As filed with the Securities and Exchange Commission on May 10, 2002
Securities Act File No. 333-84754
Investment Company Act File No. 811-09243
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
_____________________
[ ] Registration Statement under the Securities Act of 1933
[ X ] Pre-Effective Amendment No. 1
[ ] Post-Effective Amendment No. 1
and/or
[X] Registration Statement under the Investment
Company Act of 1940 Amendment No. 4
(Check Appropriate Box or Boxes)
_____________________
THE GABELLI UTILITY TRUST
(Exact Name of Registrant as Specified in Charter)
_____________________
One Corporate Center
Rye, New York 10580-1434
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (800) 422-3554
Bruce N. Alpert
The Gabelli Utility Trust
One Corporate Center
Rye, New York 10580-1434
(914) 921-5100
(Name and Address of Agent for Service)
_____________________
Copies to:
James E. McKee, Esq. Richard T. Prins, Esq.
The Gabelli Utility Trust Skadden, Arps, Slate, Meagher & Flom LLP
One Corporate Center Four Times Square
Rye, New York 10580 New York, New York 10036
Approximate date of proposed public offering: As soon as practicable
after the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act
of 1933, as amended, other than securities offered in connection with a
dividend reinvestment plan, check the following box. [X]
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Amount Proposed Maximum Proposed Maximum Amount of
Title of Securities Being Offering Price Per Aggregate Offering Registration
Being Registered Registered Share (1) Price Fee (2)
---------------- ---------- ------------------ ------------------ -------------
Shares of
Common
beneficial interest 3,770,000 $9.96 $37,618,920 $3,460
(1) As calculated pursuant to Rule 457(c) under the Securities Act of 1933,
as amended. Based on the average of the high and low sales prices reported on
the New York Stock Exchange on May 8, 2002.
(2) $93 previously paid in connection with the Trust's initial registration
statement filed with the Securities and Exchange Commission on March 22, 2002.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
Notice to Canadian Residents:
These Securities Have Not Been Approved or Disapproved by any Securities or
Regulatory Authority in Canada. This offering will be made in the Province of
Ontario but will not be made in the Province of Quebec or any other province
of Canada where it is not permitted by law.
CROSS-REFERENCE SHEET
PURSUANT TO RULE 481(a)
N-2 Item Number Location in Part A (Caption)
---------------------------------------------------------------------------------------------------------------
PART A
1. Outside Front Cover..................................Front Cover Page
2. Inside Front and Outside Back Cover Page.............Front Cover Page
3. Fee Table and Synopsis...............................Prospectus Summary; Table of Fees and Expenses
4. Financial Highlights.................................Financial Highlights
5. Plan of Distribution.................................The Offer
6. Selling Shareholders.................................Not Applicable
7. Use of Proceeds......................................Use of Proceeds;
8. General Description of the Registrant................Investment Objectives and Policies; The
Offer; Risk Factors and Special
Considerations
9. Management...........................................Management of the Fund
10. Capital Stock........................................The Offer; Capitalization; Custodian,
Transfer Agent, Dividend-Disbursing Agent
and Registrar; Dividends and Distributions; Taxation
11. Defaults and Arrears on Senior
Securities...........................................Not Applicable
12. Legal Proceedings....................................Not Applicable
13. Table of Contents of the Statement of Table of Contents of the Statement of
Additional Information...............................Additional Information
PART B Location in Statement of
Additional Information
----------------------------------------------------------------------------------------------------------------
14. Cover Page...........................................Outside Front Cover Page
15. Table of Contents....................................Outside Front Cover Page
16. Investment Objectives and Policies...................Investment Objectives; Investment Practices;
17. Management...........................................Management of the Fund
18. Control Persons and Principal Holders ..............Management of the Fund
19. Investment Advisory and Other Services...............Management of the Fund
20. Brokerage Allocation and Other Practices.............Portfolio Transactions
21. Automatic Dividend Reinvestment and Automatic Dividend Reinvestment and
Voluntary Cash Purchase Plan.........................Voluntary Cash Purchase Plan
22. Tax Status...........................................Taxation
23. General Information..................................General Information
24. Beneficial Owner.....................................Beneficial Owner
25. Financial Statements.................................Financial Statements
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
PROSPECTUS
__________ RIGHTS FOR __________ SHARES
[GABELLI UTILITY TRUST LOGO]
THE GABELLI
UTILITY TRUST
COMMON STOCK
The Gabelli Utility Trust (the "Fund") is issuing transferable rights
("Rights") to its shareholders. These Rights will allow you to subscribe for
new shares of common stock of the Fund. For every three Rights that you
receive, you may buy one new Fund share. You will receive one Right for each
outstanding Fund share you own on May __, 2002 (the "Record Date").
Fractional shares will not be issued upon the exercise of the Rights.
Accordingly, shares may be purchased only pursuant to the exercise of Rights
in integral multiples of three. The number of Rights issued to a shareholder
on the Record Date will be rounded up to the nearest number of Rights evenly
divisible by three. In the case of shares of common stock held of record by
Cede & Co. ("Cede"), as nominee for the Depository Trust Company ("DTC"), or
any other depository or nominee, the number of Rights issued to Cede or such
other depository or nominee will be adjusted to permit rounding up (to the
nearest number of Rights evenly divisible by three) of the Rights to be
received by beneficial owners for whom it is the holder of record only if
Cede or such other depository or nominee provides to the Fund on or before
the close of business on May __, 2002 written representation of the number of
Rights required for such rounding. Also, shareholders on the Record Date may
purchase shares not acquired by other shareholders in this Rights offering
(the "Offer"), subject to limitations discussed in this prospectus.
The Rights are transferable and will be admitted for trading on the New
York Stock Exchange ("NYSE") under the symbol "GUT RT." The Fund's shares of
common stock are listed, and the shares issued pursuant to this Offer will be
listed, on the NYSE under the symbol "GUT." On May __, 2002 (the last date
prior to the Fund's shares trading ex- Rights), the last reported net asset
value per share of the Fund's shares was $_____ and the last reported sales
price of a share on the NYSE was $_____. THE PURCHASE PRICE PER SHARE (the
"Subscription Price") WILL BE ______. THE OFFER WILL EXPIRE AT 5:00 P.M., NEW
YORK TIME, ON JUNE __, 2002, unless the Offer is extended as described in
this Prospectus (the "Expiration Date").
The Fund is a non-diversified, closed-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Fund's primary investment objective is long-term growth of capital
and income, which the Fund attempts to achieve by investing at least 65% of
its total assets in common stock and other securities of foreign and domestic
companies involved to a substantial extent (e.g., at least 50% of the assets,
gross income or profits of such company is committed to or derived from) in
providing products, services or equipment for (i) the generation or
distribution of electricity, gas and water and (ii) telecommunications
services or infrastructure operations, such as airports, toll roads and
municipal services. Gabelli Funds, LLC (the "Investment Adviser") serves as
investment adviser to the Fund. An investment in the Fund is not appropriate
for all investors. No assurances can be given that the Fund's objectives will
be achieved. FOR A DISCUSSION OF CERTAIN RISK FACTORS AND SPECIAL
CONSIDERATIONS WITH RESPECT TO OWNING SHARES OF THE FUND, SEE "RISK FACTORS
AND SPECIAL CONSIDERATIONS" ON PAGE __ OF THIS PROSPECTUS. The address of the
Fund is One Corporate Center, Rye, New York 10580 and its telephone number
(914) 921-5070.
This Prospectus sets forth certain information about the Fund an
investor should know before investing and should be retained for future
reference.
A Statement of Additional Information dated May __, 2002 (the "SAI")
has been filed with the Securities and Exchange Commission and is
incorporated by reference in this Prospectus. The table of contents of the
SAI appears on page __ of this Prospectus. A copy of the SAI may be obtained
without charge by writing to the Fund at its address at One Corporate Center,
Rye, New York 10580-1434 or calling the Fund toll-free at (800) 422- 3554.
---------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIME.
SUBSCRIPTION PROCEEDS
PRICE SALES LOAD TO FUND(1)
------------ ------------ ---------------
Per Share................ $[ ] None $[ ]
Total.................... $[ ] None $[ ]
(1) Before deduction of expenses incurred by the Fund, estimated at $500,000.
---------------------------------
SHAREHOLDERS WHO DO NOT EXERCISE THEIR RIGHTS SHOULD EXPECT THAT THEY
WILL, AT THE COMPLETION OF THE OFFER, OWN A SMALLER PROPORTIONAL INTEREST IN
THE FUND THAN IF THEY EXERCISED THEIR RIGHTS. AS A RESULT OF THE OFFER YOU
MAY EXPERIENCE DILUTION OR ACCRETION OF THE AGGREGATE NET ASSET VALUE OF YOUR
SHARES DEPENDING UPON WHETHER THE FUND'S NET ASSET VALUE PER SHARE IS ABOVE
OR BELOW THE SUBSCRIPTION PRICE ON THE EXPIRATION DATE. The Fund cannot state
precisely the extent of any dilution or accretion at this time because the
Fund does not know what the net asset value per share will be when the Offer
expires or what proportion of the Rights will be exercised. The Investment
Adviser's parent company, Gabelli Asset Management Inc. and its affiliates
("Affiliated Parties") may purchase shares through the primary subscription
and the over-subscription privilege shares and Mr. Mario J. Gabelli, who may
be deemed to control the Fund's investment adviser, or his affiliated
entities may also purchase additional shares in such manner and on the same
terms as other shareholders.
---------------------------------
This Prospectus sets forth concisely certain information about the
Fund that a pro spective investor should know before investing. Investors
are advised to read and retain it for future reference. A Statement of
Additional Information dated May __, 2002 (the "SAI") containing additional
information about the Fund has been filed with the SEC and is incorporated
by reference in its entirety into this Prospectus. A copy of the SAI, the
table of contents of which appears on page ___ of this Prospectus, may be
obtained without charge by contacting the Fund at (800) GABELLI (800)
422-3554) or (914) 921-5070. The SAI will be sent within two business days
of receipt of a request. Investors may also obtain the Statement of
Additional Information, material incorporated by reference, and other
information about the Fund from the SEC's website (http://www.sec.gov).
Shareholder inquiries should be directed to the Subscription Agent,
EquiServe, at (800) 336-6983 or (781) 575-2000.
_________________________________
May __, 2002
PROSPECTUS SUMMARY
This summary highlights some information that is described more fully
elsewhere in this Prospectus. It may not contain all of the information that
is important to you. To understand the Offer fully, you should read the
entire document carefully, including the risk factors.
PURPOSE OF THE OFFER
The Board of Trustees of the Fund has determined that it would be in
the best interests of the Fund and its existing shareholders to increase the
assets of the Fund so that the Fund may be in a better position to take
advantage of investment opportunities that may arise. The Offer seeks to
reward existing shareholders by giving them the opportunity to purchase
additional shares at a price that may be below market and/or net asset value
without in curring any commission charge. The distribution of the Rights,
which themselves may have intrinsic value, will also give non-participating
shareholders the potential of receiving a cash payment upon the sale of their
Rights, which may be viewed as partial compensation for the possible dilution
of their interests in the Fund as a result of the Offer.
The Board of Trustees believes that increasing the size of the Fund may
lower the Fund's expenses as a proportion of average net assets because the
Fund's fixed costs can be spread over a larger asset base. There can be no
assurance that by increasing the size of the Fund, the Fund's expense ratio
will be lowered. The Board of Trustees also believes that a larger number of
outstanding shares and a larger number of beneficial owners of shares could
increase the level of market interest in and visibility of the Fund and
improve the trading liquidity of the Fund's shares on the NYSE.
IMPORTANT TERMS OF THE OFFER
Total number of shares available for primary subscription..............................3,747,614
Number of Rights you will receive for each outstanding
share you own on the Record Date............................One Right for every one share*
Number of shares you may purchase with your Rights
at the Subscription Price per share.......................One share for every three Rights
Subscription Price..........................................................................$[ ]
--------------
* The number of Rights to be issued to a Shareholder on the Record Date
will be rounded up to the nearest number of Rights evenly divisible by three.
===============================================================================
Shareholders' inquiries should be directed to:
EquiServe
(800) 336-6983 or (781) 575-2000
or Gabelli
(800) GABELLI (422-3554)
===============================================================================
OVER-SUBSCRIPTION PRIVILEGE
Shareholders on the Record Date who fully exercise all Rights initially
issued to them are entitled to buy those shares that were not bought by other
Rights holders. If enough shares are available, all shareholder requests to
buy shares that were not bought by other Rights holders will be honored in
full. If the requests for shares exceed the shares available, the available
shares will be allocated pro rata among those shareholders on the Record Date
who over-subscribe based on the number of Rights originally issued to them by
the Fund. Shares acquired pursuant to the over-subscription privilege are
subject to allotment, which is more fully discussed under "The Offer --
Over-Subscription Privilege."
METHOD FOR EXERCISING RIGHTS
Except as described below, subscription certificates evidencing the
Rights ("Subscription Certificates") will be sent to Record Date shareholders
or their nominees. If you wish to exercise your Rights, you may do so in the
following ways:
(1) Complete and sign the Subscription Certificate. Mail it in
the envelope provided or deliver it, together with payment
in full to EquiServe, Boston, Massachusetts (the
"Subscription Agent") at the address indicated on the
Subscription Certificate. Your completed and signed
Subscription Certificate and payment must be received by
the Expiration Date.
(2) Contact your broker, banker or trust company, which can
arrange, on your behalf, to guarantee delivery of payment
and delivery of a properly completed and executed
Subscription Certificate by the close of business on the
third business day after the Expiration Date pursuant to
a notice of guaranteed delivery ("Notice of Guaranteed
Delivery"). A fee may be charged for this service. The
Notice of Guaranteed Delivery must be received by the
Expiration Date.
Rights holders will have no right to rescind a purchase after the
Subscription Agent has received payment. See "The Offer -- Method of Exercise
of Rights" and "The Offer -- Payment for Shares."
SALE OF RIGHTS
The Rights are transferable until the Expiration Date and have
been admitted for trading on the NYSE. Although no assurance can be given
that a market for the Rights will develop, trading in the Rights on the
NYSE will begin three Business Days prior to the Record Date and may be
conducted until the close of trading on the last NYSE trading day prior to
the Expiration Date. The value of the Rights, if any, will be reflected by
the market price. Rights may be sold by individual holders or may be
submitted to the Subscription Agent for sale. Any Rights submitted to the
Subscription Agent for sale must be received by the Subscription Agent on
or before June __, 2002, one business day prior to the Expiration Date, due
to normal settlement procedures. Trading of the Rights on the NYSE will be
conducted on a when-issued basis until and including the date on which the
Subscription Certificates are mailed to Record Date shareholders and
thereafter will be conducted on a regular-way basis until and including the
last NYSE trading day prior to the Expiration Date. The shares will begin
trading ex-Rights two Business Days prior to the Record Date. If the
Subscription Agent receives Rights for sale in a timely manner, it will use
its best efforts to sell the Rights on the NYSE. The Subscription Agent
will also attempt to sell any Rights a Rights holder is unable to exercise
because the Rights represent the right to subscribe for less than one
Share. Any commissions will be paid by the selling Rights holders. Neither
the Fund nor the Subscription Agent will be responsible if Rights cannot be
sold and neither has guaranteed any minimum sales price for the Rights. For
purposes of this Prospectus, a "Business Day" shall mean any day on which
trading is conducted on the NYSE.
===============================================================================
Shareholders are urged to obtain a recent trading price for the
Rights on the New York Stock Exchange from their broker,
bank, financial advisor
or the financial press.
===============================================================================
OFFERING FEES AND EXPENSES
Offering expenses incurred by the Fund are estimated to be $500,000.
RESTRICTIONS ON FOREIGN SHAREHOLDERS
The Fund will not mail Subscription Certificates to shareholders
whose record addresses are outside the United States and the Province of
Ontario, Canada or who have an APO or FPO address. Shareholders whose
addresses are outside the United States and the Province of Ontario, Canada
or who have an APO or FPO address and who wish to subscribe to the Offer
either in part or in full should contact the Subscription Agent, EquiServe,
by written instruction or recorded telephone conversation no later than three
Business Days prior to the Expiration Date. The Fund will determine whether
the offering may be made to any such shareholder. This offering will not be
made in the Province of Quebec or any other jurisdiction where it would be
unlawful to do so. If the Subscription Agent has received no instruction by
the third business day prior to the Expiration Date or the Fund has
determined that the offering may not be made to a particular shareholder, the
Subscription Agent will attempt to sell all of such Shareholder's Rights and
remit the net proceeds, if any, to such shareholder. If the Rights can be
sold, sales of these Rights will be deemed to have been effected at the
weighted average price received by the Subscription Agent on the day the
Rights are sold, less any applicable brokerage commissions, taxes and other
expenses.
USE OF PROCEEDS
We estimate the net proceeds of the Offer to be approximately $[ ].
This figure is based on the Subscription Price per share of $[ ] and assumes
all shares offered are sold and that the expenses related to the Offer
estimated at approximately $[ ] are paid.
The Investment Adviser expects to invest such proceeds in accordance
with the Fund's investment objectives and policies within six months after
receipt of such proceeds, depending on market conditions for the types of
securities in which the Fund principally invests. Pending such investment,
the proceeds will be held in high quality short-term debt securities and
instruments.
IMPORTANT DATES TO REMEMBER
Please note that the dates in the table below may change if the
Offer is extended.
EVENT DATE
----- ----
Record Date.....................................................................May __, 2002
Subscription Period.......................................May __, 2002 through June __, 2002**
Expiration of the Offer*.......................................................June __, 2002**
Payment for Guarantees of Delivery Due*........................................June __, 2002**
Confirmation to Participants...................................................June __, 2002**
_________________________
* A shareholder exercising Rights must deliver by June __, 2002 either
(a) a Subscription Certificate and payment for shares or (b) a
Notice of Guaranteed Delivery.
** Unless the offer is extended to a date no later than June __, 2002.
INFORMATION REGARDING THE FUND
The Fund is a closed-end non-diversified management investment
company organized under the laws of the State of Delaware on February 25,
1999. The Fund's primary investment objective is long-term growth of
capital and income, which the Fund attempts to achieve by investing at
least 65% (80% commencing July 31, 2002) of its total assets in common
stock and other securities of foreign and domestic companies involved to a
substantial extent in providing (i) products, services or equipment for the
generation or distribution of electricity, gas and water and (ii)
telecommunications services or infrastructure operations, such as airports,
toll roads and municipal services (collectively, the "Utility Industry").
No assurance can be given that the Fund's investment objectives will be
achieved. See "Investment Objectives and Policies." The Fund's outstanding
common shares of beneficial interest, par value $.001 per share (the
"Common Stock"), is listed and traded on the New York Stock Exchange (the
"NYSE"). The average weekly trading volume of the Fund's common stock on
the NYSE during the period from January 1, 2001 through December 31, 2001
was [ ] shares. As of December 31, 2001, the net assets of the Fund were
approximately $[ ] million.
INFORMATION REGARDING THE INVESTMENT ADVISER
The Investment Adviser has served as the investment adviser to the
Fund since its inception. The Investment Adviser also provides certain
administrative services to the Fund. The Investment Adviser and its
affiliates have been engaged in the business of providing investment advisory
and portfolio management services for over 25 years and as of December 31,
2001, managed total assets of approximately $24.8 billion. The Fund pays the
Investment Adviser a monthly fee at the annual rate of 1.00% of the Fund's
average weekly net assets. See "Management of the Fund -- Investment
Adviser." Since the Investment Adviser's fees are based on the net assets of
the Fund, the Investment Adviser will benefit from the Offer. In addition,
three Trustees who are "interested persons" of the Fund could benefit
indirectly from the Offer because of their interests in the Investment
Adviser. See "The Offer -- Purpose of the Offer."
RISK FACTORS AND SPECIAL CONSIDERATIONS
The following summarizes some of the matters that you should
consider before investing in the Fund through the Offer.
Dilution........................... Shareholders who do not exercise their Rights should
expect that they will, at the completion of the Offer,
own a smaller proportional interest in the Fund than
if they exercised their Rights. As a result of the
Offer you may experience dilution or accretion of the
aggregate net asset value of your shares. If the
Subscription Price Per Share is below the Fund's net
asset value per share on the Expiration Date, you will
experience an immediate dilution of the aggregate net
asset value of your shares if you do not participate
in the Offer. If the Subscription Price is above the
Fund's net asset value per share on the Expiration
Date, you will experience an immediate accretion of
the aggregate net asset value of your shares, whether
or not you participate in the Offer. The Fund cannot
state precisely the extent of this dilution or
accretion at this time because the Fund does not know
what the net asset value per share will be when the
Offer expires or what proportion of the Rights will be
exercised. For example, assuming that all Rights are
exercised, the Subscription Price is $7.50 and the
Fund's net asset value per share remains the same
($_____ ) as on __, 2002 , the Fund's net asset value
per share (after payment of estimated offering
expenses) would be increased by approximately $[ ] ([
]%) per share. However, assuming that all rights are
exercised, the Subscription Price is $7.50 per share
and the Fund's net asset value increases to ____, the
Fund's net asset value per share would be reduced by
an equivalent amount. See "Risk Factors and Special
Considerations-- Dilution." If you do not wish to
exercise your Rights, you should consider selling
these Rights as set forth in this Prospectus. Any cash
you receive from selling your Rights should serve as
partial compensation for any possible dilution of your
interest in the Fund. The Fund cannot give any
assurance, however, that a market for the Rights will
develop or that the Rights will have any marketable
value.
Market Loss........................ Shares of closed-end funds frequently trade at a
market price that is less than the value of the net
assets attributable to those shares, although for most
of the Fund's life its shares have traded at a premium
over net asset value per share. The possibility that
shares of the Fund will trade at a discount from net
asset value or at premiums that are unsustainable over
the long term are risks separate and distinct from the
risk that the Fund's net asset value will decrease.
The risk of purchasing shares of a closed-end fund
that might trade at a discount or unsustainable
premium is more pronounced for investors who wish to
sell their shares in a relatively short period of time
because, for those investors, realization of a gain or
loss on their investments is likely to be more
dependent upon the existence of a premium or discount
than upon portfolio performance. See "Risk Factors and
Special Considerations--Market Value and Net Asset
Value."
Shares Repurchases................. You will be free to dispose of your shares on the NYSE
or other markets on which the shares may trade, but,
because the Fund is a closed-end fund, you do not have
the right to redeem your Shares. The Fund is
authorized to repurchase its shares on the open market
when the shares are trading at a discount of 10% or
more (or such other percentage as the Board may
determine from time to time) from net asset value.
There is no assurance that any action undertaken to
repurchase shares will result in the shares trading at
a price which approximates their net asset value.
Share repurchases by the Fund would decrease the
capital of the Fund and could have the effect of
increasing the Fund's expense ratio.
Charter Provisions................. Certain provisions of the Fund's Declaration of Trust
may be regarded as "anti-takeover" provisions. Pursuant
to these provisions only one of the three classes of
directors (which term includes trustees) is elected
each year, and the affirmative vote of the holders of
75% of the outstanding voting shares of the Fund
(together with a separate class vote by the holders of
any preferred stock outstanding) is necessary to
authorize amendments to the Fund's Declaration of
Trust that would be necessary to convert the Fund from
a closed-end to an open-end investment company. In
addition, the affirmative vote of the holders of 80%
of the outstanding voting shares of each class of the
Fund, voting as a class, is generally required to
authorize certain business transactions with the
beneficial owner of more than 5% of the outstanding
shares of the Fund. In addition, if the Fund issues
preferred stock, the holders of the preferred shares
would have the authority to elect two directors at all
times and would have separate class voting rights on
specified matters including conversion of the Fund to
open-end status and certain reorganizations of the
Fund. The overall effect of these provisions is to
render more difficult the accomplishment of a merger
with, or the assumption of control by, a principal
shareholder, or the conversion of the Fund to open-end
status. These provisions may have the effect of
depriving Fund shareholders of an opportunity to sell
their shares at a premium above the prevailing market
price. See "Certain Provisions of the Declaration of
Trust and By-laws."
