehan
4th Wednesday Barbara Marcin Barbara Marcin
All chat sessions start at 4:15 PM (Eastern Time). Please arrive early, as
participation is limited.
You may sign up for our e-mail alerts at www.gabelli.com and receive early
notice of chat sessions, closing mutual fund prices, news events and media
sightings.
Sincerely,
/S/ MARIO J. GABELLI
MARIO J. GABELLI, CFA
Portfolio Manager and Chief Investment Officer
October 15, 2002
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.
5
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2002 (UNAUDITED)
MARKET
SHARES VALUE
-------- --------
COMMON STOCKS -- 69.5%
AGRICULTURE -- 0.0%
16,000 Cadiz Inc.+ ................................. $ 48,000
------------
COMMUNICATIONS EQUIPMENT -- 0.2%
70,000 Furukawa Electric Co. Ltd. .................. 159,274
------------
CONSUMER PRODUCTS -- 1.2%
50,000 Pennzoil-Quaker State Co. ................... 1,098,500
------------
ENERGY AND UTILITIES: ELECTRIC -- 18.0%
120,000 AES Corp.+ .................................. 301,200
20,000 Calpine Corp.+ .............................. 49,400
55,000 Cinergy Corp. ............................... 1,728,650
20,000 Cleco Corp. ................................. 269,400
66,000 DPL Inc. .................................... 1,085,700
22,219 DTE Energy Co. .............................. 904,314
45,000 Edison International+ ....................... 450,000
160,000 El Paso Electric Co.+ ....................... 1,900,800
22,000 FPL Group Inc. .............................. 1,183,600
34,700 Great Plains Energy Inc. .................... 664,505
51,000 Maine Public Service Co. .................... 1,377,000
160,000 Northeast Utilities ......................... 2,704,000
58,000 SCANA Corp. ................................. 1,509,160
75,000 TECO Energy Inc. ............................ 1,191,000
23,000 UIL Holdings Corp. .......................... 815,350
20,000 Unisource Energy Corp. ...................... 305,000
------------
16,439,079
------------
ENERGY AND UTILITIES: INTEGRATED -- 25.2%
40,000 Allegheny Energy Inc. ....................... 524,000
13,000 Allete ...................................... 280,800
40,000 Alliant Energy Corp. ........................ 770,000
38,000 CH Energy Group Inc. ........................ 1,783,340
100,000 CMS Energy Corp. ............................ 806,000
75,000 Constellation Energy Group Inc. ............. 1,859,250
2,000 Dominion Resources Inc. ..................... 101,460
150,000 DQE Inc. .................................... 2,250,000
150,000 Duke Energy Corp. ........................... 2,932,500
75,000 El Paso Corp. ............................... 620,250
12,000 Empire District Electric Co. ................ 202,800
10,000 Entergy Corp. ............................... 416,000
8,979 FirstEnergy Corp. ........................... 268,382
67,666 Florida Public Utilities Co. ................ 889,808
30,000 MGE Energy Inc. ............................. 769,800
110,000 Mirant Corp.+ ............................... 243,100
5,000 NiSource Inc. ............................... 86,150
45,000 NiSource Inc.+ .............................. 81,450
56,000 NSTAR ....................................... 2,214,800
1,000 Otter Tail Corp. ............................ 26,340
48,000 PG&E Corp.+ ................................. 540,480
MARKET
SHARES VALUE
-------- --------
10,000 PNM Resources Inc. .......................... $ 198,000
10,000 Progress Energy Inc. ........................ 408,700
40,000 Progress Energy Inc., CVO+ .................. 8,400
8,000 Puget Energy Inc. ........................... 163,280
21,000 Sierra Pacific Resources .................... 128,100
6,000 Unitil Corp. ................................ 162,900
10,000 Vectren Corp. ............................... 220,000
170,000 Westar Energy Inc. .......................... 1,710,200
10,000 Wisconsin Energy Corp. ...................... 243,000
7,000 WPS Resources Corp. ......................... 248,080
193,000 Xcel Energy Inc. ............................ 1,796,830
------------
22,954,200
------------
ENERGY AND UTILITIES: NATURAL GAS -- 13.8%
35,000 AGL Resources Inc. .......................... 773,150
