Opinion
on the Financial Statements
We
have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Gabelli
Utility Trust (the “Fund”) as of December 31, 2022, the related statement of operations for the year ended
December 31, 2022, the statement of changes in net assets attributable to common shareholders for each of the two years in
the period ended December 31, 2022, including the related notes, and the financial highlights for each of the five years in
the period ended December 31, 2022 (collectively referred to as the “financial statements”). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2022,
the results of its operations for the year then ended, the changes in its net assets attributable to common shareholders for
each of the two years in the period ended December 31, 2022, and the financial highlights for each of the five years in the
period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of
America.
Basis
for Opinion
These
financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on
the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We
conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
Our procedures included confirmation of securities owned as of December 31, 2022, by correspondence with the custodian and brokers;
when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable
basis for our opinion.
/s/PricewaterhouseCoopers
LLP
New
York, New York
March 1, 2023
We
have served as the auditor of one or more investment companies in the Gabelli Fund Complex since 1986.
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Delaware
Statutory Trust Act – Control Share Acquisitions
The
Fund is organized as a Delaware statutory trust and thus is subject to the control share acquisition statute contained in Subchapter
III of the Delaware Statutory Trust Act (the DSTA Control Share Statute). The DSTA Control Share Statute applies to any closed-end
investment company organized as a Delaware statutory trust and listed on a national securities exchange, such as the Fund. The
DSTA Control Share Statute became automatically applicable to the Fund on August 1, 2022.
The
DSTA Control Share Statute defines “control beneficial interests” (referred to as “control shares”
herein) by reference to a series of voting power thresholds and provides that a holder of control shares acquired in a
control share acquisition has no voting rights under the Delaware Statutory Trust Act (DSTA) or the Fund’s Governing
Documents (as used herein, “Governing Documents” means the Fund’s Agreement and Declaration of Trust and
By-Laws, together with any amendments or supplements thereto, including any Statement of Preferences establishing a series of
preferred shares) with respect to the control shares acquired in the control share acquisition, except to the extent approved
by the Fund’s shareholders by the affirmative vote of two–thirds of all the votes entitled to be cast on the
matter, excluding all interested shares (generally, shares held by the acquiring person and their associates and shares held
by Fund insiders).
The
DSTA Control Share Statute provides for a series of voting power thresholds above which shares are considered control shares.
Whether one of these thresholds of voting power is met is determined by aggregating the holdings of the acquiring person as well
as those of his, her or its “associates.” These thresholds are:
| ● | 10%
or more, but less than 15% of all voting power; |
| ● | 15%
or more, but less than 20% of all voting power; |
| ● | 20%
or more, but less than 25% of all voting power; |
| ● | 25%
or more, but less than 30% of all voting power; |
| ● | 30%
or more, but less than a majority of all voting power; or |
| ● | a
majority or more of all voting power. |
Under
the DSTA Control Share Statute, once a threshold is reached, an acquirer has no voting rights with respect to shares in excess
of that threshold (i.e., the “control shares”) until approved by a vote of shareholders, as described above, or otherwise
exempted by the Fund’s Board of Trustees. The DSTA Control Share Statute contains a statutory process for an acquiring person
to request a shareholder meeting for the purpose of considering the voting rights to be accorded control shares. An acquiring
person must repeat this process at each threshold level.
Under
the DSTA Control Share Statute, an acquiring person’s “associates” are broadly defined to include, among others,
relatives of the acquiring person, anyone in a control relationship with the acquiring person, any investment fund or other collective
investment vehicle that has the same investment adviser as the acquiring person, any investment adviser of an acquiring person
that is an investment fund or other collective investment vehicle and any other person acting or intending to act jointly or in
concert with the acquiring person.
Voting
power under the DSTA Control Share Statute is the power (whether such power is direct or indirect or through any contract, arrangement,
understanding, relationship or otherwise) to directly or indirectly exercise or direct the exercise of the voting power of shares
of the Fund in the election of the Fund’s Trustees (either
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generally
or with respect to any subset, series or class of trustees, including any Trustees elected solely by a particular series or class
of shares, such as the preferred shares). Thus, Fund preferred shares, including the Series B and Series C Preferred Shares, acquired
in excess of the above thresholds would be considered control shares with respect to the preferred share class vote for two Trustees.