Non-Diversified Status............. As a non-diversified investment company under the 1940
Act, the Fund is not limited in the proportion of its assets
that may be invested in securities of a single issuer. As a
result of investing a greater portion of its assets in the
securities of a smaller number of issuers, the Fund may be
more vulnerable to events affecting a single issuer and
therefore subject to greater volatility than a fund that is
more broadly diversified. Accordingly, an investment in
the Fund may, under some circumstances, present greater
risk to an investor than an investment in a diversified
company. See "Risk Factors and Special Considerations--
Non-Diversified Status."
Foreign Securities.................There is no limitation on the amount of foreign securities in
which the Fund may invest. Investing in securities of
foreign companies and foreign governments, which
generally are denominated in foreign currencies, may
involve certain risk and opportunity considerations not
typically associated with investing in domestic companies
and could cause the Fund to be affected favorably or
unfavorably by changes in currency exchange rates and
revaluations of currencies. See "Investment Objectives and
Policies" and "Risk Factors and Special Considerations.
Leveraging......................... As provided in the 1940 Act and subject to certain
exceptions, the Fund may issue debt or preferred stock
so long as the Fund's total assets immediately after
such issuance, less certain ordinary course
liabilities, exceed 300% of the amount of the debt
outstanding and exceed 200% of the sum of the amount
of preferred stock and debt outstanding. Such debt or
preferred stock may be convertible in accordance with
SEC staff guidelines which may permit each fund to
obtain leverage at attractive rates.
Use of leverage may magnify the impact on the holders of
common stock of changes in net asset value and the
cost of leverage may exceed the return on the
securities acquired with the proceeds of leverage,
thereby diminishing rather than enhancing the return
to such shareholders and generally making the Fund's
total return to such shareholders more volatile. In
addition, the Fund may be required to sell investments
in order to meet dividend or interest payments on the
debt or preferred stock when it may be disadvantageous
to do so. Leveraging through the issuance of preferred
stock requires that the holders of the preferred stock
have class voting rights on various matters that could
make it more difficult for the holders of the Common
Stock to change the investment objectives or
fundamental policies of the fund, to convert it to an
open- end fund or make certain other changes. See
"Risk Factors and Special Considerations" and "Special
Investment Methods".
Industry Risks..................... The Fund will invest at least 65% of its assets (80%
commencing July 31, 2002) in companies in the Utility
Industry and, as a result, the value of the Fund's
shares will be more susceptible to factors affecting
those particular types of companies, including
governmental regulation, deregulation, inflationary
and other cost increases in fuel and other operating
expenses and increases in interest rates resulting in
higher interest costs on borrowings needed for capital
construction programs, including compliance with
environmental regulations. As a consequence of its
concentration policy, the Fund's investments may be
subject to greater risk and market fluctuation than a
fund that has securities representing a broader range
of alternatives. See "Investment Objectives and
Policies" and "Risk Factors and Special
Considerations."
Dependence on Key
Personnel....................... The Investment Adviser is dependent upon the expertise
of Mr. Mario J. Gabelli in providing advisory services
with respect to the Fund's investments. If the
Investment Adviser were to lose the services of Mr.
Gabelli, its ability to service the Fund could be
adversely affected. There can be no assurance that a
suitable replacement could be found for Mr. Gabelli in
the event of his death, resignation, retirement or
inability to act on behalf of the Investment Adviser.
Taxation............................The Fund intends to continue to be treated and qualify, for
U.S. federal income tax purposes, as a regulated investment
company. Qualification requires, among other things,
compliance by the Fund with certain distribution
requirements. Statutory limitations on distributions on the
Common Stock if the Fund fails to satisfy the 1940 Act's
asset coverage requirements could jeopardize the Fund's
ability to meet the distribution requirements. See
"Taxation" for a more complete discussion of these and
other U.S. federal income tax considerations.
TABLE OF FEES AND EXPENSES
Registrant
SHAREHOLDER TRANSACTION EXPENSES
Voluntary Cash Purchase Plan Purchase Fees......................... $0.75 (1)
Automatic Dividend Reinvestment and Voluntary Cash
Purchase Plan Sales Fees........................................... $2.50 (1)
ANNUAL OPERATING EXPENSES (as a percentage of net
assets attributable to Common Stock)...............................
Management Fees.................................................... 1.00%
Other Expenses 1.00%
----------
Total Annual Operating Expenses................... ....... 2.00%
----------
(1) Shareholders participating in the Fund's Automatic Dividend
Reinvestment and Voluntary Cash Purchase Plan would pay $0.75 per
transaction to purchase shares and $2.50 per transaction to sell
shares. See "Automatic Dividend Reinvestment and Voluntary Cash
Purchase Plan" in the SAI.
EXAMPLE
The following examples illustrate the projected dollar amount of
cumulative expenses that would be incurred over various periods with respect
to a hypothetical investment in the Fund. These amounts are based upon
payment by the Fund of expenses at levels set forth in the above table.
You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return: (3)
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$20 $63 $108 $233
The foregoing table is to assist you in understanding the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. The assumed 5% annual return is not a prediction of, and does not
represent, the projected or actual performance of the Common Stock. Actual
expenses and annual rates of return may be more or less than those assumed
for purposes of the Example.
----------------------------
(3) Amounts are exclusive of fees discussed in Note (1) above.
FINANCIAL HIGHLIGHTS
The table below sets forth selected financial data for a share of
Common Stock outstanding throughout the periods presented. The per share
operating performance and ratios for the fiscal years ended December 31,
2001, December 31, 2000 and the period ended December 31, 1999 have been
audited by PricewaterhouseCoopers LLP, the Fund's independent accountants, as
stated in their report which is incorporated by reference into the SAI. The
following information should be read in conjunction with the Financial
Statements and Notes thereto, which are incorporated by reference into the
SAI.
SELECTED DATA FOR A COMMON SHARE
OUTSTANDING THROUGHOUT EACH PERIOD
Year Ended Year Ended Period Ended
December 31, December 31, December 31,
2001 2000 1999 (a)
-------------- ------------- --------------
OPERATING PERFORMANCE:
Net asset value, beginning of period... $ 8.21 $ 7.62 $ 7.50
------ ------ ------
Net investment income.................. 0.61 0.15 0.08
Net realized and unrealized gain(loss)
on investments......................... (0.81) 1.44 0.19
------ ------ ------
Total from investment operations....... (0.20) 1.59 0.27
------ ------ ------
Increase in net asset value from Trust
transactions...........................share 0.01 -- --
------ ------ ------
DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income.................. (0.21) (0.06) (0.08)
Net realized gain on investments....... (0.49) (0.94) (0.07)
------- ------- ------
Total distributions.................... (0.70) (1.00) (0.15)
------- ------- ------
NET ASSET VALUE, END OF PERIOD: 7.32 8.21 $ 7.62
======= ======= ======
Market value, end of period............ 9.33 8.75 $ 7.63
======= ======= ======
Net asset value total return + ........ (3.15%) 22.01% 3.62%
======= ======= ======
Total Investment Return ++ .............. 15.82% 29.95% 3.70%
======= ======= ======
RATIOS TO AVERAGE NET ASSETS
AVAILABLE TO COMMON STOCK
SHAREHOLDERS AND
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 82,197 $ 90,669 $ 83,330
Ratio of net investment income to
average net assets (c).................. 1.57% 1.88% 2.27%(b)
Ratio of operating expenses to average
net assets (c)(d)....................... 2.00% 1.95% 1.75%(b)
Portfolio turnover rate................. 41% 92% 37%
+ Based on net asset value per share, adjusted for reinvestment of
distributions. Total return for the period of less than one year is
not annualized.
++ Based on market value per share, adjusted for reinvestment of
distributions. Total return for the period of less than one year is
not annualized.
(a) The Gabelli Utility Trust commenced investment operations on July 9, 1999.
(b) Annualized.
(c) During the period ended December 31, 1999, the Utility Trust's
administrator voluntarily reimbursed certain expenses. If such
reimbursement had not occurred, the annualized ratios of net
investment income and operating expenses to average net assets would
have been 1.85% and 2.17%, respectively.
(d) The ratios do not include a reduction of expenses for custodian fee
credits on cash balances maintained with the custodian. Including
such custodian fee credits for the year ended December 31, 2001 and
the year ended December 31, 2000, the expense ratios would be 2.00%
and 1.93%, respectively.
THE OFFER
TERMS OF THE OFFER
The Fund is issuing to shareholders on the Record Date ("Record Date
Shareholders") Rights to subscribe for the shares (the "Shares") of the
Fund's Common Stock ("Common Stock"). Each Record Date Shareholder is being
issued one transferable Right for each share of Common Stock owned on the
Record Date. The Rights entitle the holder to acquire at the Subscription
Price one Share for each three Rights held. Fractional shares will not be
issued upon the exercise of the Rights. Accordingly, shares may be purchased
only pursuant to the exercise of Rights in integral multiples of three. The
number of Rights issued to a shareholder on the Record Date will be rounded
up to the nearest number of Rights evenly divisible by three. In the case of
shares of common stock held of record by Cede & Co. ("Cede"), as nominee for
the Depository Trust Company ("DTC"), or any other depository or nominee, the
number of Rights issued to Cede or such other depository or nominee will be
adjusted to permit rounding up (to the nearest number of Rights evenly
divisible by three) of the Rights to be received by beneficial owners for
whom it is the holder of record only if Cede or such other depository or
nominee provides to the Fund on or before the close of business on May __,
2002 written representation of the number of Rights required for such
rounding. Rights may be exercised at any time during the period (the
"Subscription Period"), which commences on May __, 2002, and ends at 5:00
p.m., New York time, on June __, 2002, unless extended by the Fund to a date
not later than June __, 2002, 5:00 p.m., New York time. See "Expiration of
the Offer." The Right to acquire one additional Share for each three Rights
held during the Subscription Period at the Subscription Price is hereinafter
referred to as the "Primary Subscription."
In addition, any Record Date Shareholder who fully exercises all
Rights initially issued to him is entitled to subscribe for Shares that were
not otherwise subscribed for by others on Primary Subscription (the
"Over-Subscription Privilege"). For purposes of determining the maximum
number of Shares a Record Date Shareholder may acquire pursuant to the Offer,
broker-dealers whose shares are held of record by Cede & Co., Inc. ("Cede"),
nominee for The Depository Trust Company, or by any other depository or
nominee, will be deemed to be the holders of the Rights that are issued to
Cede or such other depository or nominee on their behalf. Shares acquired
pursuant to the Over-Subscription Privilege are subject to allotment, which
is more fully discussed below under "Over- Subscription Privilege."
Officers of the Investment Adviser have advised the Fund that the
Affiliated Parties, as Record Date Shareholders, have been authorized to
purchase Shares through the Primary Subscription and the Over-Subscription
Privilege to the extent the Shares become available to it in accordance with
the Primary Subscription and the allotment provisions of the Over-
Subscription Privilege. In addition, Mario J. Gabelli individually or his
affiliated entities, as a Record Date Shareholder, may also purchase Shares
through the Primary Subscription and the Over-Subscription Privilege. Such
over-subscriptions by the Affiliated Parties and Mr. Gabelli may
disproportionately increase their already existing ownership resulting in a
higher percentage ownership of outstanding shares of the Fund. Any Shares so
acquired by the Affiliated Parties or Mr. Gabelli, as "affiliates" of the
Fund as that term is defined under the Securities Act of 1933, as amended
(the "Securities Act"), may only be sold in accordance with Rule 144 under
the Securities Act or another applicable exemption or pursuant to an
effective registration statement under the Securities Act. In general, under
Rule 144, as currently in effect, an "affiliate" of the Fund is entitled to
sell, within any three-month period, a number of shares that does not exceed
the greater of 1% of the then outstanding shares of Common Stock or the
average weekly reported trading volume of the Common Stock during the four
calendar weeks preceding such sale. Sales under Rule 144 are also subject to
certain restrictions on the manner of sale, to notice requirements and to
the availability of current public information about the Fund. In addition,
any profit resulting from the sale of Shares so acquired, if the Shares are
held for a period of less than six months, will be returned to the Fund.
Rights will be evidenced by Subscription Certificates. The number of
Rights issued to each holder will be stated on the Subscription Certificates
delivered to the holder. The method by which Rights may be exercised and
Shares paid for is set forth below in "Method of Exercise of Rights" and
"Payment for Shares." A Rights holder will have no right to rescind a
purchase after the Subscription Agent has received payment. See "Payment for
Shares" below. Shares issued pursuant to an exercise of Rights will be listed
on the NYSE.
The Rights are transferable until the Expiration Date and will be
admitted for trading on the NYSE. Assuming a market exists for the Rights,
the Rights may be purchased and sold through usual brokerage channels and
sold through EquiServe, Boston, Massachusetts (the "Subscription Agent").
Although no assurance can be given that a market for the Rights will develop,
trading in the Rights on the NYSE will begin three Business Days before the
Record Date and may be conducted until the close of trading on the last
Exchange trading day prior to the Expiration Date. Trading of the Rights on
the NYSE will be conducted on a when-issued basis until and including the
date on which the Subscription Certificates are mailed to Record Date
Shareholders and thereafter will be conducted on a regular way basis until
and including the last NYSE trading day prior to the Expiration Date. The
method by which Rights may be transferred is set forth below in "Method of
Transferring Rights." The Common Stock will begin trading ex-Rights two
Business Days prior to the Record Date. For purposes of this Prospectus, a
"Business Day" shall mean any day on which trading is conducted on the NYSE.
Nominees who hold shares of the Fund's common stock for the account
of others, such as banks, brokers, trustees or depositories for securities,
should notify the respective beneficial owners of such shares as soon as
possible to ascertain such beneficial owners' intentions and to obtain
instructions with respect to the Rights. If the beneficial owner so
instructs, the nominee should complete the Subscription Certificate and
submit it to the Subscription Agent with proper payment. In addition,
beneficial owners of the Fund's common stock or Rights held through such a
nominee should contact the nominee and request the nominee to effect
transactions in accordance with the beneficial owner's instructions.
PURPOSE OF THE OFFER
The Board of Trustees of the Fund has determined that it would be in
the best interests of the Fund and the shareholders to increase the assets of
the Fund available for investment thereby permitting the Fund to be in a
better position to more fully take advantage of investment opportunities that
may arise. The Offer seeks to reward existing shareholders by giving them the
right to purchase additional shares at a price that may be below market
and/or net asset value without incurring any commission charge. The
distribution to shareholders of transferable Rights, which themselves may
have intrinsic value, will also afford non-subscribing shareholders the
potential of receiving a cash payment upon sale of such Rights, receipt of
which may be viewed as partial compensation for the possible dilution of
their interests in the Fund.
The Fund's Investment Adviser will benefit from the Offer because
the Investment Adviser's fee is based on the average net assets of the Fund.
See "Management of the Fund." It is not possible to state precisely the
amount of additional compensation the Investment Adviser will receive as a
result of the Offer because the proceeds of the Offer will be in vested in
additional portfolio securities which will fluctuate in value. However,
assuming all Rights are exercised and that the Fund receives the maximum
proceeds of the Offer, the annual compensation to be received by the
Investment Adviser would be increased by approximately $[ ] thousand. Three
of the Fund's Trustees, including Mario J. Gabelli, who voted to authorize
the Offer are "interested persons" of the Investment Adviser within the
meaning of the 1940 Act and may benefit indirectly from the Offer because of
their interest in the Investment Adviser. See "Management of the Fund" in the
SAI. In determining that the Offer was in the best interest of shareholders,
the Fund's Board of Trustees was cognizant of this benefit as well as the
possible participation of the Affiliated Parties and Mr. Gabelli in the Offer
as shareholders on the same basis as other shareholders.
The Fund may, in the future and at its discretion, choose to make
additional rights offerings from time to time for a number of shares and on
terms which may or may not be similar to the Offer. Any such future rights
offering will be made in accordance with the 1940 Act. Under the laws of
Delaware, the state in which the Fund is organized, and the Trust's
Declaration of Trust, the Board of Trustees is authorized to approve rights
offerings without obtaining shareholder approval. The staff of the Securities
and Exchange Commission ("SEC") has interpreted the 1940 Act as not requiring
shareholder approval of a rights offering at a price below the then current
net asset value so long as certain conditions are met, including a good faith
determination by the Fund's board of directors that such offering would
result in a net benefit to existing shareholders.
OVER-SUBSCRIPTION PRIVILEGE
If all of the Rights initially issued are not exercised, any Shares
for which subscriptions have not been received will be offered, by means of
the Over-Subscription Privilege, to Record Date Shareholders who have
exercised all the Rights initially issued to them and who wish to acquire
more than the number of Shares for which the Rights issued to them are
exercisable. Record Date Shareholders who exercise all the Rights initially
issued to them will have the opportunity to indicate on the Subscription
Certificate how many Shares they are willing to acquire pursuant to the
Over-Subscription Privilege. If sufficient Shares remain after the Primary
Subscriptions have been exercised, all over-subscriptions will be honored in
full. If sufficient Shares are not available to honor all over-subscriptions,
the available Shares will be allocated among those who over-subscribe based
on the number of Rights originally issued to them by the Fund. The percentage
of remaining Shares each over-subscribing shareholder may acquire will be
rounded down to result in delivery of whole Shares. The allocation process
may involve a series of allocations in order to assure that the total number
of Shares available for over-subscriptions is distributed on a pro rata basis.
The method by which Shares will be distributed and allocated
pursuant to the Over- Subscription Privilege is as follows. Shares will be
available for purchase pursuant to the Over-Subscription Privilege only to
the extent that the maximum number of Shares is not subscribed for through
the exercise of the Primary Subscription by the Expiration Date. If the
Shares so available ("Excess Shares") are not sufficient to satisfy all
subscriptions pursuant to the Over-Subscription Privilege, the Excess Shares
will be allocated pro rata (subject to the elimination of fractional Shares)
among those holders of Rights exercising the Over-Subscription Privilege, in
proportion, not to the number of Shares requested pursuant to the
Over-Subscription Privilege, but to the number of shares held on the Record
Date; provided, however, that if this pro rata allocation results in any
holder being allocated a greater number of Excess Shares than the holder
subscribed for pursuant to the exercise of such holder's Over-Subscription
Privilege, then such holder will be allocated only such number of Excess
Shares as such holder subscribed for and the remaining Excess Shares will be
allocated among all other holders exercising Over-Subscription Privileges.
The formula to be used in allocating the Excess Shares is as follows:
Holder's Record Date Position x Excess Shares Remaining
-----------------------------
Total Record Date Position
of All Over-Subscribers
The Fund will not offer or sell any Shares which are not subscribed
for under the Primary Subscription or the Over-Subscription Privilege.
THE SUBSCRIPTION PRICE
The Subscription Price for the Shares to be issued pursuant to the
Rights will be $[ ].
The Fund announced the Offer on January 10, 2002. The net asset
value per share of Common Stock at the close of business on April __, 2002
and May __, 2002 (the last date prior to the Fund's Shares trading
ex-Rights), was $[ ] and $[ ], respectively. The last reported sale price of
a share of the Fund's Common Stock on the NYSE on those dates was $[ ] and
$[ ], respectively, representing a [ ]% and a [ ]% premium, respectively, in
relation to the net asset value per share of Common Stock at the close of
business on these dates.
SALES BY SUBSCRIPTION AGENT
Holders of Rights who do not wish to exercise any or all of their
Rights may instruct the Subscription Agent to sell any unexercised Rights.
The Subscription Certificates repre senting the Rights to be sold by the
Subscription Agent must be received on or before May __, 2002. Upon the
timely receipt of appropriate instructions to sell Rights, the Subscription
Agent will use its best efforts to complete the sale and will remit the
proceeds of sale, net of commissions, to the holders. If the Rights can be
sold, sales of the Rights will be deemed to have been effected at the
weighted average price received by the Subscription Agent on the day such
Rights are sold. The selling Rights holder will pay all brokerage commissions
incurred by the Subscription Agent. These sales may be effected by the
Subscription Agent through Gabelli & Company, Inc., a registered
broker-dealer and an affiliate of the Investment Adviser, at a commission of
up to $0.02 per Right, provided that, if the Subscription Agent is able to
negotiate a lower brokerage commission with an independent broker, the
Subscription Agent will execute these sales through the broker. Gabelli &
Company, Inc. may also act on behalf of its clients to purchase or sell
Rights in the open market and be compensated therefor. The Subscription Agent
will automatically attempt to sell any unexercised Rights that remain
unclaimed as a result of Subscription Certificates being returned by the
postal authorities as undeliverable as of the fourth Business Day prior to
the Expiration Date. These sales will be made net of commissions on behalf of
the nonclaiming shareholders. Proceeds from those sales will be held by
EquiServe, in its capacity as the Fund's transfer agent, for the account of
the nonclaiming shareholder until the proceeds are either claimed or
escheated. There can be no assurance that the Subscription Agent will be able
to complete the sale of any of these Rights and neither the Fund nor the
Subscription Agent has guaranteed any minimum sales price for the Rights. All
of these Rights will be sold at the market price, if any, on the NYSE or
through an unaffiliated market maker if no market exists on the NYSE.
METHOD OF TRANSFERRING RIGHTS
The Rights evidenced by a single Subscription Certificate may be
transferred in whole by endorsing the Subscription Certificate for transfer
in accordance with the accompanying instructions. A portion of the Rights
evidenced by a single Subscription Certificate (but not fractional Rights)
may be transferred by delivering to the Subscription Agent a Subscription
Certificate properly endorsed for transfer, with instructions to register
the portion of the Rights evidenced thereby in the name of the transferee
(and to issue a new Subscription Certificate to the transferee evidencing
the transferred Rights). In this event, a new Subscription Certificate
evidencing the balance of the Rights will be issued to the Rights holder or,
if the Rights holder so instructs, to an additional transferee.
Holders wishing to transfer all or a portion of their Rights (but
not fractional Rights) should allow at least three Business Days prior to the
Expiration Date for (i) the transfer instructions to be received and
processed by the Subscription Agent, (ii) a new Subscription Certificate to
be issued and transmitted to the transferee or transferees with respect to
transferred Rights, and to the transferor with respect to retained rights, if
any, and (iii) the Rights evidenced by the new Subscription Certificates to
be exercised or sold by the recipients thereof. Neither the Fund nor the
Subscription Agent shall have any liability to a transferee or transferor of
Rights if Subscription Certificates are not received in time for exercise or
sale prior to the Expiration Date.
Except for the fees charged by the Subscription Agent (which will be
paid by the Fund as described below), all commissions, fees and other
expenses (including brokerage commissions and transfer taxes) incurred in
connection with the purchase, sale or exercise of Rights will be for the
account of the transferor of the Rights, and none of these commissions, fees
or expenses will be paid by the Fund or the Subscription Agent.