12,000 Cascade Natural Gas Corp. ................... 236,400
2,000 Chesapeake Utilities Corp. .................. 37,720
33,000 Delta Natural Gas Co. Inc. .................. 698,610
20,000 Dynegy Inc., Cl. A .......................... 23,200
1,000 EnergySouth Inc. ............................ 25,500
26,000 National Fuel Gas Co. ....................... 516,620
90,000 Nicor Inc. .................................. 2,538,000
65,000 ONEOK Inc. .................................. 1,228,500
19,000 Peoples Energy Corp. ........................ 640,110
23,000 Piedmont Natural Gas Co. Inc. ............... 815,810
3,000 RGC Resources Inc. .......................... 53,970
120,000 SEMCO Energy Inc. ........................... 933,600
100,566 Southern Union Co. .......................... 1,136,396
130,000 Southwest Gas Corp. ......................... 2,892,500
------------
12,550,086
------------
ENERGY AND UTILITIES: WATER -- 4.8%
12,000 American States Water Co. ................... 314,640
11,000 Artesian Resources Corp., Cl. A ............. 312,070
20,500 BIW Ltd. .................................... 366,950
20,520 California Water Service Group .............. 523,875
7,500 Connecticut Water Service Inc. .............. 192,150
40,000 Middlesex Water Co. ......................... 900,000
11,466 Pennichuck Corp. ............................ 322,195
15,000 Philadelphia Suburban Corp. ................. 304,500
13,500 SJW Corp. ................................... 1,053,000
5,250 Southwest Water Co. ......................... 74,865
------------
4,364,245
------------
ENVIRONMENTAL SERVICES -- 0.1%
18,000 Catalytica Energy Systems Inc.+ ............. 62,460
------------
SATELLITE -- 0.5%
50,000 General Motors Corp., Cl. H+ ................ 457,500
------------
6
THE GABELLI UTILITY TRUST
PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 2002 (UNAUDITED)
MARKET
SHARES VALUE
-------- --------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS -- 5.1%
3,000 ALLTEL Corp. ................................ $ 120,390
12,000 AT&T Corp. .................................. 144,120
48,000 BellSouth Corp. ............................. 881,280
125,000 Broadwing Inc.+ ............................. 247,500
20,000 BT Group plc, ADR ........................... 516,800
30,000 CenturyTel Inc. ............................. 672,900
12,000 Citizens Communications Co.+ ................ 81,360
4,000 Commonwealth Telephone
Enterprises Inc.+ ......................... 139,080
10,388 D&E Communications Inc. ..................... 103,880
13,000 Deutsche Telekom AG, ADR .................... 107,510
4,000 France Telecom SA, ADR ...................... 27,920
27,300 Touch America Holdings Inc.+ ................ 16,926
60,000 Verizon Communications Inc. ................. 1,646,400
------------
4,706,066
------------
WIRELESS COMMUNICATIONS -- 0.6%
40,000 mm02 plc, ADR+ .............................. 247,600
40,000 Nextel Communications Inc., Cl. A+ .......... 302,000
------------
549,600
------------
TOTAL COMMON STOCKS ......................... 63,389,010
------------
PREFERRED STOCKS -- 0.6%
TELECOMMUNICATIONS -- 0.6%
17,000 Citizens Communications Co.,
5.000% Cv. Pfd. ........................... 556,070
------------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS -- 0.6%
ENERGY AND UTILITIES: INTEGRATED -- 0.6%
$ 1,100,000 Mirant Corp., Sub. Deb. Cv.,
2.500%, 06/15/21 .......................... 485,375
------------
TELECOMMUNICATIONS -- 0.0%
100,000 Williams Communications Group Inc.,
10.875%, 10/01/09+ (b) .................... 10,500
------------
TOTAL CORPORATE BONDS ....................... 495,875
------------
PRINCIPAL MARKET
AMOUNT VALUE
--------- --------
U.S. GOVERNMENT OBLIGATIONS -- 25.2%
$23,000,000 U.S. Treasury Bills,
1.660%++, 10/03/02 ........................ $ 22,997,885
------------
REPURCHASE AGREEMENT -- 6.3%
5,771,000 Agreement with State Street
Bank and Trust Co.,
1.800%, dated 9/30/02,
due 10/01/02, proceeds
at maturity, $5,771,289 (a) ............... 5,771,000
------------
TOTAL INVESTMENTS -- 102.2%
(Cost $105,875,892) ...................................... 93,209,840