The Fund anticipates that the Rights will be eligible for transfer
through, and that the exercise of the Primary Subscription and
Over-Subscription may be effected through, the facilities of DTC (Rights
exercised through DTC are referred to as "DTC Exercised Rights").
EXPIRATION OF THE OFFER
The Offer will expire at 5:00 p.m., New York time, on June __,
2002, unless extended by the Fund to a date not later than June __, 2002,
5:00 p.m., New York time (the "Expiration Date"). Rights will expire on the
Expiration Date and thereafter may not be exercised.
SUBSCRIPTION AGENT
The Subscription Agent is EquiServe, Att: Corporate Actions, P.O.
Box 9573, Boston, Massachusetts 02205-9573. The Subscription Agent will
receive from the Fund an amount estimated to be $[ ] comprised of the fee
for its services and the reimbursement for certain expenses related to the
Offer. INQUIRIES BY ALL HOLDERS OF RIGHTS SHOULD BE DIRECTED TO P.O. BOX
9573, BOSTON, MASSACHUSETTS 02205-9573 (TELEPHONE (800) 336-6983 OR (781)
575-2000); HOLDERS MAY ALSO CONSULT THEIR BROKERS OR NOMINEES.
METHOD OF EXERCISE OF RIGHTS
Rights may be exercised by filling in and signing the reverse side
of the Subscription Certificate and mailing it in the envelope provided, or
otherwise delivering the completed and signed Subscription Certificate to the
Subscription Agent, together with payment for the Shares as described below
under "Payment for Shares." Rights may also be exercised through a Rights
holder's broker, who may charge the Rights holder a servicing fee in
connection with such exercise.
Completed Subscription Certificates must be received by the
Subscription Agent prior to 5:00 p.m., New York time, on the Expiration Date
(unless payment is effected by means of a notice of guaranteed delivery as
described below under "Payment for Shares"). The Subscription Certificate and
payment should be delivered to EquiServe at the following address:
If By Mail: PO Box 43025
Reporting Services, Inc.
Providence, RI 02940-3025
If By Hand: Securities Transfer and Reporting Services, Inc.
c/o EquiServe
100 Williams St. Galleria
New York, NY 10038
If By Overnight Courier: EquiServe
Attn: Corporate Actions
40 Campanelli Drive
Braintree, MA 02184
PAYMENT FOR SHARES
Holders of Rights who acquire Shares on Primary Subscription or
pursuant to the Over-Subscription Privilege may choose between the following
methods of payment:
(1) A subscription will be accepted by the Subscription Agent if, prior
to 5:00 p.m., New York time, on the Expiration Date, the
Subscription Agent has received a Notice of Guaranteed Delivery by
telegram or otherwise from a bank, a trust company, or a NYSE
member, guaranteeing delivery of (i) payment of the full
Subscription Price for the Shares subscribed for on Primary
Subscription and any additional Shares subscribed for pursuant to
the Over-Subscription Privilege and (ii) a properly completed and
executed Subscription Certificate. The Subscription Agent will not
honor a notice of guaranteed delivery if a properly completed and
executed Subscription Certificate and full payment is not received
by the Subscription Agent by the close of business on the third
Business Day after the Expiration Date. The notice of guaranteed
delivery may be delivered to the Subscription Agent in the same
manner as Subscription Certificates at the addresses set forth
above, or may be transmitted to the Subscription Agent by facsimile
transmission (telecopy number (781) 575-4826; telephone number to
confirm receipt (781) 575-4816).
(2) Alternatively, a holder of Rights can send the Subscription
Certificate together with payment in the form of a check for the
Shares subscribed for on Primary Subscription and additional Shares
subscribed for pursuant to the Over-Subscription Privilege to the
Subscription Agent based on the Subscription Price of $[ ] per
Share. To be accepted, the payment, together with the executed
Subscription Certificate, must be received by the Subscription Agent
at the addresses noted above prior to 5:00 p.m., New York time, on
the Expiration Date. The Subscription Agent will deposit all stock
purchase checks received by it prior to the final due date into a
segregated interest-bearing account pending proration and
distribution of Shares. The Subscription Agent will not accept cash
as a means of payment for Shares. EXCEPT AS OTHERWISE SET FORTH
BELOW, A PAYMENT PURSUANT TO THIS METHOD MUST BE IN UNITED STATES
DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A BANK LOCATED IN THE
CONTINENTAL UNITED STATES, MUST BE PAYABLE TO THE GABELLI UTILITY
TRUST, AND MUST ACCOMPANY AN EXECUTED SUBSCRIPTION CERTIFICATE TO BE
ACCEPTED. If the aggregate Subscription Price paid by a Record Date
Shareholder is insufficient to purchase the number of shares of
Common Stock that the holder indicates are being subscribed for, or
if a Record Date Shareholder does not specify the number of shares
of Common Stock to be purchased, then the Record Date Shareholder
will be deemed to have exercised first, the Primary Subscription
Rights (if not already fully exercised) and second, the
Over-Subscription Privilege to the full extent of the payment
tendered. If the aggregate Subscription Price paid by a Record Date
Shareholder is greater than the shares he has indicated an intention
to subscribe, then the Record Date Shareholder will be deemed to
have exercised first, the Primary Subscription Rights (if not
already fully subscribed) and second, the Over-Subscription
Privilege to the full extent of the excess payment tendered.
Within ten Business Days following the Expiration Date (the
"Confirmation Date"), a confirmation will be sent by the Subscription Agent
to each holder of Rights (or, if the Fund's shares are held by Cede or any
other depository or nominee, to Cede or such other depository or nominee),
showing (i) the number of Shares acquired pursuant to the Primary
Subscription, (ii) the number of Shares, if any, acquired pursuant to the
Over-Subscription Privilege, (iii) the per Share and total purchase price for
the Shares and (iv) any excess to be refunded by the Fund to such holder as a
result of payment for Shares pursuant to the Over- Subscription Privilege
which the holder is not acquiring. Any payment required from a holder of
Rights must be received by the Subscription Agent on the Expiration Date, or
if the Rights holder has elected to make payment by means of a notice of
guaranteed delivery, on the third Business Day after the Expiration Date. Any
excess payment to be refunded by the Fund to a holder of Rights, or to be
paid to a holder of Rights as a result of sales of Rights on his behalf by
the Subscription Agent or exercises by Record Date Shareholders of their
Over- Subscription Privileges, and all interest accrued on the holder's
excess payment will be mailed by the Subscription Agent to the holder within
fifteen Business Days after the Expiration Date. Interest on the excess
payment will accrue through the date that is one Business Day prior to the
mail date of the reimbursement check. All payments by a holder of Rights must
be in United States dollars by money order or check drawn on a bank located
in the continental United States of America and payable to The Gabelli
Utility Trust except that holders of Rights who are residents of the province
of Ontario may make payment in U.S. dollars by money order or check drawn on
a bank located in the province of Ontario.
Whichever of the two methods described above is used, issuance and
delivery of certificates for the Shares purchased are subject to collection
of checks and actual payment pursuant to any notice of guaranteed delivery.
A Rights holder will have no right to rescind a purchase after the
Subscription Agent has received payment either by means of a notice of
guaranteed delivery or a check.
If a holder of Rights who acquires Shares pursuant to the Primary
Subscription or the Over-Subscription Privilege does not make payment of any
amounts due, the Fund reserves the right to take any or all of the following
actions: (i) find other purchasers for such subscribed-for and unpaid-for
Shares; (ii) apply any payment actually received by it toward the purchase of
the greatest whole number of Shares which could be acquired by such holder
upon exercise of the Primary Subscription or the Over-Subscription Privilege;
(iii) sell all or a portion of the Shares purchased by the holder, in the
open market, and apply the proceeds to the amounts owed; and (iv) exercise
any and all other rights or remedies to which it may be entitled, including,
without limitation, the right to set off against payments actually received
by it with respect to such subscribed Shares and to enforce the relevant
guaranty of payment.
Holders who hold shares of Common Stock for the account of others,
such as brokers, trustees or depositaries for securities, should notify the
respective beneficial owners of the shares as soon as possible to ascertain
the beneficial owners' intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the record holder of the
Rights should complete Subscription Certificates and submit them to the
Subscription Agent with the proper payment. In addition, beneficial owners of
Common Stock or Rights held through such a holder should contact the holder
and request the holder to effect transactions in accordance with the
beneficial owner's instructions.
The instructions accompanying the Subscription Certificates should
be read carefully and followed in detail. DO NOT SEND SUBSCRIPTION
CERTIFICATES TO THE FUND.
The method of delivery of subscription certificates and payment of
the subscription price to the subscription agent will be at the election and
risk of the rights holders, but if sent by mail it is recommended that the
certificates and payments be sent by registered mail, properly insured, with
return receipt requested, and that a sufficient number of days be allowed to
ensure delivery to the subscription agent and clearance of payment prior to
5:00 p.m., New York City time, on the expiration date. Because uncertified
personal checks may take at least five business days to clear, you are
strongly urged to pay, or arrange for payment, by means of a certified or
cashier's check or money order.
All questions concerning the timeliness, validity, form and
eligibility of any exercise of Rights will be determined by the Fund, whose
determinations will be final and binding. The Fund in its sole discretion may
waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported ex
ercise of any Right. Subscriptions will not be deemed to have been received
or accepted until all irregularities have been waived or cured within such
time as the Fund determines in its sole discretion. Neither the Fund nor the
Subscription Agent will be under any duty to give notification of any defect
or irregularity in connection with the submission of Subscription
Certificates or incur any liability for failure to give such notification.
DELIVERY OF STOCK CERTIFICATES
Certificates representing Shares purchased pursuant to the Primary
Subscription will be delivered to subscribers as soon as practicable after
the corresponding Rights have been validly exercised and full payment for the
Shares has been received and cleared. Certificates representing Shares
purchased pursuant to the Over-Subscription Privilege will be delivered to
subscribers as soon as practicable after the Expiration Date and after all
allocations have been effected. Participants in the Fund's Automatic Dividend
Reinvestment and Voluntary Cash Purchase Plan (the "Plan") will be issued
Rights for the shares held in their accounts in the Plan. Participants
wishing to exercise these Rights must exercise the Rights in accordance with
the procedures set forth above in "Method of Exercise of Rights" and "Payment
for Shares." These Rights will not be exercised automatically by the Plan.
Plan participants exercising their Rights will receive their Primary and
Over-Subscription Shares via an uncertificated credit to their existing
account. To request a stock certificate, participants in the Plan should
check the appropriate box on the Subscription Certificate. These Shares will
remain subject to the same investment option as previously selected by the
Plan participant.
FOREIGN RESTRICTIONS
Subscription Certificates will only be mailed to Record Date
Shareholders whose addresses are within the United States and the Province of
Ontario, Canada (other than an APO or FPO address). Record Date Shareholders
whose addresses are outside the United States and the Province of Ontario,
Canada or who have an APO or FPO address and who wish to subscribe to the
Offer either in part or in full should contact the Subscription Agent,
EquiServe, by written instruction or recorded telephone conversation no later
than three Business Days prior to the Expiration Date. The Fund will
determine whether the offering may be made to any such shareholder. If the
Subscription Agent has received no instruction by the third business day
prior to the Expiration Date or the Fund has determined that the offering may
not be made to a particular shareholder, the Subscription Agent will attempt
to sell all of such shareholder's Rights and remit the net proceeds, if any,
to such shareholders. If the Rights can be sold, sales of these Rights will
be deemed to have been effected at the weighted average price received by the
Subscription Agent on the day the Rights are sold, less any applicable
brokerage commissions, taxes and other expenses.
Under the securities laws of the Province of Ontario, investors
residing in Ontario may, subject to compliance with all applicable regulatory
requirements, transfer either the Rights or the Shares to be acquired upon
the exercise of such Rights (i) through a dealer registered in Ontario that
effects the transaction through the facilities of the NYSE or other exchange
or market outside of Canada; (ii) to a person or company outside of Canada,
or (iii) through certain other means as provided under and in compliance with
Ontario securities laws.
FEDERAL INCOME TAX CONSEQUENCES TO SHAREHOLDERS
For U.S. federal income tax purposes, neither the receipt nor the
exercise of the Rights will result in taxable income to you. Moreover, you
will not realize a loss if you do not exercise the Rights. The holding period
for a share acquired upon exercise of a Right begins with the date of
exercise. The basis for determining gain or loss upon the sale of a share
acquired upon the exercise of a Right will be equal to the sum of:
- the subscription price per share,
- any servicing fee charged to you by your broker,
bank or trust company, and
- the basis, if any, in the Rights that you exercised.
A gain or loss recognized upon a sale of a share acquired upon the
exercise of a Right will be a capital gain or loss assuming the share is held
as a capital asset at the time of sale.
This gain or loss will be a long-term capital gain or loss if the share has
been held at the time of sale for more than one year.
As noted above, your basis in shares issued under the Offer includes
your basis in the Rights underlying those shares. Assuming that, as the Fund
expects, the aggregate fair market value of the Rights at the time they are
distributed is less than 15% of the aggregate fair market value of the Fund's
Common Stock at such time, the basis of the Rights issued to you will be zero
unless you elect to allocate your basis of previously owned shares to the
Rights issued to you in the Offer. This allocation is based upon the relative
fair market value of such shares and the Rights as of the date of
distribution of the Rights. Thus, if you make such an election and the Rights
are later exercised, the basis in the shares you originally owned will be
reduced by an amount equal to the basis allocated to the Rights. This
election must be made in a statement attached to your federal income tax
return for the year in which the Rights are distributed. If the rights expire
without exercise, you will realize no loss and you will not be permitted to
allocate a portion of your basis in the shares to the unexercised Rights.
The foregoing is a general summary of the material United States
federal income tax consequences of the receipt and exercise of Rights. The
discussion is based upon applicable provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), U.S. Treasury regulations thereunder and
other authorities currently in effect, and does not cover state, local or
foreign taxes. The Code and Treasury regulations thereunder are subject to
change by legislative or administrative action, possibly with retroactive
effect. You should consult your tax advisors regarding specific questions as
to federal, state, local or foreign taxes. You should also review the
discussion of certain tax considerations affecting yourself and the Fund set
forth under "Taxation."
EMPLOYEE PLAN CONSIDERATIONS
Shareholders that are employee benefit plans subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), including
corporate savings and 401(k) plans, Keogh Plans of self-employed individuals
and Individual Retirement Accounts ("IRA") (each a "Benefit Plan" and
collectively, "Benefit Plans"), should be aware that additional contributions
of cash in order to exercise Rights may be treated as Benefit Plan
contributions and, when taken together with contributions previously made,
may subject a Benefit Plan to excise taxes for excess or nondeductible
contributions. In the case of Benefit Plans qualified under Section 401(a) of
the Code, additional cash contributions could cause the maximum contribution
limitations of Section 415 of the Code or other qualification rules to be
violated. Benefit Plans contemplating making additional cash contributions to
exercise Rights should consult with their counsel prior to making such
contributions.
Benefit Plans and other tax exempt entities, including governmental
plans, should also be aware that if they borrow in order to finance their
exercise of Rights, they may become subject to the tax on unrelated business
taxable income ("UBTI") under Section 511 of the Code. If any portion of an
IRA is used as security for a loan, the portion so used is also treated as
distributed to the IRA depositor.
ERISA contains prudence and diversification requirements and ERISA
and the Code contain prohibited transaction rules that may impact the
exercise of Rights. Among the prohibited transaction exemptions issued by the
Department of Labor that may exempt a Benefit Plan's exercise of Rights are
Prohibited Transaction Exemption 84-24 (governing purchases of shares in
investment companies) and Prohibited Transaction Exemption 75-1 (covering
sales of securities).
Due to the complexity of these rules and the penalties for
noncompliance, Benefit Plans should consult with their counsel regarding the
consequences of their exercise of Rights under ERISA and the Code.
USE OF PROCEEDS
The net proceeds of the Offer, assuming all Shares offered hereby
are sold, are estimated to be approximately $[ ] million, before deducting
expenses payable by the Fund estimated at approximately $[ ]. The Investment
Adviser anticipates that investment of the proceeds, in accordance with the
Fund's investment objectives and policies, will be invested promptly as
investment opportunities are identified, depending on market conditions and
the availability of appropriate securities, and is anticipated to take not
more than approximately six months.
INVESTMENT OBJECTIVES AND POLICIES
The Fund is a closed-end non-diversified management investment
company organized under the laws of the State of Delaware on February 25, 1999.
The primary objective of the Fund is long-term growth of capital and
income, which the Fund attempts to achieve by investing at least 65% (80%
commencing July 31, 2002) of its total assets in common stock and other
securities of foreign and domestic companies involved to a substantial extent
(e.g., at least 50% of the assets, gross income or net profits of a company
is committed to or derived from) in providing products, services or equipment
for (i) the generation or distribution of electricity, gas and water and (ii)
telecommunications services or infrastructure operations, such as airports,
toll roads and municipal services (collectively, the "Utility Industry"). The
remaining 35% of its assets may be invested in other securities including
stocks, debt obligations and money market instruments, as well as certain
derivative instruments in the utility industry or other industries. Morever,
should extraordinary conditions affecting such sectors or securities markets
as a whole warrant, the Fund may temporarily be primarily invested in money
market instruments.
Commencing on July 1, 2002, the investment policy of the Fund
relating to the type of securities in which 80% of the Fund's net assets must
be invested may be changed by the Board of Trustees without shareholder
approval. Shareholders will, however, receive at least 60 days' prior notice
of any change in this policy.
Although many companies in the Utility Industry traditionally pay
above average dividends, the Fund intends to focus on those companies whose
securities have the potential to increase in value. The Fund's performance is
expected to reflect conditions affecting public utility industries. These
industries are sensitive to factors such as interest rates, local and
national government regulations, the price and availability of fuel,
environmental protection or energy conservation regulations, weather, the
level of demand for services, and the risks associated with constructing and
operating nuclear power facilities. These factors may change rapidly. The
Fund emphasizes quality in selecting utility investments, and generally looks
for companies that have proven dividend records and sound financial
structures. Believing that the industry is under consolidation due to changes
in regulation, the Fund intends to position itself to take advantage of
trends in consolidation.
Under normal circumstances the Fund will invest in securities of
issuers located in countries other than the United States and may invest in
such foreign securities without limitation. Investing in securities of
foreign issuers, which generally are denominated in foreign currencies, may
involve certain risk and opportunity considerations not typically associated
with investing in domestic companies and could cause the Fund to be affected
favorably or unfavorably by changes in currency exchange rates and
revaluations of currencies.
INVESTMENT METHODOLOGY OF THE FUND
In selecting securities for the Fund, the Investment Adviser
normally will consider the following factors, among others: (1) the
Investment Adviser's own evaluations of the private market value, cash flow,
earnings per share and other fundamental aspects of the underlying assets and
business of the company; (2) the potential for capital appreciation of the
securities; (3) the interest or dividend income generated by the securities;
(4) the prices of the securities relative to other comparable securities; (5)
whether the securities are entitled to the benefits of call protection or
other protective covenants; (6) the existence of any anti- dilution
protections or guarantees of the security; and (7) the diversification of the
portfolio of the Fund as to issuers. The Investment Adviser's investment
philosophy with respect to debt and equity securities seeks to identify
assets that are selling in the public market at a discount to their private
market value, which the Investment Adviser defines as the value informed
purchasers are willing to pay to acquire assets with similar characteristics.
The Investment Adviser also normally evaluates the issuers' free cash flow
and long-term earnings trends. Finally, the Investment Adviser looks for a
catalyst -- something in the company's industry or indigenous to the company
or country itself that will surface additional value.
TEMPORARY INVESTMENTS
During temporary defensive periods and during inopportune periods to
be fully invested, the Fund may invest in U.S. Government Securities and in
money market mutual funds not affiliated with the Investment Adviser that
invest in those securities. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, are supported by the "full faith and credit" of the
U.S. Government; others, such as those of the Export-Import Bank of the U.S.,
are supported by the right of the issuer to borrow from the U.S. Treasury;
others, such as those of the Federal National Mortgage Association, are
supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored instrumentalities if
it is not obligated to do so by law. During temporary defensive periods, the
Fund may not achieve its investment objective.
OPTIONS
On behalf of the Fund, the Investment Adviser may, subject to the
guidelines of the Board of Trustees, purchase or sell, i.e., write, options
on securities, securities indices and foreign currencies which are listed on
a national securities exchange or in the U.S. over-the- counter ("OTC")
markets as a means of achieving additional return or of hedging the value of
the Fund's portfolio. The Fund may write covered call options on common
stocks that it owns or has an immediate right to acquire through conversion
or exchange of other securities in an amount not to exceed 25% of total
assets or invest up to 10% of its total assets in the purchase of put options
on common stocks that the Fund owns or may acquire through the conversion or
exchange of other securities that it owns.
A call option is a contract that gives the holder of the option the
right to buy from the writer (seller) of the call option, in return for a
premium paid, the security underlying the option at a specified exercise
price at any time during the term of the option. The writer of the call
option has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price during the option
period.
A put option is a contract that gives the holder of the option the
right to sell to the writer (seller), in return for the premium, the
underlying security at a specified price during the term of the option. The
writer of the put, who receives the premium, has the obligation to buy the
underlying security upon exercise, at the exercise price during the option
period.
If the Fund has written an option, it may terminate its obligation
by effecting a closing purchase transaction. This is accomplished by
purchasing an option of the same series as the option previously written.
There can be no assurance that a closing purchase transaction can be effected
when the Fund so desires.
An exchange-traded option may be closed out only on an exchange
which provides a secondary market for an option of the same series. Although
the Fund will generally purchase or write only those options for which there
appears to be an active secondary market, there is no assurance that a liquid
secondary market on an exchange will exist for any particular option.
FUTURES CONTRACTS AND OPTIONS THEREON
On behalf of the Fund, the Investment Adviser may, subject to
guidelines of the Board of Trustees, purchase and sell financial futures
contracts and options thereon which are traded on a commodities exchange or
board of trade for certain hedging, yield enhancement and risk management
purposes, in accordance with regulations of the Commodity Futures Trading
Commission ("CFTC"). These futures contracts and related options may be on
debt securities, financial indices, securities indices, U.S. Government
securities and foreign currencies. A financial futures contract is an
agreement to purchase or sell an agreed amount of securities or currencies at
a set price for delivery in the future.
Under CFTC regulations, the Investment Adviser on behalf of the Fund
may purchase and sell futures contracts and options thereon for bona fide
hedging purposes, as defined under CFTC regulations, without regard to the
percentage of the Fund's assets committed to margin and option premiums. The
Fund will not enter into futures contracts or options on futures contracts
unless (i) the aggregate initial margins and premiums do not exceed 5% of its
total assets and (ii) the aggregate market value of its outstanding futures
contracts and the market value of the currencies and futures contracts
subject to outstanding options written by the Fund, as the case may be, do
not exceed 50% of its total assets.
FORWARD CURRENCY EXCHANGE CONTRACTS
Subject to guidelines of the Board of Trustees, the Fund may enter
into forward foreign currency exchange contracts to protect the value of its
portfolio against future changes in the level of currency exchange rates. The
Fund may enter into such contracts on a spot, i.e., cash, basis at the rate
then prevailing in the currency exchange market or on a forward basis, by
entering into a forward contract to purchase or sell currency. A forward
contract on foreign currency is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days agreed upon
by the parties from the date of the contract at a price set on the date of
the contract. The Fund's dealings in forward contracts will be limited to
hedging involving either specific transactions or portfolio positions, and
the amount the Fund may invest in forward currency contracts is limited to
the amount of its aggregate investments in foreign currencies. The Fund will
only enter into forward currency contracts with parties which it believes to
be creditworthy.
LEVERAGING
As provided in the 1940 Act and subject to compliance with the
Fund's investment objectives, policies and restrictions, the Fund may issue
debt or preferred stock so long as the Fund's total assets immediately after
such issuance, less certain ordinary course liabilities, exceed 300% of the
amount of the debt outstanding and exceed 200% of the sum of the amount of
preferred stock and debt outstanding. Such debt or preferred stock may be
convertible in accordance with SEC staff guidelines which may permit the Fund
to obtain leverage at attractive rates.
Further information on the investment objectives and policies of the
Fund are set forth in the SAI.
INVESTMENT RESTRICTIONS
The Fund operates under the following restrictions that constitute
fundamental policies that, except as otherwise noted, cannot be changed
without the affirmative vote of the holders of a majority of the outstanding
voting securities of the Fund. Except as otherwise noted, all percentage
limitations set forth below apply immediately after a purchase or initial
investment and any subsequent change in any applicable percentage resulting
from market fluctuations does not require any action. The Fund may not:
o invest 25% or more of its total assets, taken at market value at
the time of each investment, in the securities of issuers in any
particular industry other than the Utility Industry. This
restriction does not apply to investments in U.S. Government
Securities.
o purchase or sell commodities or commodity contracts except that the
Fund may purchase or sell futures contracts and related options
thereon if immediately thereafter (i) no more than 5% of its total
assets are invested in margins and premiums and (ii) the aggregate
market value of its outstanding futures contracts and market value
of the currencies and futures contracts subject to outstanding
options written by the Fund do not exceed 50% of the market value
of its total assets. The Fund may not purchase or sell real estate,
provided that the Fund may invest in securities secured by real
estate or interests therein or issued by companies which invest in
real estate or interests therein.
o make loans of money, except by the purchase of a portion of private
or publicly distributed debt obligations or the entering into of
repurchase agreements. The Fund reserves the authority to make
loans of its portfolio securities to financial intermediaries in an
aggregate amount not exceeding 20% of its total assets. Any such
loans will only be made upon approval of, and subject to any
conditions imposed by, the Board of Trustees of the Fund. Because
these loans are required to be fully collateralized at all times,
the risk of loss in the event of default of the borrower should be
slight.
o borrow money except to the extent permitted by applicable law. The
1940 Act currently requires that the Fund have 300% asset coverage
with respect to all borrowings other than temporary borrowings of
up to 5% of the value of its total assets.
o issue senior securities, except to the extent permitted by
applicable law.
o underwrite securities of other issuers except insofar as the Fund
may be deemed an underwriter under the Securities Act 1933 (the
"1933 Act") in selling portfolio securities; provided, however,
this restriction shall not apply to securities of any investment
company organized by the Fund that are to be distributed pro rata
as a dividend to its shareholders.
PORTFOLIO TURNOVER
The Fund buys and sells securities to accomplish its investment
objective. The investment policies of the Fund may lead to frequent changes
in investments, particularly in periods of rapidly fluctuating interest or
currency exchange rates. The portfolio turnover may be higher than that of
other investment companies.
Portfolio turnover generally involves some expense to the Fund,
including brokerage commissions or dealer mark-ups and other transaction
costs on the sale of securities and reinvestment in other securities and may
result in taxable gains being passed to shareholders. The portfolio turnover
rate is computed by dividing the lesser of the amount of the long-term
securities purchased or securities sold by the average monthly value of
securities owned during the year (excluding securities whose maturities at
acquisition were one year or less).
OTHER INVESTMENTS
The Fund is permitted to invest in securities subject to
reorganization, lower rated securities and repurchase agreements and enter
into forward commitments for the purchase or sale of securities, including on
a "when issued" or "delayed delivery" basis and the Fund may make short sales
of securities. See "Investment Objectives and Policies --Investment Practices
--When Issued, Delayed Delivery Securities and Forward Commitments" in the
SAI for a discussion of these investments and techniques and the risks
associated with them.
LONG-TERM OBJECTIVE
The Fund is intended for investors seeking long-term capital growth
and income. The Fund is not meant to provide a vehicle for those who wish to
play short-term swings in the stock market. An investment in shares of the
Fund should not be considered a complete investment program. Each
shareholder should take into account the shareholder's investment objectives
as well as the shareholder's other investments when considering the Offering.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Please consider the matters set forth below. You should read this
entire Prospectus and the SAI before you decide whether to exercise your
Rights. In addition, you should consider the matters set forth below.
PRINCIPAL RISKS ASSOCIATED WITH THE FUND
DILUTION
If you do not exercise all of your Rights, you will likely own a
smaller proportional interest in the Fund when the Offer is over. In
addition, whether or not you exercise your Rights, if the Subscription Price
is below the Fund's net asset value per share on the Expiration Date the per
share net asset value of your shares will be diluted (reduced) immediately as
a result of the Offer because:
- the offered shares are being sold at less than their current net
asset value
- you will indirectly bear the expenses of the Offer
- the number of shares outstanding after the Offer will have
increased proportionately more than the increase in the size of the
Fund's net assets.
However, if the Subscription per share Price remains above the
Fund's net asset value on the Expiration Date after deducting the expenses of
the Offer, the Fund's net asset value per share will be accreted (increased)
immediately as a result of the Offer whether or not you participate in the
Offer because:
- the offered shares are being sold at more than their current net
asset value after deducting the expenses of the Offer
- the number of shares outstanding after the Offer will have increased
proportionately less than the increase in the size of the Fund's net
assets.
The Fund cannot state precisely the amount of any dilution because
it is not known at this time what the net asset value per share will be on
the Expiration Date or what proportion of the Rights will be exercised. The
impact of the Offer on net asset value per share is shown by the following
examples, assuming a $[ ] Subscription Price:
Scenario 1: (assumes net asset value per share is below subscription price)(1)
NAV................................................................$
----------
Subscription Price.................................................$
----------
Increase in NAV($)(2)..............................................$
----------
Increase in NAV(%)................................................
----------
Scenario 2: (assumes net asset value is above subscription price)(1)
NAV................................................................$
----------
Subscription Price.................................................$
----------
Reduction in NAV($)(2)...................................................$( )
----
Reduction in NAV(%)......................................................( )%
----------
_____________________
(1) Both examples assume full primary and over-subscription privilege
exercise. Actual amounts may vary due to rounding.
(2) Assumes $[ ] in estimated offering expenses.
If you do not wish to exercise your Rights, you should consider
selling them as set forth in this Prospectus. Any cash you receive from
selling your Rights should serve as partial compensation for any possible
dilution of your interest in the Fund. The Fund cannot give assurance,
however, that a market for the Rights will develop or that the Rights will
have any marketable value.
INDUSTRY RISKS
The Fund will invest a significant portion of its assets in foreign
and domestic companies involved in the Utility Industry and, as a result, the
value of the Fund's shares will be more susceptible to factors affecting
those particular types of companies, including governmental regulation,
inflation, cost increases in fuel and other operating expenses and increasing
interest rates resulting in high interest costs on borrowings needed for
capital construction programs, including compliance with environmental
regulations.
Various regulatory regimes impose limitations on the percentage of
the shares of a public utility held by an investment for its clients. These
limitations may unfavorably restrict the ability of the Fund to make certain
investments.
In addition, deregulation of the utility industry could have a
positive or negative impact on the Fund's shares. The Investment Adviser
believes that certain utility companies' fundamentals should continue to
improve as the industry undergoes deregulation. Companies may seek to
strengthen their competitive positions through mergers and takeovers. The
loosening of the government regulation of utilities should encourage
convergence within the industry. Improving earnings prospects, strong cash
flows, share repurchases and takeovers from industry consolidation may tend
to boost share prices. However, as has occurred in California and elsewhere,
certain companies may be less able to meet the challenge of deregulation as
competition increases and investments in these companies would not be likely
to perform well.
NON-DIVERSIFIED STATUS
The Fund is classified as a "non-diversified" investment company
under the 1940 Act, which means that the Fund is not limited by the 1940 Act
in the proportion of its assets that may be invested in the securities of a
single issuer. However, the Fund intends to conduct its operations so as to
qualify as a "regulated investment company" for purposes of the Code, which
will relieve it of any liability for U.S. federal income tax if all of its
earnings are distributed to shareholders. See "Taxation --Taxation of the
Fund." Because the Fund, as a non-diversified investment company, may invest
in the securities of individual issuers to a greater degree than a
diversified investment company, an investment in the Fund may present greater
risk to an investor than an investment in a diversified company because the
investment risk may be concentrated in fewer securities.
MARKET VALUE AND NET ASSET VALUE
Shares of closed-end investment companies frequently trade at a
discount from net asset value, although for most of the Fund's life its
shares have traded at a premium over net asset value per share. The
possibility that shares of a closed-end fund will trade at a discount from
net asset value or at premiums that are unsustainable over the long term are
risks separate and distinct from the risk that the Fund's net asset value
will decrease. The risk of holding shares of a closed-end fund that might
trade at a discount or unsustainable premium is more pronounced for
shareholders who wish to sell their shares in a relatively short period of
time after acquiring them because, for those investors, realization of a gain
or loss on their investments is likely to be more dependent upon the
existence of a premium or discount than upon portfolio performance. The
Fund's shares are not subject to redemption. Shareholders desiring liquidity
may, subject to applicable securities laws, trade their shares in the Fund on
the New York Stock Exchange or other markets on which such shares may trade
at the then current market value, which may differ from the then current net
asset value.
LOWER RATED SECURITIES
The Fund may invest up to 10% of its total assets in fixed-income
securities rated in the lower rating categories of recognized statistical
rating agencies, such as securities rated "CCC" or lower by S&P or "Caa" or
lower by Moody's, Inc., or non-rated securities of comparable quality. These
debt securities are predominantly speculative and involve major risk exposure
to adverse conditions and are often referred to in the financial press as
"junk bonds."
FOREIGN SECURITIES
There is no limitation on the amount of foreign securities in which
the Fund may invest. Investing in securities of foreign companies and foreign
governments, which generally are denominated in foreign currencies, may
involve certain risk and opportunity considerations not typically associated
with investing in domestic companies and could cause the Fund to be affected
favorably or unfavorably by changes in currency exchange rates and
revaluations of currencies. In addition, less information may be available
about foreign companies and foreign governments than about domestic companies
and foreign companies and foreign governments generally are not subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory practices and requirements comparable to those applicable to
domestic companies. Foreign securities and their markets may not be as liquid
as U.S. securities and their markets. Securities of some foreign companies
may involve greater market risk than securities of U.S. companies. Investment
in foreign securities may result in higher expenses than investing in
domestic securities because of the payment of fixed brokerage commissions on
foreign exchanges, which generally are higher than commissions on U.S.
exchanges, and the imposition of transfer taxes or transaction charges
associated with foreign exchanges. Investment in foreign securities also may
be subject to local economic or political risks, including instability of
some foreign governments, the possibility of currency blockage or the
imposition of withholding taxes on dividend or interest payments, and the
potential for expropriation, nationalization or confiscatory taxation and
limitations on the use or removal of funds or other assets.
Among the foreign securities in which the Fund may invest are those
issued by companies located in developing countries, which are countries in
the initial stages of their industrialization cycles. Investing in the equity
and debt markets of developing countries involves exposure to economic
structures that are generally less diverse and less mature, and to political
systems that can be expected to have less stability, than those of developed
countries. The markets of developing countries historically have been more
volatile than the markets of the more mature economies of developed
countries, but often have provided higher rates of return to investors. The
Fund may also invest in debt securities of foreign governments.
For a further description of lower rated securities and the risks
associated therewith, see "Investment Objectives and Policies -- Lower Rated
Securities."
SPECIAL RISKS OF DERIVATIVE TRANSACTIONS
Participation in the options or futures markets and in currency
exchange transactions involves investment risks and transaction costs to
which the Fund would not be subject absent the use of these strategies. If
the Investment Adviser's prediction of movements in the direction of the
securities, foreign currency and interest rate markets are inaccurate, the
consequences to the Fund may leave the Fund in a worse position than if such
strategies were not used. Risks inherent in the use of options, foreign
currency, futures contracts and options on futures contracts, securities
indices and foreign currencies include (1) dependence on the Adviser's
ability to predict correctly movements in the direction of interest rates,
securities prices and currency markets; (2) imperfect correlation between
the price of options and futures contracts and options thereon and movements
in the prices of the securities or currencies being hedged; (3) the fact
that skills needed to use these strategies are different from those needed
to select portfolio securities; (4) the possible absence of a liquid
secondary market for any particular instrument at any time; (5) the possible
need to defer closing out certain hedged positions to avoid adverse tax
consequences; (6) the possible inability of the Fund to purchase or sell a
security at a time that otherwise would be favorable for it to do so, or the
possible need for the Fund to sell a security at a disadvantageous time due
to a need for the Fund to maintain "cover" or to segregate securities in
connection with the hedging techniques; and (7) the creditworthiness of
counterparties. For a further description, see "Risk Factors and Special
Considerations -- Futures Transactions" and "Risk Factors and Special
Considerations -- Forward Currency Exchange Contracts."
FUTURES TRANSACTIONS
Futures and options on futures entail certain risks, including but
not limited to the following: no assurance that futures contracts or options
on futures can be offset at favorable prices, possible reduction of the yield
of the Fund due to the use of hedging, possible reduction in value of both
the securities hedged and the hedging instrument, possible lack of liquidity
due to daily limits on price fluctuation, imperfect correlation between the
contracts and the securities being hedged, losses from investing in futures
transactions that are potentially unlimited and the segregation requirements
for such transactions. For a further description, see "Investment Objectives
and Policies -- Investment Practices" in the SAI.
FORWARD CURRENCY EXCHANGE CONTRACTS
The use of forward currency contracts may involve certain risks,
including the failure of the counter party to perform its obligations under
the contract, and that such use may not serve as a complete hedge because of
an imperfect correlation between movements in the prices of the contracts and
the prices of the currencies hedged or used for cover. For a further
description of such investments, see "Investment Objectives and Policies --
Investment Practices" in the SAI.
RISKS TO HOLDERS OF COMMON STOCK OF LEVERAGING AND ISSUANCE OF
SENIOR SECURITIES
Leverage entails two primary risks. The first risk is that the use
of leverage magnifies the impact on the common shareholders of changes in
net asset value. For example, a fund that uses 33% leverage (that is, $50 of
leverage per $100 of common equity) will show a 1.5% increase or decline in
net asset value for each 1% increase or decline in the value of its total
assets. The second risk is that the cost of leverage will exceed the return
on the securities acquired with the proceeds of leverage, thereby
diminishing rather than enhancing the return to common shareholders. If the
fund were to utilize leverage, these two risks would generally make the
Fund's total return to common shareholders more volatile. In addition, the
Fund might be required to sell investments in order to meet dividend or
interest payments on the debt or preferred stock when it may be
disadvantageous to do so.
As provided in the 1940 Act and subject to certain exceptions, the
Fund may issue debt or preferred stock so long as the Fund's total assets
immediately after such issuance, less certain ordinary course liabilities,
exceed 300% of the amount of the debt outstanding and exceed 200% of the sum
of the amount of the preferred stock and debt outstanding. Such debt or
preferred stock may be convertible in accordance with Securities and Exchange
Commission ("SEC") guidelines which may permit the registrant to obtain
leverage at attractive rates. A leveraged capital structure creates certain
special risks and potential benefits not associated with unleveraged funds
having similar investment objectives and policies. Any investment income or
gains from the capital represented by preferred shares or debt which is in
excess of the dividends payable thereon will cause the total return of the
common shares to be higher than would otherwise be the case. Conversely, if
the investment performance of the capital represented by preferred shares or
debt fails to cover the dividends payable thereon, the total return of the
common shares would be less or, in the case of negative returns, would result
in higher negative returns to a greater extent than would otherwise be the
case. The requirement under the 1940 Act to pay in full dividends on
preferred shares or interest on debt before any dividends may be paid on the
common shares means that dividends on the common shares from earnings may be
reduced or eliminated. Although an inability to pay dividends on the common
shares could conceivably result in the Fund ceasing to qualify as a regulated
investment company under the Code, which would be materially adverse to the
holders of the common shares, such inability can be avoided through the use
of mandatory redemption requirements designed to ensure that the Fund
maintains the necessary asset coverage.
The class voting rights of preferred shares could make it more
difficult for the Fund to take certain actions that may, in the future, be
proposed by the Board and/or the holders of Common Stock, such as a merger,
exchange of securities, liquidation or alteration of the rights of a class of
the Fund's securities if such actions would be adverse to the preferred
shares, or such as changing to an open-end investment company or acting
inconsistently with its fundamental investment restrictions or other
fundamental policies or seeking to operate other than as an investment company.
Preferred shares will be issued only if the Board of the Fund
determines in light of all relevant circumstances known to the Board that to
do so would be in the best interests of the Fund and its common
shareholders. The circumstances that the Board will consider before issuing
preferred shares include not only the dividend rate on the preferred shares
in comparison to the historical performance of the Fund but also such
matters as the terms on which the Fund can call the preferred shares, the
circumstances in which the Investment Adviser will earn additional
investment advisory fees on the net assets attributable to the preferred
shares and the ability of the Fund to meet the asset coverage tests and
other requirements imposed by the rating agencies for such preferred shares.
The issuance of preferred shares convertible into shares of common
stock might also reduce the net income and net asset value per share of the
common shares upon conversion. Such income dilution would occur if the Fund
could, from the investments made with the proceeds of the preferred shares,
earn an amount per common share issuable upon conversion greater than the
dividend required to be paid on the amount of preferred stock convertible
into one share of common stock. Such net asset value dilution would occur if
preferred shares were converted at a time when the net asset value per common
share was greater than the conversion price.
The Fund does not currently intend to issue preferred shares or
preferred shares convertible into shares of common stock. However, the Fund
will consider from time to time whether to do so and expects that it would
issue such shares if the Trustees conclude that the Fund can earn an
incremental return for the common shareholders.
MANAGEMENT OF THE FUND
The Fund's Board of Trustees (who, with its officers, are described
in the SAI) has overall responsibility for the management of the Fund. The
Board of Trustees decides upon matters of general policy and reviews the
actions of the Investment Adviser and the Administrator (as defined below).
Pursuant to an Investment Advisory Contract with the Fund, the Investment
Adviser, under the supervision of the Fund's Board of Trustees, provides a
continuous investment program for the Fund's portfolio; provides investment
research and makes and executes recommendations for the purchase and sale of
securities; and provides all facilities and personnel, including officers
required for its administrative management and pays the compensation of all
officers and directors of the Fund who are its affiliates. As compensation
for its services and the related expenses borne by the Investment Adviser,
the Fund pays the Investment Adviser a fee, computed daily and payable
monthly, equal, on an annual basis, to 1.00% of the Fund's average weekly net
assets, which is higher than that paid by most mutual funds. For purposes of
the calculation of the fees payable to the Investment Adviser by the Fund,
average weekly net assets of the Fund are determined at the end of each month
on the basis of its average net assets for each week during the month. The
assets for each weekly period are determined by averaging the net assets at
the end of a week with the net assets at the end of the prior week.
The Adviser, together with other affiliated investment advisers,
has assets under management totaling over $24.8 billion as of December 31,
2001. The Investment Adviser was organized in 1999 and is the successor to
the investment advisory division of Gabelli Funds, Inc. which was organized
in 1980. As of December 31, 2001, the Investment Adviser and its affiliate,
Gabelli Advisers, Inc., act as primary investment adviser to 18 management
investment companies with aggregate net assets of $11.1 billion. GAMCO
Investors, Inc., an affiliate of the Investment Adviser, acts as investment
adviser for individuals, pension trusts, profit sharing trusts and
endowments, and as investment sub-adviser to management investment companies
having aggregate assets of $11.5 billion under management as of December 31,
2001. Gabelli Fixed Income LLC, an affiliate of the Investment Adviser, acts
as investment adviser for the Treasurer's Fund and separate accounts having
aggregate assets of $1.6 billion under management as of December 31, 2001.
The Investment Adviser is a wholly-owned subsidiary of Gabelli Asset
Management Inc., a New York corporation, whose Class A Common Stock is
traded on the New York Stock Exchange under the symbol "GBL." Mr. Mario J.
Gabelli may be deemed a "controlling person" of the Investment Adviser on
the basis of his ownership of a majority of the stock of the Gabelli Group
Capital Partners, Inc., which owns 78.6% of the capital stock of Gabelli
Asset Management Inc.
The Investment Adviser is obligated to pay expenses associated with
providing the services contemplated by the Investment Advisory Agreement
between the Fund and the Investment Adviser (the "Advisory Agreement")
including compensation of and office space for its officers and employees
connected with investment and economic research, trading and investment
management and administration of the Fund, as well as the fees of all
trustees of the Fund who are affiliated with the Investment Adviser. The Fund
pays all other expenses incurred in its operation including, among other
things, expenses for legal and independent accountants' services, costs of
printing proxies, stock certificates and shareholder reports, charges of the
custodian, any subcustodian and transfer and dividend paying agent, expenses
in connection with its respective Automatic Dividend Reinvestment and
Voluntary Cash Purchase Plan, SEC fees, fees and expenses of unaffiliated
directors, accounting and pricing costs, membership fees in trade
associations, fidelity bond coverage for its officers and employees,
directors' and officers' errors and omission insurance coverage, interest,
brokerage costs, taxes, stock exchange listing fees and expenses, expenses of
qualifying its shares for sale in various states, litigation and other
extraordinary or non-recurring expenses, and other expenses properly payable
by the Fund.
In addition to the fees of the Investment Adviser, the Fund is
responsible for the payment of all its other expenses incurred in the
operation of the Fund, which include, among other things, expenses for legal
and independent accountant's services, stock exchange listing fees, expenses
relating to the offering of preferred stock, costs of printing proxies,
stock certificates and shareholder reports, charges of Boston Safe Deposit
and Trust Company ("Boston Safe" or the "Custodian,") charges of EquiServe,
SEC fees, fees and expenses of unaffiliated directors, accounting and
printing costs, the Fund's pro rata portion of membership fees in trade
organizations, fidelity bond coverage for the Fund's officers and employees,
interest, brokerage costs, taxes, expenses of qualifying the Fund for sale
in various states, expenses of personnel performing shareholder servicing
functions, litigation and other extraordinary or non-recurring expenses and
other expenses properly payable by the Fund.
The Investment Advisory Contract contains provisions relating to the
selection of securities brokers to effect the portfolio transactions of the
Fund. Under those provisions, the Investment Adviser may (1) direct Fund
portfolio brokerage to Gabelli & Company, Inc. or other broker-dealer
affiliates of the Investment Adviser; and (2) pay commissions to brokers
other than Gabelli & Company, Inc. which are higher than might be charged by
another qualified broker to obtain brokerage and/or research services
considered by the Investment Adviser to be useful or desirable for its
investment management of the Fund and/or its other advisory accounts or those
of any investment adviser affiliated with it. The SAI contains further
information about the Investment Advisory Contract including a more complete
description of the advisory and expense arrangements, exculpatory and
brokerage provisions, as well as information on the brokerage practices of
the Fund.
Canadian shareholders should note, to the extent applicable, that
there may be difficulty enforcing any legal rights against the Investment
Adviser because it is resident outside Canada and all of its assets are
situated outside Canada.