OTHER ASSETS AND LIABILITIES (NET) -- (2.2)% ............... (2,022,943)
------------
NET ASSETS -- 100.0%
(15,127,034 shares outstanding) .......................... $ 91,186,897
============
NET ASSET VALUE
(91,186,897 / 15,127,034 shares outstanding) ............. $6.03
=====
---------------
For Federal tax purposes:
Aggregate cost ................................. $104,913,573
============
Gross unrealized appreciation .................. $ 3,446,153
Gross unrealized depreciation .................. (15,149,886)
------------
Net unrealized depreciation $(11,703,733)
============
---------------
(a) Collateralized by U.S. Treasury Note, 7.500%, due 11/15/24, market value
$5,887,000.
(b) Security in default.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depository Receipt.
CVO - Contingent Value Obligation.
--------------------------------------------------------------------------------
SELECTED HOLDINGS
SEPTEMBER 30, 2002
------------------
CH Energy Group Inc. Nicor Inc.
Cinergy Corp. NSTAR
DPL Inc. ONEOK Inc.
DQE Inc. SCANA Corp.
Duke Energy Corp. Southwest Gas Corp.
--------------------------------------------------------------------------------
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 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, RI02940-3011
Shareholders requesting this cash election must include the shareholder's
name and address as they appear on the share certificate. Shareholders with
additional questions regarding the Plan or requesting a copy of the terms of the
Plan may contact EquiServe at 1 (800) 336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at EquiServe must do
so in writing or by telephone. Please submit your request to the above mentioned
address or telephone number. Include in your request your name, address and
account number. The cost to liquidate shares is $2.50 per transaction as well as
the brokerage commission incurred. Brokerage charges are expected to be less
than the usual brokerage charge for such transactions.
If your shares are held in the name of a broker, bank or nominee, you should
contact such institution. If such institution is not participating in the Plan,
your account will be credited with a cash dividend. In order to participate in
the Plan through such institution, it may be necessary for you to have your
shares taken out of "street name" and re-registered in your own name. Once
registered in your own name your dividends will be automatically reinvested.
Certain brokers participate in the Plan. Shareholders holding shares in "street
name" at participating institutions will have dividends automatically
reinvested. Shareholders wishing a cash dividend at such institution must
contact their broker to make this change.
The number of shares of Common Stock distributed to participants in the Plan
in lieu of cash dividends is determined in the following manner. Under the Plan,
whenever the market price of the Utility Trust's Common Stock is equal to or
exceeds net asset value at the time shares are valued for purposes of
determining the number of shares equivalent to the cash dividends or capital
gains distribution, participants are issued shares of Common Stock valued at the
greater of (i) the net asset value as most recently determined or (ii) 95% of
the then current market price of the Utility Trust's Common Stock. The valuation
date is the dividend or distribution payment date or, if that date is not a New
York Stock Exchange trading day, the next trading day. If the net asset value of
the Common Stock at the time of valuation exceeds the market price of the Common
Stock, participants will receive shares from the Utility Trust valued at market
price. If the Utility Trust should declare a dividend or capital gains
distribution payable only in cash, EquiServe will buy Common Stock in the open
market, or on the New York Stock Exchange or elsewhere, for the participants'
accounts, except that EquiServe will endeavor to terminate purchases in the open
market and cause the Utility Trust to issue shares at net asset value if,
following the commencement of such purchases, the market value of the Common
Stock exceeds the then current net asset value.