PORTFOLIO MANAGER
Mario J. Gabelli is the leader of a team which is primarily
responsible for the day-to- day management of the Fund. Mr. Gabelli has
served as Chairman, President and Chief Investment Officer of the Adviser
since 1980. Mr. Gabelli also serves as Portfolio Manager for several other
funds in the Gabelli fund family. Because of the diverse nature of Mr.
Gabelli's responsibilities, he will devote less than all of his time to the
day-to-day management at the Fund.
NON-RESIDENT DIRECTORS
Karl Otto Pohl, a trustee of the Fund, resides outside the United
States and all or a significant portion of his assets are located outside the
United States. He has no authorized agent in the United States to receive
service of process. As a result, it may not be possible for investors to
effect service of process within the United States or to enforce against him
in United States courts judgments predicated upon civil liability provisions
of United States securities laws. It may also not be possible to enforce
against him in foreign courts judgments of United States courts or
liabilities in original actions predicated upon civil liability provisions of
the United States securities laws.
ADMINISTRATOR
The Investment Adviser has entered into sub-administration
agreement with PFPC Inc. (the "Sub-Administrator") pursuant to which the
Sub-Administrator provides certain administrative services necessary for the
Fund's operations which do not include the investment advisory and portfolio
management services provided by the Adviser. For these services and the
related expenses borne by the Sub-Administrator, the Investment Adviser pays
a prorated monthly fee at the annual rate of .0275% of the first $10.0
billion of the aggregate average net assets of the Fund and all other funds
advised by the Investment Adviser and administered by the Sub-Administrator,
..0125% of the aggregate average net assets exceeding $10 billion and .01% of
the aggregate average net assets in excess of $15 billion. The
Sub-Administrator has its principal office at 3200 Horizon Drive, King of
Prussia, Pennsylvania 19406.
PORTFOLIO TRANSACTIONS
Principal transactions are not entered into with affiliates of the
Fund. However, Gabelli & Company may execute transactions in the
over-the-counter markets on an agency basis and receive a stated commission
therefrom. For a more detailed discussion of the Fund's brokerage allocation
practice, see the SAI under "Portfolio Transactions."
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to make monthly distributions to holders of its
Common Stock. The source of such distribution is determined pursuant to an
exemptive order issued by the SEC (as described below). As a regulated
investment company under the Code, the Fund will not be subject to U.S.
federal income tax on its investment company taxable income that it
distributes to shareholders, provided that at least 90% of its investment
company taxable income for that taxable year is distributed to its
shareholders. See "Taxation." Shareholders exercising Rights will be entitled
to receive dividends on shares issued pursuant to the Offering beginning with
dividends payable after the Expiration Date.
The Fund, along with other registered investment companies advised
by the Adviser (the "Other Funds"), has obtained an exemption from Section
19(b) of the 1940 Act and Rule 19b-1 thereunder permitting the Fund to make
periodic distributions of long-term capital gains provided that the Fund
maintains distribution policies with respect to the Common Stock calling for
periodic (e.g., quarterly or semi-annually, but in no event more frequently
than monthly) distributions in an amount equal to a fixed percentage of the
Fund's average net asset value over a specified period of time or market
price per share of Common Stock at or about the time of distribution or
pay-out of a fixed dollar amount. If the total distributions required by the
proposed periodic pay-out policy exceed the Fund's net investment income and
net capital gains, the excess will be treated as a return of capital. If the
Fund's net invest ment income, net short-term capital gains and net
long-term capital gains for any year exceed the amount required to be
distributed under the proposed periodic pay-out policy, the Fund generally
intends to pay such excess once a year, but may, in its discretion, retain
and not distribute net long-term capital gains to the extent of such excess.
The Fund reserves the right, but does not currently intend, to retain for
reinvestment and pay U.S. federal income taxes on the excess of its net
realized long-term capital gains over its net short-term capital losses, if any.
TAXATION
TAXATION OF THE FUND
The Fund has qualified and elected to be taxed as a regulated
investment company under Subchapter M of the Code. Accordingly, the Fund
must, among other things, (a) derive in each taxable year at least 90% of its
gross income (including tax-exempt interest) from dividends, interest,
payments with respect to certain securities loans, and gains from the sale or
other disposition of stock, securities or foreign currencies, or other income
(including but not limited to gain from options, futures and forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies; and (b) diversify its holdings so that, at the end
of each fiscal quarter (i) at least 50% of the market value of the Fund's
total assets is represented by cash and cash items, U.S. Government
securities, the securities of other regulated investment companies and other
securities, with such other securities limited, in respect of any one issuer,
to an amount not greater than 5% of the value of the Fund's total assets and
not more than 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the market value of the Fund's total assets is
invested in the securities of any issuer (other than U.S. Government
securities and the securities of other regulated investment companies) or of
any two or more issuers that the Fund controls and that are determined to be
engaged in the same business or similar or related trades or businesses.
As a regulated investment company, the Fund generally is not subject
to U.S. federal income tax on income and gains that it distributes each
taxable year to shareholders, if at least 90% of the sum of the Fund's (i)
investment company taxable income (which includes, among other items,
dividends, interest and the excess of any net short-term capital gains over
net long-term capital losses and other taxable income other than any net
capital gain (as defined below) reduced by deductible expenses) determined
without regard to the deduction for dividends paid and (ii) its net tax
exempt interest (the excess of its gross tax exempt interest over certain
disallowed deductions). The Fund intends to distribute at least annually
substantially all of such income.
Amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4%
excise tax at the Fund level. To avoid the tax, the Fund must distribute
during each calendar year an amount equal to the sum of (1) at least 98% of
its ordinary income (not taking into account any capital gains or losses)
for the calendar year, (2) at least 98% of its capital gains in excess of
its capital losses (adjusted for certain ordinary losses) for a one-year
period generally ending on October 31 of the calendar year (unless, an
election is made by a fund with a November or December year- end to use the
fund's fiscal year), and (3) certain undistributed amounts from previous
years on which the fund paid no U.S. federal income tax. While the Fund
intends to distribute any income and capital gains in the manner necessary
to minimize imposition of the 4% excise tax, there can be no assurance that
sufficient amounts of the Fund's taxable income and capital gains will be
distributed to avoid entirely the imposition of the tax. In that event, the
Fund will be liable for the tax only on the amount by which it does not meet
the foregoing distribution requirement.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital
gains) will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions will be
taxable to the shareholders as ordinary dividends to the extent of the Fund's
current and accumulated earnings and profits.
TAXATION OF THE SHAREHOLDERS
Distributions paid to you by the Fund from its ordinary income or
from an excess of net short-term capital gains over net long-term capital
losses (together referred to hereinafter as "ordinary income dividends") are
taxable to you as ordinary income to the extent of the Fund's earning and
profits. Distributions made to you from an excess of net long-term capital
gains over net short-term capital losses ("capital gain dividends"),
including capital gain dividends credited to you but retained by the Trust,
are taxable to you as long-term capital gains, regardless of the length of
time you have owned Fund shares. Distributions in excess of the Fund's
earnings and profits will first reduce the adjusted tax basis of your shares
and, after such adjusted tax basis is reduced to zero, will constitute
capital gains to you (assuming the shares are held as a capital asset).
Generally, not later than 60 days after the close of its taxable year, the
Fund will provide you with a written notice designating the amount of any
ordinary income dividends or capital gain dividends and other distributions.
The sale or other disposition of common shares of the Fund will
generally result in capital gain or loss to you, and will be long-term
capital gain or loss if the shares have been held for more than one year at
the time of sale. Any loss upon the sale or exchange of Fund shares held for
six months or less will be treated as long-term capital loss to the extent
of any capital gain dividends received (including amounts credited as an
undistributed capital gain dividend) by you. A loss realized on a sale or
exchange of shares of the Fund will be disallowed if other Fund shares are
acquired (whether through the automatic reinvestment of dividends or
otherwise) within a 61-day period beginning 30 days before and ending 30
days after the date that the shares are disposed of. In such case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss.
Present law taxes both long-term and short- term capital gains of
corporations at the rates applicable to ordinary income. For non- corporate
taxpayers, however, short-term capital gains and ordinary income will
currently be taxed at a maximum rate of 38.6% while long-term capital gains
generally will be taxed at a maximum rate of 20% and 10% for taxpayers in
the 15% bracket. The 20% capital gains rate and the 10% capital rate will be
reduced to 18% and 8% respectively, for capital assets held for more than
five years if the holding period begins after December 31, 2000.(1)
______________
(1) The Economic Growth and Tax Relief Reconciliation Act of 2001,
effective for taxable years beginning after December 31, 2000,
creates a new 10 percent income tax bracket and reduces the tax
rates applicable to ordinary income over a six year phase-in period.
Beginning in the taxable year 2006, ordinary income will be subject
to a 35% maximum rate, with approximately proportionate reductions
Dividends and other taxable distributions are taxable to you even
though they are reinvested in additional shares of the Fund. If the Fund pays
you a dividend in January which was declared in the previous October,
November or December to shareholders of record on a specified date in one of
such months, then such dividend will be treated for tax purposes as being
paid by the Fund and received by you on December 31 of the year in which the
dividend was declared.
The Fund is required in certain circumstances to backup withhold on
taxable dividends and certain other payments paid to non-corporate holders of
the Fund's shares who do not furnish the Fund with their correct taxpayer
identification number (in the case of individuals, their social security
number) and certain certifications, or who are otherwise subject to backup
withholding. Backup withholding is not an additional tax. Any amounts
withheld from payments made to you may be refunded or credited against your
U.S. federal income tax liability, if any, provided that the required
information is furnished to the Internal Revenue Service.
The foregoing is a general and abbreviated summary of the provisions
of the Code and the Treasury regulations in effect as they directly govern
the taxation of the Fund and its shareholders. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive. A more complete discussion of the tax rules applicable to the
Fund can be found in the Statement of Additional Information which is
incorporated by reference into this prospectus. Shareholders are urged to
consult their tax advisers regarding specific questions as to U.S. federal,
foreign, state, local income or other taxes.
CAPITALIZATION
The Fund is authorized to issue an unlimited number of shares of
beneficial interest, par value $.001 per share, in multiple classes and
series thereof as determined from time to time by the Board of Trustees. The
Board of Trustees of the Fund has authorized issuance of an unlimited number
of shares of two classes, the Common Stock and preferred stock. Each share
within a particular class or series thereof has equal voting, dividend,
distribution and liquidation rights. When issued, in accordance with the
terms thereof, shares of Common Stock will be fully paid and non-assessable.
Shares of Common Stock are not redeemable and have no preemptive, conversion
or cumulative voting rights.
The following table shows the number of shares of (i) capital stock
authorized, (ii) capital stock unissued and (iii) capital stock outstanding
for each class of authorized securities of the Fund as of [ ], 2001.
Amount Held by
Company or for
Title of Class Amount Authorized its Own Account Amount Outstanding
Common Stock........................... unlimited
------------------- ----------------- ------------------
Preferred Stock........................ unlimited none none
------------------- ----------------- ------------------
The Common Stock is listed and traded on the NYSE under the symbol
"GUT." The average weekly trading volume of the Common Stock on the NYSE for
the 12 months ended December 31, 2001 was _______ shares. The following table
sets forth for the quarters indicated the high and low closing prices on the
NYSE per share of the Common Stock and the net asset value and the premium or
discount from net asset value at which the Common Stock was trading,
expressed as a percentage of net asset value, at each of the high and low
closing prices provided.
PREMIUM OR DISCOUNT
MARKET PRICE (1) NET ASSET VALUE (2) AS % OF NAV
-------------------------- ---------------------------- ------------------------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
------------- ---- --- ---- --- ---- ---
____________________
(1) As reported on the NYSE
ANTI-TAKEOVER PROVISIONS OF THE DECLARATION OF TRUST AND BY-LAWS
The Fund presently has provisions in its Declaration of Trust and
By-Laws (together, its "Governing Documents") which could have the effect of
limiting, in each case, (i) the ability of other entities or persons to
acquire control of the Fund, (ii) the Fund's freedom to engage in certain
transactions, or (iii) the ability of the Fund's trustees or shareholders to
amend the Governing Documents or effectuate changes in the Fund's management.
These provisions of the Governing Documents of the Fund may be regarded as
"anti-takeover" provisions. The Board of Trustees of the Fund is divided into
three classes, each having a term of no more than three years (except, to
ensure that the term of a class of the Fund's trustees expires each year, one
class of the Fund's trustees will serve an initial one-year term and
three-year terms thereafter and another class of its trustees will serve an
initial two-year term and three-year terms thereafter). Each year the term of
one class of trustees will expire. Accordingly, only those trustees in one
class may be changed in any one year, and it would require a minimum of two
years to change a majority of the Board of Trustees. Such system of electing
trustees may have the effect of maintaining the continuity of management and,
thus, make it more difficult for the shareholders of the Fund to change the
majority of trustees. See "Trustees and Officers." A trustee of the Fund may
be removed with or without cause by 66 2/3% of the votes entitled to be cast
for the election of such trustees. Special voting requirements also apply to
mergers into or a sale of all or substantially all of the Fund's assets and
conversion of the Fund into an open-end fund (or other closed-end fund
commonly known as an "interval fund"). These special voting requirements are
75% of the outstanding voting shares (together with a separate vote by the
holders of any preferred stock outstanding). In addition, 80% of the holders
of the outstanding voting securities of the Fund voting as a class is
generally required in order to authorize any of the following transactions:
o merger or consolidation of the Fund with or into any other corporation;
o issuance of any securities of the Fund to any person or entity for cash;
o sale, lease or exchange of all or any substantial part of the assets
of the Fund to any entity or person (except assets having an aggregate
fair market value of less than $1,000,000);
o sale, lease or exchange to the Fund, in exchange for securities of the
Fund, of any assets of any entity or person (except assets having an
aggregate fair market value of less than $1,000,000); or
o the purchase of the Fund's Common Stock by the Fund from any other
person or entity;
if such corporation, person or entity is directly, or indirectly through
affiliates, the beneficial owner of more than 5% of the outstanding shares
of the Fund. However, such vote would not be required when, under certain
conditions, the Board of Trustees approves the transaction. Reference is
made to the Governing Documents of the Fund, on file with the SEC, for the
full text of these provisions.
The provisions of the Governing Documents described above could have
the effect of depriving the owners of shares in the Fund of opportunities to
sell their shares at a premium over prevailing market prices, by discouraging
a third party from seeking to obtain control of the Fund in a tender offer or
similar transaction. The overall effect of these provisions is to render more
difficult the accomplishment of a merger or the assumption of control by a
principal shareholder.
CUSTODIAN, TRANSFER AGENT, DIVIDEND-DISBURSING
AGENT AND REGISTRAR
Boston Safe Deposit and Trust Company (the "Custodian"), located at
One Boston Place, Boston, Massachusetts 02019, serves as the custodian of the
Fund's assets pursuant to a custody agreement. Under the custody agreement,
the Custodian holds the Fund's assets in compliance with the 1940 Act. For
its services, the Custodian will receive a monthly fee based upon the average
weekly value of the total assets of the Fund, plus certain charges for
securities transactions.
Equiserve Trust Company, N.A. located at 150 Royall Street, Canton,
Massachusetts 02021, serves as the Fund's dividend disbursing agent, as agent
under the Fund's Plan and as transfer agent and registrar for shares of the
Fund.
LEGAL MATTERS
Certain legal matters will be passed on by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York, special counsel to the Fund in
connection with the offering of Common Shares and this rights offering.
EXPERTS
The financial statements of the Fund as of December 31, 2001 have
been incorporated by reference into the SAI in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority
of that firm as experts in accounting and auditing. PricewaterhouseCoopers
LLP is located at 1177 Avenue of the Americas, New York, New York 10036.
FURTHER INFORMATION
The Fund is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports,
proxy statements and other information with the SEC. Such reports, proxy
statements and other information filed by the Fund can be inspected and
copied at public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549; and 500 West Madison Street, Chicago,
Illinois 60661. The Fund's Common Stock is listed on the NYSE. Reports, proxy
statements and other information concerning the Fund can be inspected and
copied at the Library of the NYSE at 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on
Form N-2 (together with the SAI and all the exhibits and the appendix
thereto, the "Registration Statement") filed by the Fund with the SEC under
the Securities Act and the 1940 Act. This Prospectus and the SAI do not
contain all of the information set forth in the Registration Statement.
Reference is hereby made to the Registration Statement and related exhibits
for further information with respect to the Fund and the Shares offered
hereby. Statements contained herein concerning the provisions of documents
are necessarily summaries of such documents, and each statement is qualified
in its entirety by reference to the copy of the applicable document filed
with the SEC.
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS.
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND OR THE FUND'S ADVISER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS AS SET FORTH IN THE
PROSPECTUS OR IN THE AFFAIRS OF THE FUND SINCE THE DATE HEREOF.
---------------------------------
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY.............................................................4
TABLE OF FEES AND EXPENSES....................................................14
FINANCIAL HIGHLIGHTS..........................................................15
THE OFFER.....................................................................17
USE OF PROCEEDS...............................................................29
INVESTMENT OBJECTIVES AND POLICIES............................................29
RISK FACTORS AND SPECIAL CONSIDERATIONS.......................................35
MANAGEMENT OF THE FUND........................................................41
DIVIDENDS AND DISTRIBUTIONS...................................................44
TAXATION .....................................................................45
CAPITALIZATION................................................................47
CUSTODIAN, TRANSFER AGENT, DIVIDEND-DISBURSING AGENT
AND REGISTRAR............................................................50
LEGAL MATTERS.................................................................51
EXPERTS .....................................................................51
FURTHER INFORMATION...........................................................51
TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION
INVESTMENT OBJECTIVES AND POLICIES.............................................1
PORTFOLIO TRANSACTIONS........................................................20
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN.....................................22
TAXATION .....................................................................24
NET ASSET VALUE...............................................................30
GENERAL INFORMATION...........................................................31
BENEFICIAL OWNER..............................................................31
APPENDIX A...................................................................A-1
=================================
THE GABELLI UTILITY TRUST
[ ] SHARES
OF COMMON STOCK
ISSUABLE UPON EXERCISE OF RIGHTS
TO SUBSCRIBE TO SUCH SHARES
[GABELLI GLOBAL LOGO]
PROSPECTUS
May __, 2002
=================================
STATEMENT OF ADDITIONAL INFORMATION
The Gabelli Utility Trust (the "Fund") is a non-diversified,
closed-end management investment company that seeks long-term growth of
capital and income by investing primarily in a portfolio of equity securities
selected by Gabelli Funds, LLC, the investment adviser to the Fund (the
"Adviser"). It is the policy of the Fund, under normal market conditions, to
invest at least 65% of its total assets in common stock and other securities
of foreign and domestic companies involved to a substantial extent (e.g., at
least 50% of the assets, gross income or net profits of a company is
committed to or derived from) in providing products, services or equipment
for (i) the generation or distribution of electricity, gas and water and (ii)
telecommunications services or infrastructure operations, such as airports,
toll roads and municipal services.
This Statement of Additional Information ("SAI") is not a
prospectus, but should be read in conjunction with the Prospectus for the
Fund dated May __, 2002 (the "Prospectus"). This SAI does not include any
information that a prospective investor should consider before purchasing
shares of the Fund, and investors should obtain and read the Prospectus prior
to purchasing shares. A copy of the Prospectus may be obtained without
charge, by calling the Fund at 1-800-GABELLI (1-800-422-3554) or (914)
921-5070. This SAI incorporates by reference the entire Prospectus.
The Prospectus and this SAI omit certain of the information
contained in the regis tration statement filed with the Securities and
Exchange Commission, Washington, D.C. The registration statement may be
obtained from the Securities and Exchange Commission upon payment of the fee
prescribed, or inspected at the Securities and Exchange Commission's office
at no charge.
This Statement of Additional Information is dated May __, 2002.
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
The Fund's primary investment objectives are long-term growth of
capital and in come. Under normal market conditions, the Fund will invest at
least 65% (80% commencing on July 1, 2002) of its total assets in common
stock and other securities of foreign and domestic companies involved to a
substantial extent (e.g., at least 50% of the assets, gross income or net
profits of a company is committed to or derived from) in providing products,
services or equipment for (i) the generation or distribution of electricity,
gas and water and (ii) telecommunications services or infrastructure
operations, such as airports, toll roads and municipal services. See
"Investment Objectives and Policies" in the Prospectus.
INVESTMENT PRACTICES
Securities Subject to Reorganization. The Fund may invest without
limit in securities for which a tender or exchange offer has been made or
announced and in securities of companies for which a merger, consolidation,
liquidation or reorganization proposal has been announced if, in the judgment
of the Adviser, there is a reasonable prospect of high total return
significantly greater than the brokerage and other transaction expenses
involved.
In general, securities which are the subject of such an offer or
proposal sell at a premium to their historic market price immediately prior
to the announcement of the offer or may also discount what the stated or
appraised value of the security would be if the contemplated transaction
were approved or consummated. Such investments may be advantageous when the
discount significantly overstates the risk of the contingencies involved;
significantly undervalues the securities, assets or cash to be received by
shareholders of the prospective portfolio company as a result of the
contemplated transaction; or fails adequately to recognize the possibility
that the offer or proposal may be replaced or superseded by an offer or
proposal of greater value. The evaluation of such contingencies requires
unusually broad knowledge and experience on the part of the Adviser which
must appraise not only the value of the issuer and its component businesses
as well as the assets or securities to be received as a result of the
contemplated transaction but also the financial resources and business
motivation of the offer or and the dynamics and business climate when the
offer or proposal is in process. Since such investments are ordinarily
short- term in nature, they will tend to increase the turnover ratio of the
Fund, thereby increasing its brokerage and other transaction expenses. The
Adviser intends to select investments of the type described which, in its
view, have a reasonable prospect of capital appreciation which is
significant in relation to both risk involved and the potential of available
alternative investments.
Temporary Investments. Although under normal market conditions at
least 65% of the Fund's assets will consist of common stock and other
securities of foreign and domestic companies involved in the utility
industry, when a temporary defensive posture is believed by the Adviser to
be warranted ("temporary defensive periods"), the Fund may without
limitation hold cash or invest its assets in money market instruments and
repurchase agreements in respect of those instruments. The money market
instruments in which the Fund may invest are obligations of the United
States Government, its agencies or instrumentalities ("U.S. Government
Securities"); commercial paper rated A-1 or higher by Standard & Poor's
Corporation ("S&P") or Prime-1 by Moody's Investors Service, Inc.
("Moody's"); and certificates of deposit and bankers' acceptances issued by
domestic branches of U.S. banks that are members of the Federal Deposit
Insurance Corporation. During temporary defensive periods, the Fund may also
invest to the extent permitted by applicable law in shares of money market
mutual funds. Money market mutual funds are investment companies and the
investments in those companies in some cases by the Fund are subject to
certain fundamental investment restrictions and applicable law. See
"Investment Restrictions." As a shareholder in a mutual fund, the Fund will
bear its ratable share of the its expenses, including management fees, and
will remain subject to payment of the fees to the Adviser, with respect to
assets so invested. See "Management of the Fund-Investment Advisory and
Administration Arrangements."
Lower Rated Securities. The Fund may invest up to 10% of its total
assets in fixed- income securities rated in the lower rating categories of
recognized statistical rating agencies, such as securities rated "CCC" or
lower by S&P or "Caa" or lower by Moody's, or non-rated securities of
comparable quality. These debt securities are predominantly speculative and
involve major risk exposure to adverse conditions and are often referred to
in the financial press as "junk bonds."
Generally, such lower rated securities and unrated securities of
comparable quality offer a higher current yield than is offered by higher
rated securities, but also (i) will likely have some quality and protective
characteristics that, in the judgment of the rating organizations, are
outweighed by large uncertainties or major risk exposures to adverse
conditions and (ii) are predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligation. The market values of certain of these securities
also tend to be more sensitive to individual corporate developments and
changes in economic conditions than higher quality bonds. In addition, such
lower rated securities and comparable unrated securities generally present a
higher degree of credit risk. The risk of loss due to default by these
issuers is significantly greater because such lower rated securities and
unrated securities of comparable quality generally are unsecured and
frequently are subordinated to the prior payment of senior indebtedness. In
light of these risks, the Adviser, in evaluating the creditworthiness of an
issue, whether rated or unrated, will take various factors into
consideration, which may include, as applicable, the issuer's financial
resources, its sensitivity to economic conditions and trends, the operating
history of and the community support for the facility financed by the issue,
the ability of the issuer's management and regulatory matters.
In addition, the market value of securities in lower rated
categories is more volatile than that of higher quality securities, and the
markets in which such lower rated or unrated securities are traded are more
limited than those in which higher rated securities are traded. The existence
of limited markets may make it more difficult for the Fund to obtain accurate
market quotations for purposes of valuing its portfolio and calculating its
net asset value. Moreover, the lack of a liquid trading market may restrict
the availability of securities for the Fund to purchase and may also have the
effect of limiting the ability of the Fund to sell securities at their fair
value to respond to changes in the economy or the financial markets.
Lower-rated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Fund may
have to replace the security with a lower yielding security, resulting in a
decreased return for investors. Also, as the principal value of bonds moves
inversely with movements in interest rates, in the event of rising interest
rates the value of the securities held by the Fund may decline
proportionately more than a portfolio consisting of higher rated securities.
Investments in zero coupon bonds may be more speculative and subject to
greater fluctuations in value due to changes in interest rates than bonds
that pay interest currently.
The Fund may invest in securities of issuers in default within their
limitations on the purchase of fixed-income securities. The Fund will make an
investment in securities of issuers in default only when the Adviser believes
that such issuers will honor their obligations or emerge from bankruptcy
protection and the value of these securities will appreciate. By investing in
securities of issuers in default, the Fund bears the risk that these issuers
will not continue to honor their obligations or emerge from bankruptcy
protection or that the value of the securities will not appreciate.
In addition to using recognized rating agencies and other sources,
the Adviser also performs its own analysis of issues in seeking investments
that it believes to be underrated (and thus higher-yielding) in light of the
financial condition of the issuer. Its analysis of issuers may include, among
other things, current and anticipated cash flow and borrowing requirements,
value of assets in relation to historical cost, strength of management,
responsiveness to business conditions, credit standing and current
anticipated results of operations. In selecting investments for the Fund, the
Adviser may also consider general business conditions, anticipated changes in
interest rates and the outlook for specific industries.
Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its rating may be reduced. In addition, it is possible
that statistical rating agencies might change their ratings of a particular
issue or reflect subsequent events on a timely basis. None of these events
will require the sale of the securities by the Fund, although the Adviser
will consider these events in determining whether the Fund should continue to
hold the securities.
Fixed-income securities, including lower rated securities and
comparable unrated securities, frequently have call or buy-back features that
permit their issuers to call or repurchase the securities from their holders,
such as the Fund. If an issuer exercises these rights during periods of
declining interest rates, the Fund may have to replace the security with a
lower yielding security, thus resulting in a decreased return for the Fund.
The market for certain lower rated and comparable unrated securities
several years ago experienced a major economic recession. Past recessions
have adversely affected the value of such securities as well as the ability
of certain issuers of such securities to repay principal and pay interest
thereon. The market for those securities could react in a similar fashion in
the event of any future economic recession.
Options. A call option is a contract that, in return for a premium,
gives the holder of the option the right to buy from the writer of the call
option the security underlying the option at a specified exercise price at
any time during the term of the option. The writer of the call option has
the obligation, upon exercise of the option, to deliver the underlying
security upon payment of the exercise price during the option period. A put
option is the reverse of a call option, giving the holder the right to sell
the security to the writer and obligating the writer to purchase the
underlying security from the holder.
A written call option is "covered" if the writer owns the underlying
security covered by the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option is also covered if the Fund holds a call on the same security as the
call written where the exercise price of the call held is (1) equal to or
less than the exercise price of the call written or (2) greater than the
exercise price of the call written if the difference is maintained by the
Fund in cash, U.S. Government Securities or other high grade short-term
obligations in a segregated account held with its custodian. A written put
option is "covered" if the Fund maintains cash or other high grade short-term
obligations with a value equal to the exercise price in a segregated account
held with its custodian, or else holds a put on the same security as the put
written where the exercise price of the put held is equal to or greater than
the exercise price of the put written.
If the Fund has written an option, it may terminate its obligation
by effecting a closing purchase transaction. This is accomplished by
purchasing an option of the same series as the option previously written.
However, once it has been assigned an exercise notice, the Fund will be
unable to effect a closing purchase transaction. Similarly, if the Fund is
the holder of an option it may liquidate its position by effecting a closing
sale transaction. This is accomplished by selling an option of the same
series as the option previously purchased. There can be no assurance that
either a closing purchase or sale transaction can be effected when the Fund
so desires.
The Fund will realize a profit from a closing transaction if the
price of the transaction is less than the premium received from writing the
option or is more than the premium paid to purchase the option; the Fund will
realize a loss from a closing transaction if the price of the transaction is
more than the premium received from writing the option or is less than the
premium paid to purchase the option. Since call option prices generally
reflect increases in the price of the underlying security, any loss resulting
from the repurchase of a call option may also be wholly or partially offset
by unrealized appreciation of the underlying security. Other principal
factors affecting the market value of a put or a call option include supply
and demand, interest rates, the current market price and price volatility of
the underlying security and the time remaining until the expiration date.
Gains and losses on investments in options depend, in part, on the ability of
the Adviser to predict correctly the effect of these factors. The use of
options cannot serve as a complete hedge since the price movement of
securities underlying the options will not necessarily follow the price
movements of the portfolio securities subject to the hedge.
An option position may be closed out only on an exchange which
provides a secondary market for an option of the same series or in a private
transaction. Although the Fund will generally purchase or write only those
options for which there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange will exist for
any particular option. In such event, it might not be possible to effect
closing transactions in particular options, so that the Fund would have to
exercise its options in order to realize any profit and would incur
brokerage commissions upon the exercise of call options and upon the
subsequent disposition of underlying securities for the exercise of put
options. If the Fund, as a covered call option writer, is unable to effect a
closing purchase transaction in a secondary market, it will not be able to
sell the underlying security until the option expires or it delivers the
underlying security upon exercise or otherwise covers the position.
In addition to options on individual securities, the Fund may also
purchase and sell call and put options on securities indices. A stock index
reflects in a single number the market value of many different stocks.
Relative values are assigned to the stocks included in an index and the index
fluctuates with changes in the market values of the stocks. The options give
the holder the right to receive a cash settlement during the term of the
option based on the difference between the exercise price and the value of
the index. By writing a put or call option on a securities index, the Fund is
obligated, in return for the premium received, to make delivery of this
amount. The Fund may offset its position in stock index options prior to
expiration by entering into an closing transaction on an exchange or it may
let the option expire unexercised.
The Fund also may buy or sell put and call options on foreign
currencies. A put option on a foreign currency gives the purchaser of the
option the right to sell a foreign currency at the exercise price until the
option expires. A call option on a foreign currency gives the purchaser of
the option the right to purchase the currency at the exercise price until the
option expires. Currency options traded on U.S. or other exchanges may be
subject to position limits which may limit the ability of the Fund to reduce
foreign currency risk using such options. Over-the-counter options differ
from exchange-traded options in that they are two-party contracts with price
and other terms negotiated between buyer and seller and generally do not have
as much market liquidity as exchange-traded options. Over-the- counter
options are illiquid securities.
Use of options on securities indices entails the risk that trading
in the options may be interrupted if trading in certain securities included
in the index is interrupted. The Fund will not purchase these options unless
the Adviser is satisfied with the development, depth and liquidity of the
market and the Adviser believes the options can be closed out.
Price movements in the portfolio of the Fund are unlikely to
correlate precisely with movements in the level of an index and, therefore,
the use of options on indices cannot serve as a complete hedge and will
depend, in part, on the ability of the Adviser to predict correctly movements
in the direction of the stock market generally or of a particular industry.
Because options on securities indices require settlement in cash, the Adviser
may be forced to liqui date portfolio securities to meet settlement
obligations. The staff of the SEC considers over- the-counter options such as
options on indices illiquid securities.
Although the Adviser will attempt to take appropriate measures to
minimize the risks relating to the Fund's writing of put and call options,
there can be no assurance that the Fund will succeed in any option-writing
program it undertakes.
Futures Contracts and Options on Futures. The Fund will not enter
into futures contracts or options on futures contracts unless (i) the
aggregate initial margins and premiums do not exceed 5% of the fair market
value of its assets and (ii) the aggregate market value of its outstanding
futures contracts and the market value of the currencies and futures
contracts subject to outstanding options written by the Fund do not exceed
50% of the market value of its total assets. It is anticipated that these
investments, if any, will be made by the Fund solely for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Such investments will only be
made if they are economically appropriate to the reduction of risks involved
in the management of the Fund. In this regard, the Fund may enter into
futures contracts or options on futures for the purchase or sale of
securities indices or other financial instruments including but not limited
U.S. Government securities.
A "sale" of a futures contract (or a "short" futures position) means
the assumption of a contractual obligation to deliver the securities
underlying the contract at a specified price at a specified future time. A
"purchaser" of a futures contract (or a "long" futures position) means the
assumption of a contractual obligation to acquire the securities underlying
the contract at a specified future time. Certain futures contracts, including
stock and bond index futures, are settled on a net cash payment basis rather
than by the sale and delivery of the securities underlying the futures
contracts.
No consideration will be paid or received by the Fund upon the
purchase or sale of a futures contract. Initially, the Fund will be required
to deposit with the broker an amount of cash or cash equivalents equal to
approximately 1% to 10% of the contract amount (this amount is subject to
change by the exchange or board of trade on which the contract is traded and
brokers or members of such board of trade may charge a higher amount). This
amount is known as "initial margin" and is in the nature of a performance
bond or good faith deposit on the contract. Subsequent payments, known as
"variation margin," to and from the broker will be made daily as the price of
the index or security underlying the futures contract fluctuates. At any time
prior to the expiration of the futures contract, the Fund may elect to close
the position by taking an opposite position, which will operate to terminate
its existing position in the contract.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time to the expiration of the option. Upon
exercise of an option, the delivery of the futures position by the writer of
the option to the holder of the option will be accompanied by delivery of
the accumulated balance in the writer's futures margin account attributable
to that contract, which represents the amount by which the market price of
the futures contract exceeds, in the case of a call, or is less than, in the
case of a put, the exercise price of the option on the futures contract. The
potential loss related to the purchase of an option on futures on contracts
is limited to the premium paid for the option (plus transaction costs).
Because the value of the option purchased is fixed at the point of sale,
there are no daily cash payments by the purchaser to reflect changes in the
value of the underlying contract; however, the value of the option does
change daily and that change would be reflected in the net assets of the Fund.
Futures and options on futures entail certain risks, including but
not limited to the following: no assurance that futures contracts or options
on futures can be offset at favorable prices, possible reduction of the yield
of the Fund due to the use of hedging, possible reduc tion in value of both
the securities hedged and the hedging instrument, possible lack of liquidity
due to daily limits on price fluctuations, imperfect correlation between the
contracts and the securities being hedged, losses from investing in futures
transactions that are potentially unlimited and the segregation requirements
described below.
In the event the Fund sells a put option or enters into long futures
contracts, under current interpretations of the 1940 Act, an amount of cash,
obligations of the U.S. Government and its agencies and instrumentalities or
other liquid securities equal to the market value of the contract must be
deposited and maintained in a segregated account with the custodian of the
Fund to collateralize the positions, in order for the Fund to avoid being
treated as having issued a senior security in the amount of its obligations.
For short positions in futures contracts and sales of call options, the Fund
may establish a segregated account (not with a futures commission merchant or
broker) with cash obligations of the U.S. Government and its agencies and
instrumentalities or other high grade debt securities that, when added to
amounts deposited with a futures commission merchant or a broker as margin,
equal the market value of the instruments or currency underlying the futures
contracts or call options, respectively (but are no less than the stock price
of the call option or the market price at which the short positions were
established).
Forward Currency Transactions. The Fund may hold currencies to meet
settlement requirements for foreign securities and may engage in currency
exchange transactions to protect against uncertainty in the level of future
exchange rates between a particular foreign currency and the U.S. dollar or
between foreign currencies in which its securities are or may be
denominated. Forward currency contracts are agreements to exchange one
currency for another at a future date. The date (which may be any
agreed-upon fixed number of days in the future), the amount of currency to
be exchanged and the price at which the exchange takes place will be
negotiated and fixed for the term of the contract at the time that the Fund
enters into the contract. Forward currency contracts (1) are traded in a
market conducted directly between currency traders (typically, commercial
banks or other financial institutions) and their customers, (2) generally
have no deposit requirements and (3) are typically consummated without
payment of any commissions. The Fund, however, may enter into forward
currency contracts requiring deposits or involving the payment of
commissions. To assure that its forward currency contracts are not used to
achieve investment leverage, the Fund will segregate liquid assets
consisting of cash, U.S. Government Securities or other liquid securities
with its custodian, or a designated sub-custodian, in an amount at all times
equal to or exceeding its commitment with respect to the contracts.
The dealings of the Fund in forward foreign exchange are limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of one forward foreign currency
for another currency with respect to specific receivables or payables of the
Fund accruing in connection with the purchase and sale of its portfolio
securities or its payment of dividends and distributions. Position hedging is
the purchase or sale of one forward foreign currency for another currency
with respect to portfolio security positions denominated or quoted in the
foreign currency to offset the effect of an anticipated substantial
appreciation or depreciation, respectively, in the value of the currency
relative to the U.S. dollar. In this situation, the Fund also may, for
example, enter into a forward contract to sell or purchase a different
foreign currency for a fixed U.S. dollar amount where it is believed that the
U.S. dollar value of the currency to be sold or bought pursuant to the
forward contract will fall or rise, as the case may be, whenever there is a
decline or increase, respectively, in the U.S. dollar value of the currency
in which its portfolio securities are denominated (this practice being
referred to as a "cross-hedge").
In hedging a specific transaction, the Fund may enter into a forward
contract with respect to either the currency in which the transaction is
denominated or another currency deemed appropriated by the Adviser. The
amount the Fund may invest in forward currency contracts is limited to the
amount of its aggregate investments in foreign currencies.
The use of forward currency contracts may involve certain risks,
including the failure of the counterparty to perform its obligations under
the contract, and such use may not serve as a complete hedge because of an
imperfect correlation between movements in the prices of the contracts and
the prices of the currencies hedged or used for cover. The Fund will only
enter into forward currency contracts with parties which it believes to be
creditworthy institutions.
When Issued, Delayed Delivery Securities and Forward Commitments.
The Fund may enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis, in
excess of customary settlement periods for the type of security involved. In
some cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring, i.e., a when, as and if issued
security. When such transactions are negotiated, the price is fixed at the
time of the commitment, with payment and delivery taking place in the future,
generally a month or more after the date of the commitment. While it will
only enter into a forward commitment with the intention of actually acquiring
the security, the Fund may sell the security before the settlement date if it
is deemed advisable.
Securities purchased under a forward commitment are subject to
market fluctuation, and no interest (or dividends) accrues to the Fund prior
to the settlement date. The Fund will segregate with its custodian cash or
liquid securities in an aggregate amount at least equal to the amount of its
outstanding forward commitments.
Short Sales. The Fund may make short sales of securities. A short
sale is a transaction in which the Fund sells a security it does not own in
anticipation that the market price of that security will decline. The market
value of the securities sold short of any one issuer will not exceed either
5% of the Fund's total assets or 5% of such issuer's voting securities. The
Fund also will not make a short sale, if, after giving effect to such sale,
the market value of all securities sold short exceeds 25% of the value of its
assets or the Fund's aggregate short sales of a particular class of
securities exceeds 25% of the outstanding securities of that class. The Fund
may also make short sales "against the box" without respect to such
limitations. In this type of short sale, at the time of the sale, the Fund
owns, or has the immediate and unconditional right to acquire at no
additional cost, the identical security.
The Fund expects to make short sales both to obtain capital gains
from anticipated declines in securities and as a form of hedging to offset
potential declines in long positions in the same or similar securities. The
short sale of a security is considered a speculative investment technique.
When the Fund makes a short sale, it must borrow the security sold
short and deliver it to the broker-dealer through which it made the short
sale in order to satisfy its obligation to deliver the security upon
conclusion of the sale. The Fund may have to pay a fee to borrow particular
securities and is often obligated to pay over any payments received on such
borrowed securities.
The Fund's obligation to replace the borrowed security will be
secured by collateral deposited with the broker-dealer, usually cash, U.S.
government securities or other highly liquid debt securities. The Fund will
also be required to deposit similar collateral with its custodian, Boston
Safe Deposit and Trust Company ("Boston Safe"), and, to the extent, if any,
necessary so that the value of both collateral deposits in the aggregate is
at all times equal to the greater of the price at which the security is sold
short or 100% of the current market value of the security sold short.
Depending on arrangements made with the broker- dealer from which it borrowed
the security regarding payment over of any payments received by the Fund on
such security, the Fund may not receive any payments (including interest) on
its collateral deposited with such broker-dealer. If the price of the
security sold short increases between the time of the short sale and the time
the Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain. Any
gain will be decreased, any loss increased, by the transaction costs
described above. Although the Fund's gain is limited to the price at which it
sold the security short, its potential loss is theoretically unlimited.
To secure its obligations to deliver the securities sold short, the
Fund will deposit in escrow in a separate account with the custodian, an
amount at least equal to the securities sold short or securities convertible
into, or exchangeable for, the securities. The Fund may close out a short
position by purchasing and delivering an equal amount of securities sold
short, rather than by delivering securities already held by the Fund,
because the Fund may want to continue to receive interest and dividend
payments on securities in its portfolio that are convertible into the
securities sold short.
Repurchase Agreements. The Fund may engage in repurchase agreement
transactions involving money market instruments with banks, registered
broker-dealers and government securities dealers approved by the Adviser. The
Fund will not enter into repurchase agreements with the Adviser or any of its
affiliates. Under the terms of a typical repurchase agreement, the Fund would
acquire an underlying debt obligation for a relatively short period (usually
not more than one week) subject to an obligation of the seller to repurchase,
and the Fund to resell, the obligation at an agreed price and time, thereby
determining the yield during its holding period. Thus, repurchase agreements
may be seen to be loans by the Fund collateralized by the underlying debt
obligation. This arrangement results in a fixed rate of return that is not
subject to market fluctuations during the holding period. The value of the
underlying securities will be at least equal to all times to the total amount
of the repurchase obligation, including interest. The Fund bears a risk of
loss in the event that the other party to a repurchase agreement defaults on
its obligations and the Fund is delayed in or prevented from exercising its
rights to dispose of the collateral securities, including the risk of a
possible decline in the value of the underlying securities during the period
in which it seeks to assert these rights. The Adviser, acting under the
supervision of the Board of Trustees of the Fund, reviews the
creditworthiness of those banks and dealers with which the Fund enters into
repurchase agreements to evaluate these risks and monitors on an ongoing
basis the value of the securities subject to repurchase agreements to ensure
that the value is maintained at the required level.
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
Overall responsibility for management and supervision of the Fund
rests with its Board of Trustees. The Board of Trustees approves all
significant agreements between the Fund and the companies that furnish the
Fund with services, including agreements with the Adviser, the Fund's
custodian and the Fund's transfer agent. The day-to-day operations of the
Fund are delegated to the Adviser.
The names and business addresses of the trustees and principal
officers of the Fund are set forth in the following table, together with
their positions and their principal occupations during the past five years
and, in the case of the trustees, their positions with certain other
organizations and companies. Trustees who are "interested persons" of the
Fund, as defined by the 1940 Act, are indicated by an asterisk.
Trustees
Number of
Portfolios in Other
Name (And Age), Position Term of Office Principal Fund Complex Directorships
with the Fund and and Length of Occupation During Overseen by Held by
Business Address(1) Time Served(2) Past Five Years Director Director
------------------------ ------------------ ---------------------------- ------------- ---------------
INTERESTED TRUSTEES(3): Since 1999*** President and Chief 21 Director of
---------------------- Investment Officer of the Morgan Group
*Mario J. Gabelli (59) Fund; Chairman of the Board, Holdings, Inc.
Chairman of the Board Chief Executive Officer of (transportation
Gabelli Asset Management services); Vice
Inc. and Chief Investment Chairman of
Officer of the Adviser and Lynch
GAMCO Investors, Inc; Corporation
Chairman and Trustee of other (diversified
registered investment manufacturing
companies in the Gabelli fund company).
complex.
John D. Gabelli (58) Since 1999** Senior Vice President of 9 ____
Trustee Gabelli & Company and
Director of Gabelli Advisers,
Inc.; Trustee of other
registered investment
companies in the Gabelli fund
complex.
*Karl Otto Pohl (72) Since 1999** Member of the Shareholder 30 Director of
Trustee Committee of Sal. Oppenheim Gabelli Asset
Jr. & Cie (private investment Management
bank); Former President of the Inc.;
Deutsche Bundesbank and Chairman,
Chairman of its Central Bank Incentive
Council from 1980 through Capital and
1991; Trustee of other Incentive
registered investment Asset
companies in the Gabelli Management
fund complex. (Zurich);
Director at Sal
Oppenheim Jr.
& Cie, Zurich
DISINTERESTED TRUSTEES: Director, President and 3 ___
---------------------- Founder, The John Dewey
Dr. Thomas E. Bratter (62) Since 1999*** Academy (residential college
Trustee preparatory therapeutic high
school); Trustee of other
registered investment
companies in the Gabelli
fund complex.
Anthony J. Colavita (66) Since 1999* President and Attorney at law 32 ___
Trustee in the law firm of Anthony J.
Colavita, P.C. since 1961;
Trustee of other registered
investment companies in the
Gabelli fund complex.
James P. Conn (64) Since 1999** Former Managing Director 11 Director of
Trustee and Chief Investment Officer LaQuinta
of Financial Security Corp. (hotels)
Assurance Holdings Ltd., and First
1992-1998; Director of Republic Bank
Meditrust Corporation (real
estate investment
trust); Director of
First Republic Bank;
Trustee of other
registered investment
companies in the
Gabelli fund complex.
Vincent D. Enright (58) Since 1999* Former Senior Vice President 10 ___
Trustee and Chief Financial Officer of
KeySpan Energy
Corporation through
1998; Trustee of other
registered investment
companies in the
Gabelli fund complex.
Frank J. Fahrenkopf, Jr. (62) Since 1999* President and CEO of the 3 ___
Trustee American Gaming Association
since June 1995; Partner of
Hogan & Hartson; Chairman
of International Trade Practice
Group. Co-Chairman of the
Commission on Presidential
Debates; former Chairman of
the Republican National
Committee; Trustee of other
registered investment
companies in the Gabelli
fund complex.
Robert J. Morrisey (62) Since 1999* Partner in the law firm of 8 ___
Trustee Morrissey & Hawkins;
Trustee of other
registered investment
companies in the
Gabelli fund complex.