The automatic reinvestment of dividends and capital gains distributions will
not relieve participants of any income tax which may be payable on such
distributions. A participant in the Plan will be treated for Federal income tax
purposes as having received, on a dividend payment date, a dividend or
distribution in an amount equal to the cash the participant could have received
instead of shares.
The Utility Trust reserves the right to amend or terminate the Plan as
applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to written notice of the change sent to the members of the Plan
at least 90 days before the record date for such dividend or distribution. The
Plan also may be amended or terminated by EquiServe on at least 90 days' written
notice to participants in the Plan.
VOLUNTARY CASH PURCHASE PLAN
The Voluntary Cash Purchase Plan is yet another vehicle for our shareholders
to increase their investment in the Utility Trust. In order to participate in
the Voluntary Cash Purchase Plan, shareholders must have their shares registered
in their own name.
Participants in the Voluntary Cash Purchase Plan have the option of making
additional cash payments to EquiServe for investments in the Utility Trust's
shares at the then current market price. Shareholders may send an amount from
$250 to $10,000. EquiServe will use these funds to purchase shares in the open
market on or about the 1st and 15th of each month. EquiServe will charge each
shareholder who participates $0.75, plus a pro rata share of the brokerage
commissions. Brokerage charges for such purchases are expected to be less than
the usual brokerage charge for such transactions. It is suggested that any
voluntary cash payments be sent to EquiServe, P.O. Box 43011, Providence, RI
02940-3011 such that EquiServe receives such payments approximately 10 days
before the 1st and 15th of the month. Funds not received at least five days
before the investment date shall be held for investment until the next purchase
date. A payment may be withdrawn without charge if notice is received by
EquiServe at least 48 hours before such payment is to be invested.
For more information regarding the Dividend Reinvestment Plan and Voluntary
Cash Purchase Plan, brochures are available by calling (914) 921-5070 or by
writing directly to the Utility Trust.
8
TRUSTEES AND OFFICERS
THE GABELLI UTILITY TRUST
ONE CORPORATE CENTER, RYE, NY 10580-1422
TRUSTEES
Mario J. Gabelli, CFA
CHAIRMAN AND CHIEF INVESTMENT OFFICER,
GABELLI ASSET MANAGEMENT INC.
Dr. Thomas E. Bratter
PRESIDENT, JOHN DEWEY ACADEMY
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
James P. Conn
FORMER MANAGING DIRECTOR AND CHIEF INVESTMENT OFFICER,
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
Vincent D. Enright
FORMER SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER,
KEYSPAN ENERGY CORP.
Frank J. Fahrenkopf, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER,
AMERICAN GAMING ASSOCIATION
John D. Gabelli
SENIOR VICE PRESIDENT,
GABELLI & COMPANY, INC.
Robert J. Morrissey
ATTORNEY-AT-LAW,
MORRISSEY, HAWKINS & LYNCH
Karl Otto Pohl
FORMER PRESIDENT, DEUTSCHE BUNDESBANK
Anthony R. Pustorino
CERTIFIED PUBLIC ACCOUNTANT,
PROFESSOR EMERITUS, PACE UNIVERSITY
Salvatore J. Zizza
CHAIRMAN, HALLMARK ELECTRICAL SUPPLIES CORP.
OFFICERS
Mario J. Gabelli, CFA
PRESIDENT & CHIEF INVESTMENT OFFICER
Bruce N. Alpert
VICE PRESIDENT & TREASURER
David I. Schachter
VICE PRESIDENT & OMBUDSMAN
James E. McKee
SECRETARY
INVESTMENT ADVISER
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
CUSTODIAN
Boston Safe Deposit and Trust Company
COUNSEL
Skadden, Arps, Slate, Meagher & Flom, LLP
TRANSFER AGENT AND REGISTRAR
EquiServe Trust Company N.A.
STOCK EXCHANGE LISTING
COMMON
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NYSE-Symbol: GUT
Shares Outstanding: 15,127,034
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
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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 10580-1422
(914) 921-5070
HTTP://WWW.GABELLI.COM
THIRD QUARTER REPORT
SEPTEMBER 30, 2002
GBFUF 09/02