Anthony R. Pustorino (76) Since 1999** Certified Public Accountant; 16 ___
Trustee Professor Emeritus (since
2002) and Professor of
Accounting, Pace
University, since 1965
(prior to 2002);
Trustee of other
registered investment
companies in the
Gabelli fund complex.
Salvatore J. Zizza (56) Since 1999* Chairman of Hallmark 8 Board
Trustee Electrical Supply Corp.; Member of
Former Executive Vice Hollis Eden
President of FMG Group (a Pharmaceutica
healthcare provider); Former ls, Bion
President and Chief Executive Environmental
Officer of the Lehigh Group Technologies
Inc. (an electrical supply Inc. and The
wholesaler); Trustee of [ ] Credit Store Inc.
registered investment
companies in the Gabelli
fund complex.
Officers
Name (And Age), Position Principal
with the Fund and Occupation During
Business Address(1) Past Five Years
------------------------ ------------------------------
Bruce N. Alpert (50) Executive Vice President and Chief Operating Officer
Vice President and Treasurer of the Adviser since June 1988; Director and President
One Corporate Center of Gabelli Advisers, Inc.; Officer of all other
Rye, New York 10580-1434 registered investment companies in the Gabelli fund
complex; Vice President of The Treasurer's Fund Inc.;
Vice President of Gabelli Westwood Funds.
David Schachter (48) Vice President of the Fund since July 9, 1999; Officer
Vice President of certain other registered investment companies in the
One Corporate Center Gabelli fund complex; Financial Services Research
Rye, New York 10580-1434 Analyst of Gabelli & Company from October 1, 1998
to July 9, 1999; Prior to October, 1998, Vice President
of Thomas J. Herzfeld Advisers, Inc., a registered
investment adviser and noted closed-end fund authority.
James E. McKee (38) Vice President and Secretary of the Adviser (since
Secretary of the Fund 1995) and Vice President and General Counsel of
One Corporate Center GAMCO Investors, Inc. (since 1993); Secretary of the
Rye, New York 10580-1434 registered investment companies in the Gabelli fund
complex; Vice President and Secretary of Gabelli
Asset Management.
* "Interested person" of the Fund, as defined in the 1940 Act. Mr. Mario Gabelli is an
"interested person" of the Fund as a result of his employment as an officer of the
Fund and the Adviser. Messrs. John and Mario Gabelli are registered representatives
of an affiliated broker-dealer. Mr. Pohl is a director of the parent company of the
Adviser.
_______________________
(1) Address: One Corporate Center, Rye, NY 10580, unless otherwise noted.
(2) The Trust's Board of Trustees is divided into three classes, each class having a term
of three years. Each year the term of office of one class expires
and the successor or successors elected to such class serve for a
three year term. The three year term for each class expires as follows:
*-- Term expires at the Trust's 2002 Annual Meeting of Shareholders
and until their successors are duly elected and qualified. **-- Term
expires at the Trust's 2003 Annual Meeting of Shareholders and until
their successors are duly elected and qualified.
***-- Term expires at the Trust's 2004 Annual Meeting of
Shareholders and until their successors are duly elected and qualified.
(3) "Interested person" of the Trust as defined in the Investment Company Act of 1940.
Messrs. M. Gabelli, J. Gabelli and Pohl are each considered an "interested person"
because of their affiliation with Gabelli Funds LLC which acts as the Trust's
investment adviser.
The Board of Trustees of the Fund are divided into three classes,
with a class having a term of three years except as described below. Each
year the term of office of one class of trustees of the Fund will expire.
However, to ensure that the term of a class of the Fund's trustees expires
each year, one class of the Fund's trustees will serve three-year terms. The
terms of Messrs. Colavita, Fahrenkopf, Morrissey and Zizza as trustees of the
Fund expire in 2002; the terms of Messrs. Conn, John Gabelli, Pohl and
Pustorino as trustees of the Fund expire in 2003; and the terms of Messrs.
Bratter, Enright and Mario Gabelli as trustees of the Fund expire in 2004.
See "Certain Provisions of the Declaration of Trust and the By-Laws" in the
Prospectus.
-------------------------------------------------------------------------------------------------
Name of Director Dollar Range of Equity Aggregate Dollar Range of
Securities in the Fund Equity Securities in all
Registered Investment
Companies Overseen by
Directors in Family of
Investment Companies
-------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
-------------------------------------------------------------------------------------------------
Mario J. Gabelli E E
John D. Gabelli A E
Karl Otto Pohl A A
-------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
-------------------------------------------------------------------------------------------------
Dr. Thomas E. Bratter C E
James P. Conn C E
Vincent D. Enright A E
Frank J. Fahrenkopf, Jr. A A
Robert J. Morrissey A C
Anthony J. Pustonino B E
Salvatore J. Zizza C E
-------------------------------------------------------------------------------------------------
---------------------------------
* KEY TO DOLLAR RANGES
A. None
B. $1 - $10,000
C. $10,001 - $50,000
D. $50,001 - $100,000
E. Over $100,000
All Shares were valued as of December 31, 2001.
The Trustees serving on the Trust's Nominating Committee are Messrs.
Zizza (Chairman) and Colavita. The Nominating Committee is responsible for
recommending qualified candidates to the Board in the event that a position
is vacated or created. The Nominating Committee would consider
recommendations by shareholders if a vacancy were to exist. Such
recommendations should be forwarded to the Secretary of the Trust. The
Nominating Committee did not meet during the year ended December 31, 2001.
The Trust does not have a standing compensation committee.
Messrs. Pustorino (Chairman), Colavita and Enright serve on the
Trust's Audit Committee and these Trustees are not "interested persons" of
the Trust as defined in the 1940 Act. The Audit Committee is responsible for
reviewing and evaluating issues related to the accounting and financial
reporting policies and internal controls of the Trust and the internal
controls of certain service providers, overseeing the quality and
objectivity of the Trust's financial statements and the audit thereof and to
act as a liaison between the Board of Trustees and the Trust's independent
accountants. During the year ended December 31, 2001, the Audit Committee
met twice.
REMUNERATION OF TRUSTEES AND OFFICERS
The Fund pays each trustee who is not affiliated with the Adviser or
its affiliates a fee of $3,000 per year plus $500 per meeting attended,
together with each trustee's actual out-of-pocket expenses relating to
attendance at such meetings.
The following table shows certain compensation information for the
Trustees and Officers of the Fund for the fiscal year ended December 31,
2001. Mr. Schachter is employed by the Fund and his compensation is evaluated
and approved by the Trustees. Other officers who are employed by the Adviser
receive no compensation or expense reimbursement from the Fund.
COMPENSATION TABLE
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
TOTAL
COMPENSATION
FROM THE FUND
AND FUND
AGGREGATE COMPLEX PAID
NAME OF PERSON AND COMPENSATION TO TRUSTEES/
POSITION* FROM THE FUND OFFICERS**
MARIO J. GABELLI Chairman of the $0 $0
Board (21)
DR. THOMAS E. BRATTER Trustee (3) $5,000 $31,500
FELIX J. CHRISTIANA** $3,544 $50,533
ANTHONY J. COLAVITA (32) $6,500 $145,016
JAMES P. CONN (11) Trustee $5,000 $53,750
VINCENT D. ENRIGHT (10) Trustee $5,500 $46,250
FRANK J. FAHRENKOPF, JR. (3) Trustee $5,000 $31,500
JOHN D. GABELLI (9) Trustee $0 $0
ROBERT J. MORRISSEY (8) $4,500 $37,266
KARL OTTO POHL (30) Trustee $0 $0
ANTHONY R. PUSTORINO (16) Trustee $6,000 $125,250
SALVATORE J. ZIZZA (7) Trustee $5,500 $64,266
* Represents the total compensation paid to such persons during the
calendar year ended December 31, 2001 by investment companies
(including the Fund) or portfolios thereof from which such person
receives compensation that are considered part of the same fund
complex as the Fund because they have common or affiliated
investment advisers. The number in parenthesis represents the number
of such investment companies and portfolios.
** Mr. Christiana served as a Trustee of the Trust until June 7, 2001.
For his services as Vice President of the Fund, Mr. Schachter received
compensation in 2001 of $85,000.
LIMITATION OF OFFICERS' AND TRUSTEES' LIABILITY.
The Governing Documents of the Fund provide that the Fund will
indemnify its trustees and officers and may indemnify its employees or agents
against liabilities and expenses incurred in connection with litigation in
which they may be involved because of their positions with the Fund, to the
fullest extent permitted by law. However, nothing in the Governing Documents
of the Fund protects or indemnifies a trustee, officer, employee or agent of
the Fund against any liability to which such person would otherwise be
subject in the event of such person's willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her position.
INVESTMENT ADVISORY AND ADMINISTRATIVE ARRANGEMENTS
Gabelli Funds, LLC acts as the Fund's investment adviser pursuant
to an advisory agreement with the Fund (the "Advisory Agreement"). The
Adviser is a New York corporation with principal offices located at One
Corporate Center, Rye, New York 10580. The Adviser was organized in 1999 and
is the successor to Gabelli Funds, Inc. which was organized in 1980. As of
December 31, 2001, the Adviser and its affiliates acted as registered
investment advisers to 20 management investment companies with aggregate net
assets of $11.1 billion. The Adviser, together with other affiliated
investment advisers, has assets under management totaling $24.8 billion.
GAMCO Investors, Inc., an affiliate of the Adviser, acts as investment
adviser for individuals, pension trusts, profit sharing trusts and
endowments and as a sub-adviser to management investment companies, having
aggregate assets of $11.5 billion under management as of December 31, 2001.
Gabelli Fixed Income LLC, an affiliate of the Adviser, acts as investment
adviser for The Treasurer's Fund and separate accounts having aggregate
assets of $1.6 billion under management as of December 31, 2001. The Adviser
is a wholly-owned subsidiary of Gabelli Asset Management Inc., a New York
corporation, whose Class A Common Stock is traded on the New York Stock
Exchange under the symbol "GBL." Mr. Mario J. Gabelli may be deemed a
"controlling person" of the Adviser on the basis of his ownership of a
majority of the stock of the Gabelli Group Capital Partners, Inc., which
owns 78.6% of the capital stock of Gabelli Asset Management Inc. as of
February 28, 2002.
Under the terms of the Advisory Agreement, the Adviser manages the
portfolio of the Fund in accordance with its stated investment objective and
policies, makes investment decisions for the Fund, places orders to purchase
and sell securities on behalf of the Fund and manages its other business and
affairs, all subject to the supervision and direction of the Fund's Board of
Trustees. In addition, under the Advisory Agreement, the Adviser oversees the
administration of all aspects of the Fund's business and affairs and
provides, or arranges for others to provide, at the Adviser's expense,
certain enumerated services, including main taining the Fund's books and
records, preparing reports to the Fund's shareholders and super vising the
calculation of the net asset value of its shares. All expenses of computing
the net asset value of the Fund, including any equipment or services obtained
solely for the purpose of pricing shares or valuing its investment portfolio,
will be an expense of the Fund under its Advisory Agreement unless the
Adviser voluntarily assumes responsibility for such expense. For its
services, the Adviser is paid a fee computed daily and paid monthly at an
annual rate of 1.00% of the average weekly net assets of the Fund.
The Advisory Agreement combines investment advisory and
administrative responsibilities in one agreement. For services rendered by
the Adviser on behalf of the Fund under the Advisory Agreement, the Fund pays
the Adviser a fee computed daily and paid monthly at the annual rate of 1.00%
of the average weekly net assets of the Fund.
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties thereunder, the Adviser is not liable for any error or
judgment or mistake of law or for any loss suffered by the Fund. As part of
the Advisory Agreement, the Fund has agreed that the name "Gabelli" is the
Adviser's property, and that in the event the Adviser ceases to act as an
investment adviser to the Fund, the Fund will change its name to one not
including "Gabelli."
Pursuant to its terms, the Advisory Agreement will remain in effect
with respect to the Fund until the second anniversary of shareholder approval
of such Agreement, and from year to year thereafter if approved annually (i)
by the Fund's Board of Trustees or by the holders of a majority of its
outstanding voting securities and (ii) by a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) of any party to the
Advisory Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Agreement terminates
automatically on its assignment and may be terminated without penalty on 60
days' written notice at the option of either party thereto or by a vote of a
majority (as defined in the 1940 Act) of the Fund's outstanding shares.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Trustees of the
Fund, the Adviser is responsible for placing purchase and sale orders and
the allocation of brokerage on behalf of the Fund. Transactions in equity
securities are in most cases effected on U.S. stock exchanges and involve
the payment of negotiated brokerage commissions. In general, there may be no
stated commission in the case of securities traded in over-the-counter
markets, but the prices of those securities may include undisclosed
commissions or mark-ups. Principal transactions are not entered into with
affiliates of the Fund. However, Gabelli & Company may execute transactions
in the over-the-counter markets on an agency basis and receive a stated
commission therefrom. To the extent consistent with applicable provisions of
the 1940 Act and the rules and exemptions adopted by the SEC thereunder, as
well as other regulatory requirements, the Fund's Board of Trustees have
determined that portfolio transactions may be executed through Gabelli &
Company and its broker-dealer affiliates if, in the judgment of the Adviser,
the use of those broker-dealers is likely to result in price and execution
at least as favorable as those of other qualified broker-dealers, and if, in
particular transactions, those broker-dealers charge the Fund a rate
consistent with that charged to comparable unaffiliated customers in similar
transactions. The Fund has no obligations to deal with any broker or group
of brokers in executing transactions in portfolio securities. In executing
transactions, the Adviser seeks to obtain the best price and execution for
the Fund, taking into account such factors as price, size of order,
difficulty of execution and operational facilities of the firm involved and
the firm's risk in positioning a block of securities. While the Adviser
generally seeks reasonably competitive commission rates, the Fund does not
necessarily pay the lowest commission available.
Subject to obtaining the best price and execution, brokers who
provide supplemental research, market and statistical information to the
Adviser or its affiliates may receive orders for transactions by the Fund.
The term "research, market and statistical information" includes advice as to
the value of securities, and advisability of investing in, purchasing or
selling securities, and the availability of securities or purchasers or
sellers of securities, and furnishing analyses and reports concerning issues,
industries, securities, economic factors and trends, portfolio strategy and
the performance of accounts. Information so received will be in addition to
and not in lieu of the services required to be performed by the Adviser under
the Advisory Agreement and the expenses of the Adviser will not necessarily
be reduced as a result of the receipt of such supplemental information. Such
information may be useful to the Adviser and its affiliates in providing
services to clients other than the Fund, and not all such information is used
by the Adviser in connection with the Fund. Conversely, such information
provided to the Adviser and its affiliates by brokers and dealers through
whom other clients of the Adviser and its affiliates effect securities
transactions may be useful to the Adviser in providing services to the Fund.
Although investment decisions for the Fund are made independently
from those of the other accounts managed by the Adviser and its affiliates,
investments of the kind made by the Fund may also be made by those other
accounts. When the same securities are purchased for or sold by the Fund and
any of such other accounts, it is the policy of the Adviser and its
affiliates to allocate such purchases and sales in the manner deemed fair and
equitable to all of the accounts, including the Fund.
REPURCHASE OF SHARES
The Fund is a closed-end, non-diversified, management investment
company and as such its shareholders do not, and will not, have the right to
redeem their shares. The Fund, however, may repurchase its shares from time
to time as and when it deems such a repurchase advisable. Such repurchases
will be made when the Fund's shares are trading at a discount of 10% or more
(or such other percentage as the Board of Trustees of the Fund may determine
from time to time) from the net asset value of the shares. Pursuant to the
1940 Act, the Fund may repurchase its shares on a securities exchange
(provided that the Fund has informed its shareholders within the preceding
six months of its intention to repurchase such shares) or as otherwise
permitted in accordance with Rule 23c-1 under the 1940 Act. Under that Rule,
certain conditions must be met regarding, among other things, distribution of
net income for the preceding fiscal year, status of the seller, price paid,
brokerage commissions, prior notice to shareholders of an intention to
purchase shares and purchasing in a manner and on a basis which does not
discriminate unfairly against the other shareholders through their interest
in the Fund.
When the Fund repurchases its shares for a price below their net
asset value, the net asset value of those shares that remain outstanding will
be enhanced, but this does not necessarily mean that the market price of
those outstanding shares will be affected, either positively or negatively.
PORTFOLIO TURNOVER
The portfolio turnover rates of the Fund for the fiscal years ending
December 31, 2001 and 2000 were 41% and 92%, respectively. Portfolio turnover
rate is calculated by dividing the lesser of an investment company's annual
sales or purchases of portfolio securities by the monthly average value of
securities in its portfolio during the year, excluding portfolio securities
the maturities of which at the time of acquisition were one year or less. A
high rate of portfolio turnover involves correspondingly greater brokerage
commission expense than a lower rate, which expense must be borne by the Fund
and its shareholders, as applicable. A higher rate of portfolio turnover may
also result in taxable gains being passed to shareholders.
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
Under the Automatic Dividend Reinvestment and Voluntary Cash
Purchase Plan adopted by the Fund ( the "Plan"), a shareholder whose Common
Stock is registered in his own name, including all Shares issued pursuant to
the Rights Offering and all shares held by a shareholder participating in
the Rights Offering, will have all distributions reinvested automatically by
Equiserve Trust Company ("Equiserve"), which is agent under the Plan, unless
the shareholder elects to receive cash. Distributions with respect to shares
registered in the name of a broker-dealer or other nominee (that is, in
"street name") will be reinvested by the broker or nominee in additional
shares under the Plan, unless the service is not provided by the broker or
nominee or the shareholder elects to receive distributions in cash.
Investors who own Common Stock registered in street name should consult
their broker- dealers for details regarding reinvestment. All distributions
to investors who do not participate in the Plan will be paid by check mailed
directly to the record holder by Equiserve as dividend disbursing agent.
Under the Plan, whenever the market price of the 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 dividend
or capital gains distribution, participants in such plan 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
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
preceding 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 Fund, or acquired by the Plan agent in the open
market, valued at market price. If the Fund should declare a dividend or
capital gains distribution payable only in cash, Equiserve will buy the
Fund's Common Stock for the Plan in the open market, 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 Fund to
issue shares at net asset value if, following the commencement of such
purchases, the market value of its Common Stock exceeds net asset value.
Participants in the Plan have the option of making additional cash
payments to Equiserve, twice per month for the Fund, for investment in the
shares. Such payments may be made in any amount from $250 to $10,000.
Equiserve will use all funds received from participants to purchase shares of
the Fund in the open market on the 1st and 15th of each month. It is
suggested that participants send voluntary cash payments to Equiserve in a
manner that ensures that Equiserve will receive these payments approximately
10 days before the investment date. A participant may without charge withdraw
a voluntary cash payment by written notice, if the notice is received by
Equiserve at least 48 hours before such payment is to be invested.
Equiserve maintains all shareholder accounts in the Plan and
furnishes written confirmations of all transactions in the account, including
information needed by shareholders for personal and tax records. Shares in
the account of each Plan participant will be held by Equiserve in
noncertificated form in the name of the participant, and each shareholder's
proxy will include those shares purchased pursuant to the Plan. A Plan
participant may send his share certificates to Equiserve so that the shares
represented by such certificates will be held by Equiserve in the
participant's shareholder account under the Plan.
In the case of shareholders such as banks, brokers or nominees,
which hold shares for others who are the beneficial owners, Equiserve will
administer the Plan on the basis of the number of shares certified from time
to time by the shareholder as representing the total amount registered in
the shareholder's name and held for the account of beneficial owners who
participate in the Plan.
There is no charge to participants for reinvesting dividends or
capital gains distributions payable in either stock or cash. Equiserve's fees
for handling the reinvestment of such dividends and capital gains
distributions are paid by the Fund. There are no brokerage charges with
respect to shares issued directly by the Fund as a result of dividends or
capital gains distributions payable in stock or in cash. However, each
participant bears a pro rata share of brokerage commissions incurred with
respect to Equiserve's open market purchases in connection with the
reinvestment of dividends or capital gains distributions.
With respect to purchases from voluntary cash payments, Equiserve
will charge $0.75 for each such purchase for a participant, plus a pro rata
share of the brokerage commissions. Brokerage charges for purchasing small
amounts of stock for individual accounts through the Plan are expected to be
less than the usual brokerage charges for such transactions, as Equiserve
will be purchasing shares for all participants in blocks and prorating the
lower commission thus attainable.
The automatic reinvestment of dividends and distributions will not
relieve participants of any income tax which may be payable on such dividends
or distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate its 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 such
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 the participants in such Plan. All
correspondence concerning the Plan should be directed to Equiserve at [P.O.
Box 9573, Boston, Massachusetts 02205- 9573].
TAXATION
Set forth below is a discussion of certain U.S. federal income tax
issues concerning the Fund and the purchase, ownership and disposition of
Fund shares. This discussion is based upon present provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the regulations promulgated
thereunder, and judicial and administrative ruling authorities, all of which
are subject to change, which change may be retroactive. This discussion does
not purport to be complete or to deal with all aspects of U.S. federal income
taxation that may be relevant to investors in light of their particular
circumstances. Prospective investors should consult their own tax advisers
with regard to the U.S. federal tax consequences of the purchase, ownership,
or disposition of Fund shares, as well as the tax consequences arising under
the laws of any state, foreign country, or other taxing jurisdiction.
TAX STATUS OF THE FUND
The Fund has qualified and elected to be taxed as a regulated
investment company under Subchapter M of the Code. Accordingly, the Fund
must, among other things, (a) derive in each taxable year at least 90% of its
gross income (including tax-exempt interest) from dividends, interest,
payments with respect to certain securities loans, and gains from the sale or
other disposition of stock, securities or foreign currencies, or other income
(including but not limited to gain from options, futures and forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies; and (b) diversify its holdings so that, at the end
of each fiscal quarter (i) at least 50% of the market value of the Fund's
total assets is represented by cash and cash items, U.S. Government
securities, the securities of other regulated investment companies and other
securities, with such other securities limited, in respect of any one issuer,
to an amount not greater than 5% of the value of the Fund's total assets and
not more than 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of the Fund's total assets is invested in
the securities of any one issuer (other than U.S. Government securities and
the securities of other regulated investment companies) or of any two or more
issuers that the Fund controls and that are determined to be engaged in the
same business or similar or related trades or businesses.
As a regulated investment company, the Fund generally is not subject
to U.S. federal income tax on income and gains that it distributes each
taxable year to shareholders, if at least 90% of the sum of the Fund's (i)
investment company taxable income (which includes, among other items,
dividends, interest, the excess of any net short-term capital gains over net
long-term capital losses) and other taxable income other than any net capital
gain (as defined below) reduced by deductible expenses) determined without
regard to the deduction for dividends paid and (ii) its net tax exempt
interest (the excess of its gross tax exempt interest over certain disallowed
deductions). The Fund may retain for investment its net capital gain (which
consists of the excess of its net long-term capital gain over its net
short-term capital loss). However, if the Fund retains any net capital gain
or any investment company taxable income, it will be subject to tax at
regular corporate rates on the amount retained. The Fund intends to
distribute annually substantially all of such income.
Amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4%
excise tax at the Fund level. To avoid the tax, the Fund must distribute
during each calendar year an amount equal to the sum of (1) at least 98% of
its ordinary income (not taking into account any capital gains or losses)
for the calendar year, (2) at least 98% of its capital gains in excess of
its capital losses (adjusted for certain ordinary losses) for a one-year
period generally ending on October 31 of the calendar year (unless, an
election is made by a fund with a November or December year- end to use the
fund's fiscal year), and (3) certain undistributed amounts from previous
years on which the Fund paid no U.S. federal income tax. While the Fund
intends to distribute income and capital gains in the manner necessary to
minimize imposition of the 4% excise tax, there can be no assurance that
sufficient amounts of the Fund's taxable income and capital gains will be
distributed to avoid entirely the imposition of the tax. In that event, the
Fund will be liable for the tax only on the amount by which it does not meet
the foregoing distribution requirement.
A distribution will be treated as paid on December 31 of a calendar
year if it is declared by the Fund in October, November or December of that
year with a record date in such a month and paid by the Fund during January
of the following year. Such a distribution will be taxable to shareholders in
the calendar year in which the distribution is declared, rather than the
calendar year in which it is received.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital
gains) will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions will be
taxable to the shareholders as ordinary dividends to the extent of the Fund's
current and accumulated earnings and profits.
DISTRIBUTIONS
Distributions paid by the Fund from its ordinary income or from an
excess of net short-term capital gains over net long-term capital losses
(together referred to hereinafter as "ordinary income dividends") are taxable
to shareholders as ordinary income to the extent of the Fund's earnings and
profits. Distributions made from an excess of net long-term capital gains
over net short-term capital losses ("capital gain dividends"), including
capital gain dividends credited to a shareholder but retained by the Trust
(as described below), are taxable to shareholders as long-term capital gains,
regardless of the length of time the shareholder has owned Fund shares.
Distributions in excess of the Fund's earnings and profits will first reduce
the adjusted tax basis of a holder's shares and, after such adjusted tax
basis is reduced to zero, will constitute capital gains to such holder
(assuming the shares are held as a capital asset). Dividend distributions of
investment company taxable income are taxable to a shareholder as ordinary
income, whether paid in cash or shares. Dividends paid by the Fund to a
corporate shareholder, to the extent such dividends are attributable to
dividends received by the Fund from U.S. corporations, may, subject to
limitations, be eligible for the dividends received deduction. Generally, not
later than 60 days after the close of its taxable year, the Fund will provide
its shareholders with a written notice designating the amount of any ordinary
income dividends, capital gain dividends or dividends qualifying for a
dividends received deduction and other distributions.
Investors should be careful to consider the tax implications of
buying shares of the Fund just prior to the record date of a distribution
(including a capital gain dividend). The price of shares purchased at such a
time will reflect the amount of the forthcoming distribution, but the
distribution will generally be taxable to the shareholder.
If the Fund retains any net capital gain, it may designate the
retained amount as undistributed capital gains in a notice to its
shareholders who, if subject to U.S. federal income tax on long-term capital
gains, (i) will be required to include in income their share of such
undistributed long-term capital gain and (ii) will be entitled to credit
their proportionate share of the tax paid by the Fund against their U.S.
federal tax liability, if any, and to claim refunds to the extent the credit
exceeds such liability. For U.S. federal income tax purposes, the tax basis
of shares owned by a shareholder of the Fund will be increased by the amount
of undistributed capital gain included in the gross income of such
shareholder less the tax deemed paid by such shareholder under clause (ii)
of the preceding sentence.
FOREIGN TAXES
The Fund may be subject to certain taxes imposed by the countries in
which it in vests or operates. If the Fund qualifies as a regulated
investment company and if more than 50% of the value of the Fund's total
assets at the close of any taxable year consists of stocks or securities of
foreign corporations, the Fund may elect, for U.S. federal income tax pur
poses, to treat any foreign taxes paid by the Fund that qualify as income or
similar taxes under U.S. federal income tax principles as having been paid by
the Fund's shareholders. For any year for which the Fund makes such an
election, each shareholder will be required to include in its gross income an
amount equal to its allocable share of such taxes paid by the Fund and the
shareholders will be entitled, subject to certain limitations, to credit
their portions of these amounts against their U.S. federal income tax
liability, if any, or to deduct their portions from their U.S. taxable
income, if any. No deduction for foreign taxes may be claimed by individuals
who do not itemize deductions. In any year in which it elects to "pass
through" foreign taxes to shareholders, the Fund will notify shareholders
within 60 days after the close of the Fund's taxable year of the amount of
such taxes and the sources of its income. Because application of the credit
depends on the particular circumstances for each shareholder, shareholders
are advised to consult their own tax advisers.
DISPOSITIONS
The sale or other disposition of common shares of the Fund will
generally result in capital gain or loss to shareholders, and will be
long-term capital gain or loss if the shares have been held for more than
one year at the time of sale. Any loss upon the sale or exchange of Fund
shares held for six months or less will be treated as long-term capital loss
to the extent of any capital gain dividends received (including amounts
credited as an undistributed capital gain dividend) by the shareholder. A
loss realized on a sale or exchange of shares of the Fund will be disallowed
if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed
of. In such case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss. Present law taxes both long-term and short-term
capital gains of corporations at the rates applicable to ordinary income.
For non-corporate taxpayers, however, short-term capital gains and ordinary
income will currently be taxed at a maximum rate of 38.6% while long- term
capital gains generally will be taxed at a maximum rate of 20% and 10% for
taxpayers in the 15% bracket. The 20% capital gains rate and the 10% capital
gains rate will be reduced to 18% and 8% respectively, for capital assets
held for more than five years if the holding period begins after December
31, 2000.
BACKUP WITHHOLDING
The Fund generally will be required to withhold U.S. federal income
tax ("backup withholding") from dividends, capital gain distributions and
certain other amounts paid to shareholders who are U.S. citizens or resident
aliens if (1) the shareholder fails to furnish the Fund with the
shareholder's correct taxpayer identification number or social security
number, (2) the Internal Revenue Service notifies the shareholder or the Fund
that the shareholder has failed to report properly certain interest and
dividend income to the Internal Revenue Service and to respond to notices to
that effect, or (3) when required to do so, the shareholder fails to certify
that he or she is not subject to backup withholding. Any amounts withheld may
be credited against the shareholder's U.S. federal income tax liability.
FOREIGN INVESTORS
A shareholder that is a nonresident alien individual or a foreign
corporation (a "foreign investor") generally may be subject to U.S.
withholding tax at the rate of 30% (or possibly a lower rate provided by an
applicable tax treaty) on ordinary income dividends. Different tax
consequences may result if the foreign investor is engaged in a trade or
business in the United States or, in the case of an individual, is present in
the United States for 183 or more days during a taxable year and certain
other conditions are met.
FUND INVESTMENTS
The Fund will invest in securities rated in the lower rating
categories of nationally recognized rating organizations ("junk bonds" or
"high yield bonds"). Some of these junk bonds or high-yield bonds may be
purchased at a discount and may therefore cause the Fund to accrue and
distribute income before amounts due under the obligations are paid. In
addition, a portion of the interest on such junk bonds and high-yield bonds
may be treated as dividends for U.S. federal income tax purposes. In such
cases, if the issuer of the junk bonds or high-yield bonds is a domestic
corporation, dividend payments by the Fund will be eligible for the dividends
received deduction to the extent of the deemed dividend portion of such
interest.
The Fund may write (i.e., sell) covered call and covered put
options on its portfolio securities, purchase call and put options on
securities and engage in transactions in financial futures and related
options on such futures. Such options and futures contracts that are
"Section 1256 contracts" will be "marked to market" for U.S. federal income
tax purposes at the end of each taxable year, i.e., each such option or
futures contract will be treated as sold for its fair market value on the
last day of the taxable year. Subject to certain exceptions, generally gain
or loss from Section 1256 contracts will be 60% long-term and 40% short-
term capital gain or loss. Application of these rules to Section 1256
contracts held by the Fund may alter the timing and character of
distributions to shareholders. The mark-to-market rules outlined above,
however, will not apply to certain transactions entered into by the Fund
primarily to reduce the risk of changes in price or interest or currency
exchange rate with respect to its investments.
The U.S. federal income tax rules governing the taxation of interest
rate swaps are not entirely clear and may require the Fund to treat payment
received under such arrangements as ordinary income and to amortize such
payment under certain circumstances. The Fund does not anticipate that its
activity in this regard will affect its qualification as a regulated
investment company.
Code Section 1092, which applies to certain "straddles," may affect
the taxation of the Fund's sales of securities and transactions in options
and futures. Under Code Section 1092, the Fund may, for U.S. federal income
tax purposes, be required to postpone recognition of losses incurred in
certain sales of securities and certain closing transactions in options and
futures.
Passive Foreign Investment Companies. The Fund may invest in shares
of foreign corporations that may be classified under the Code as passive
foreign investment companies ("PFICs"). In general, a foreign corporation is
classified as a PFIC if at least one-half of its assets constitute
investment-type assets, or 75% or more of its gross income is investment-
type income. If the Fund receives a so-called "excess distribution" with
respect to PFIC stock, the Fund itself may be subject to a tax on a portion
of the excess distribution, whether or not the corresponding income is
distributed by the Fund to shareholders. In general, under the PFIC rules,
any excess distribution is treated as having been realized ratably over the
period during which the Fund held the PFIC shares. The Fund will itself be
subject to tax on the portion, if any, of an excess distribution that is so
allocated to prior Fund taxable years and an interest factor will be added to
the tax, as if the tax had been payable in such prior taxable years. Certain
distributions from a PFIC as well as gain from the sale of PFIC shares are
treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under one election currently available in some
circumstances, the Fund would be required to include in its gross income its
share of the earnings of a PFIC, on a current basis, whether or not
distributions were received from the PFIC in a given year. Under another
election, the Fund would be required to mark to market the Fund's PFIC shares
at the end of each taxable year, with the result that unrealized gains would
be treated as realized and such gains would be required to be reported as
ordinary income. Any mark-to-market losses and any loss from an actual
disposition of PFIC shares would be deductible as ordinary losses to the
extent of any net mark-to-market gains included in income in prior years. If
either one of these elections were made the special rules, discussed above,
relating to the taxation of excess distributions would not apply.
Certain of the Fund's investment practices are subject to special
and complex federal income tax provisions that may, among other things, (i)
disallow, suspend or otherwise limit the allowance of certain losses or
deductions, (ii) convert lower taxed long-term capital gains into higher
taxed short-term capital or ordinary income, (iii) convert ordinary loss or a
deduction into capital loss (the deductibility of which is more limited),
(iv) cause the Fund to recognize income or gain without a corresponding
receipt of cash, (v) adversely affect the time as to when a purchase or sale
of stock or securities is deemed to occur and (vi) adversely alter the
characterization of certain complex financial transactions.
The foregoing is a general summary of the provisions of the Code and
the Treasury Regulations in effect as they directly govern the U.S. federal
income taxation of the Fund and its shareholders. These provisions are
subject to change by legislative or administrative action, and any such
change may be retroactive. Ordinary income and capital gain dividends may
also be subject to state, local, foreign income or other taxes. Certain
states exempt from state income taxation dividends paid by regulated
investment companies which are derived from interest on United States
Government obligations. State law varies as to whether dividend income
attributable to United States Government obligations is exempt from state
income tax. Shareholders are urged to consult their tax advisers regarding
specific questions as to U.S. federal, foreign, state, local income or other
taxes.
NET ASSET VALUE
The net asset value of the Fund's shares will be computed, based on
the market value of the securities it holds and determined daily as of the
close of regular trading on the New York Stock Exchange.
Portfolio instruments of the Fund which are traded in a market
subject to government regulation on which trades are reported
contemporaneously will be valued at the last sale price on the principal
market for such instruments as of the close of regular trading on the day the
instruments are being valued, or lacking any sales, at the average of the bid
and asked price on the principal market for such instruments on the most
recent date on which bid and asked prices are available. Other readily
marketable assets will be valued at the average of quotations provided by
dealers maintaining an active market in such instruments. Securities and
other assets for which market quotations are not readily available will be
valued at fair value as determined in good faith by or under the direction of
the Board of Trustees. Short- term investments that mature in more than 60
days are valued at the highest bid price ob tained from a dealer maintaining
an active market in that security or on the basis of prices obtained from a
pricing service approved as reliable by the Board of Trustees. Short-term
investments that mature in 60 days or fewer are valued at amortized cost,
unless the Board of Trustees determines that such valuation does not
constitute fair value. The Fund may employ recognized pricing services from
time to time for the purpose of pricing portfolio instruments.
Trading takes place in various foreign markets on days which are not
Business Days and therefore the Fund's respective net asset value per share
is not calculated. The calculation of the Fund's net asset value may not take
place contemporaneously with the determination of the prices of portfolio
securities held by the Fund. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the
close of the NYSE will not be reflected in the Fund's calculation of net
asset value unless the Board of Trustees deems that the particular event
would materially affect the net asset value, in which case the fair value of
those securities will be determined by consideration of other factors by or
under the direction of the Board of Trustees.
Net asset value per share is calculated by dividing the value of the
securities held plus any cash or other assets minus all liabilities,
including accrued expenses, by the total number of shares outstanding at such
time.
GENERAL INFORMATION
COUNSEL AND INDEPENDENT ACCOUNTANTS
Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York,
New York 10036 is special counsel to the Fund in connection with the rights
offering.
PricewaterhouseCoopers LLP, independent accountants, 1177 Avenue of
the Americas, New York, New York 10036, serve as auditors of the Fund and
will annually render an opinion on the financial statements of the Fund.
BENEFICIAL OWNER
There are no persons known to the Fund who may be deemed beneficial
owners of 5% or more of shares of the Fund's Common Stock because they
possessed or shared voting or investment power with respect to shares of the
Fund's Common Stock.
FINANCIAL STATEMENTS
The audited financial statements included in the Annual Report to
the Fund's Shareholders for the fiscal year ended December 31, 2001, together
with the report of PricewaterhouseCoopers LLP thereon, are also incorporated
herein by reference from the Fund's Annual Report to Shareholders. All other
portions of the Annual Report to Shareholders are not incorporated herein by
reference and are not part of the Registration Statement. A copy of the
Annual Report to Shareholders may be obtained without charge by writing to
the Fund at its address at One Corporate Center, Rye, New York 10580-1434 or
by calling the Fund toll-free at 800-GABELLI (422-3554).
APPENDIX A
CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or exceptionally stable margin and principal
is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risk appear somewhat larger than in Aaa
Securities.
A Bonds that are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa Bonds that are rated Baa are considered as medium-grade
obligations i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present, but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba Bonds that are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate
and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in
this class.
B Bonds that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small. Moody's applies numerical
modifiers (1, 2, and 3) with respect to the bonds rated "Aa"
through "B." The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that
the company ranks in the lower end of its generic rating category.
Caa Bonds that are rated Caa are of poor standing. These issues may be
in default or there may be present elements of danger with respect
to principal or interest.
Ca Bonds that are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C Bonds that are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
STANDARD & POOR'S RATINGS SERVICES
AAA This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and
repay principal.
AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from AAA issues only in small degree.
Principal and interest payments on bonds in this category are
regarded as safe.
A Debt rated A has a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB This is the lowest investment grade. Debt rated BBB has an
adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
Speculative Grade
Debt rated BB, CCC, CC and C are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation, and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major exposures to adverse
conditions. Debt rated C1 is reserved for income bonds on which no interest
is being paid and debt rated D is in payment default.
In July 1994, S&P initiated an "r" symbol to its ratings. The "r"
symbol is attached to derivatives, hybrids and certain other obligations that
S&P believes may experience high variability in expected returns due to
noncredit risks created by the terms of the obligations.
"AA" to "CCC" may be modified by the addition of a plus or minus
sign to show relative standing within the major categories.
"NR" indicates that no public rating has been requested, that there
is insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy.
___________________________
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements
(a) Financial Statements (audited) for the fiscal year 2001(1) (i)
Portfolio of Investments as of December 31, 2001 (ii) Statement of
Assets and Liabilities as of December 31, 2001 (iii) Statement of
Operations for the year ended December 31, 2001 (iv) Statement of
Changes in Net Assets for the year ended December 31, 2001
(v) Financial highlights for a share outstanding throughout the
periods 2001 and 2000 and 1999.
(vi) Notes to Financial Statements
(vii) Report of Independent Accountants
(2) Exhibits
(a) Amended and Restated Agreement and Declaration of Trust of
Registrant(2)
(b) Amended and Restated By-Laws of Registrant(2)
(c) Not applicable
(d) (i) Form of Registrant's Common Stock Certificate(2)
(ii) Form of Subscription Certificate(3) (iii) Form of Notice of
Guaranteed Delivery of Payment(3) (iv) Form of DTC Participant
Oversubscription Exercise Form(3) (v) Form of Nominee Holder
Oversubscription Certification(3) (vi) Form of Subscription,
Distribution and Escrow Agency Agreement(3)
(e) Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan of
Registrant(2)
(f) Not applicable
(g) Form of Investment Advisory Agreement between Registrant and
Gabelli Funds, LLC(2)
(h) Not applicable
(i) Not applicable
(j) (1) Form of Custodian Contract between Registrant and Boston Safe
Deposit and Trust Company(3)
(2) Form of Custodian Fee Schedule between Registrant and Boston Safe
Deposit and Trust Company(2)
(k) Form of Registrar, Transfer Agency and Service Agreement
between Registrant and Equiserve Trust Company (2)
(l) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom LLP
with respect to legality(3)
(m) Not applicable
(n) (i) Consent of PricewaterhouseCoopers LLP(3)
(ii) Powers of Attorney(3)
(o) Not applicable
(p) Not applicable
(q) Codes of Ethics of the Trust and the Advisor (3)
___________________
(1) Incorporated by reference to the Fund's annual report filed on March 8, 2001
(2) Previously filed.
(3) Filed herewith.
Item 25. Marketing Arrangements
Not Applicable
Item 26. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to be incurred
in connection with the offering described in this Registration Statement:
SEC registration fees.............................................. $ 3,460
New York Stock Exchange listing fee................................ 50,765
Printing and engraving expenses ................................... 75,000
Auditing fees and expenses ........................................ 10,000
Legal fees and expenses............................................ 100,000
Blue Sky fees and expenses......................................... 5,000
Miscellaneous...................................................... 225,471
Total....................................................... 470,696
Item 27. Persons Controlled by or Under Common Control with Registrant
NONE
Item 28. Number of Holders of Securities as of March 21, 2002
Number of Record
Title of Class Holders
-------------- ---------------
Capital Stock, par value $.001 per share 11,368
Item 29. Indemnification
The response of this Item is incorporated by reference to the caption
"Limitation of Officers' and Trustees Liability" in the Part B of this
Registration Statement.
Insofar as indemnification for liability arising under the 1933 Act
may be permitted to trustees, officers and controlling persons of Registrant
pursuant to the foregoing provisions, or otherwise, Registrant has been
advised that, in the opinion of the Commission, such indemnification is
against public policy as expressed in the 1933 Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered. Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by
the final adjudication of such issue.
Item 30. Business and Other Connections of Adviser
Item 30. Business and Other Connections of Investment Adviser
The Adviser, a limited liability company organized under the laws of
the State of New York, acts as investment adviser to the Registrant. The
Registrant is fulfilling the requirement of this Item 30 to provide a list of
the officers and directors of the Investment Adviser, together with
information as to any other business, profession, vocation or employment of a
substantial nature engaged in by the Investment Adviser or those officers and
directors during the past two years, by incorporating by reference the
information contained in the Form ADV of the Investment Adviser filed with
the Commission pursuant to the Investment Advisers Act of 1940 (Commission
File No. 801-26202).
Item 31. Location of Accounts and Records
The accounts and records of the Registrant are maintained in part
at the office of the Adviser at One Corporate Center, Rye, New York
10580-1434, in part at the offices of the Custodian, Boston Safe Deposit and
Trust Company, One Boston Place, Boston, Massachusetts 02108, at the offices
of the Fund's Administrator, PFPC, Inc, 3200 Horizon Drive, King of Prussia,
Pennsylvania 19406, and in part at the offices of EquiServe Trust Company,
N.A., 150 Royall Street, Mail Stop 45-02-62, Canton, MA 02021.
Item 32. Management Services
Not applicable.
Item 33. Undertakings
o Registrant undertakes to suspend the offering of shares
until the prospectus is amended, if subsequent to the
effective date of this registration statement, its net
asset value declines more than ten percent from its net
asset value, as of the effective date of the registration
statement or its net asset value increases to an amount
greater than its net proceeds as stated in the prospectus.
o Not applicable.
o Not applicable.
o Not applicable.
o Registrant undertakes that, for the purpose of determining
any liability under the 1933 Act the information omitted
from the form of prospectus filed as part of the
Registration Statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant
pursuant to Rule 497(h) will be deemed to be a part of the
Registration Statement as of the time it was declared
effective.
Registrant undertakes that, for the purpose of determining
any liability under the 1933 Act, each post-effective
amendment that contains a form of prospectus will be deemed
to be a new Registration Statement relating to the
securities offered therein, and the offering of such
securities at that time will be deemed to be the initial
bona fide offering thereof.
o Registrant undertakes to send by first class mail or other
means designed to ensure equally prompt delivery, within
two business days of receipt of a written or oral request,
any Statement of Additional Information constituting Part B
of this Registration Statement.
SIGNATURES
As required by the Securities Act of 1933, this Registrant's
Registration Statement has been signed on behalf of the Registrant, in the
City of Rye, State of New York, on the 10th day of May, 2002.
THE GABELLI UTILITY TRUST
By: /s/ Bruce N. Alpert
--------------------------
Bruce N. Alpert
Vice President and Treasurer
As required by the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
and on the dates indicated.
Signature Title Date
Chairman of the Board, May 10, 2002
-------------------------------- President, Chief Investment
Mario J. Gabelli Officer and Trustee
/s/ Bruce N. Alpert Chief Financial Officer May 10, 2002
--------------------------------
Bruce N. Alpert
* Trustee May 10, 2002
--------------------------------
Thomas E. Bratter
* Trustee May 10, 2002
--------------------------------
Felix J. Christiana
* Trustee May 10, 2002
--------------------------------
Anthony J. Colavita
* Trustee May 10, 2002
--------------------------------
James P. Conn
* Trustee May 10, 2002
--------------------------------
Vincent D. Enright
* Trustee May 10, 2002
--------------------------------
Frank J. Fahrenkopf, Jr.
Trustee May 10, 2002
--------------------------------
John D. Gabelli
* Trustee May 10, 2002
--------------------------------
Karl Otto Pohl
* Trustee May 10, 2002
--------------------------------
Anthony R. Pustorino
* Trustee May 10, 2002
--------------------------------
Salvatore J. Zizza
* Trustee May 10, 2002
--------------------------------
Bruce N. Alpert
Attorney-in-Fact
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
EX-99 (d) (ii) Form of Subscription Certificate
EX-99 (d) (iii) Notice of Guaranteed Delivery
EX-99 (d) (iv) Form of DTC Participant Oversubscription Exercise Form
EX-99 (d) (v) Form of Nominee Holder Oversubscription Certification
EX-99 (d) (vi) Form of Subscription, Distribution and Escrow Agency Agreement
EX-99 (j)(1) Form of Custodian Contract between Registrant and Boston
Safe Deposit and Trust Company
EX-99 (1) Opinion and Consent of Skadden, Arps, Slate, Meagher &
Flom LLP
EX-99 (n)(1) Consent of PricewaterhouseCoopers LLP
EX-99 (n)(2) Powers of Attorney
EX-99 (q) Codes of Ethics of the Trust and the Advisor