Any
control shares of the Fund acquired before August 1, 2022 are not subject to the DSTA Control Share Statute; however, any further
acquisitions on or after August 1, 2022 are considered control shares subject to the DSTA Control Share Statute.
The
DSTA Control Share Statute requires shareholders to disclose to the Fund any control share acquisition within 10 days of such
acquisition, and also permits the Fund to require a shareholder or an associate of such person to disclose the number of shares
owned or with respect to which such person or an associate thereof can directly or indirectly exercise voting power. Further,
the DSTA Control Share Statute requires a shareholder or an associate of such person to provide to the Fund within 10 days of
receiving a request therefor from the Fund any information that the Fund’s Trustees reasonably believe is necessary or desirable
to determine whether a control share acquisition has occurred.
The
DSTA Control Share Statute permits the Fund’s Board of Trustees, through a provision in the Fund’s Governing Documents
or by Board action alone, to eliminate the application of the DSTA Control Share Statute to the acquisition of control shares
in the Fund specifically, generally, or generally by types, as to specifically identified or unidentified existing or future beneficial
owners or their affiliates or associates or as to any series or classes of shares. The DSTA Control Share Statute does not provide
that the Fund can generally “opt out” of the application of the DSTA Control Share Statute; rather, specific acquisitions
or classes of acquisitions may be exempted by the Fund’s Board of Trustees, either in advance or retroactively, but other
aspects of the DSTA Control Share Statute, which are summarized above, would continue to apply. The DSTA Control Share Statute
further provides that the Board of Trustees is under no obligation to grant any such exemptions.
The
foregoing is only a summary of the material terms of the DSTA Control Share Statute. Shareholders should consult their own counsel
with respect to the application of the DSTA Control Share Statute to any particular circumstance.
The
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Summary
of Updated Information Regarding the Fund
The
following includes information that is incorporated by reference in the Fund’s Registration Statement and is also a summary
of certain changes during the most recent fiscal year ended December 31, 2022. This information may not reflect all of the changes
that have occurred since you purchased shares of the Fund.
Investment
Objective and Strategies
During
the Fund’s most recent fiscal year, there were no material changes to the Fund’s investment objectives or policies
that have not been approved by shareholders or in the principal risk factors associated with an investment in the Fund.
Investment
Objective
The
Fund’s primary investment objective is long term growth of capital and income. The Fund will invest at least 80% of its
net assets (plus borrowings made for investment purposes), under normal market conditions, in common stocks and other securities
of foreign and domestic companies involved in providing products, services, or equipment for (i) the generation or distribution
of electricity, gas, and water and (ii) telecommunications services or infrastructure operations (collectively, the “Utility
Industry”). A company will be considered to be in the Utility Industry if it derives at least 50% of its revenues or earnings
from, or devotes at least 50% of its assets to, the indicated activities or utility-related activities. The remaining 20% of its
assets may be invested in other securities including stocks, equity securities, debt obligations and money market instruments,
as well as certain derivative instruments in the Utility Industry or other industries. Moreover, should extraordinary conditions
affecting such sectors or securities markets as a whole warrant, the Fund may temporarily be primarily invested in money market
instruments. When the Fund is invested in these instruments for temporary or defensive purposes it may not achieve its investment
objective.
The
investment policy of the Fund relating to the type of securities in which at least 80% of the Fund’s net assets (plus borrowings
made for investment purposes) must be invested may be changed by the Board 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. Among the foreign securities in which the Fund may invest are those issued by companies
located in emerging markets. Investing in securities of foreign issuers, which generally are denominated in foreign currencies,
may involve certain risk and opportunity
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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. The Fund may invest in securities across all market capitalization
ranges.
No
assurance can be given that the Fund’s investment objective will be achieved.
Investment
Methodology of the Fund
In
selecting securities for the Fund, Gabelli Funds, LLC (the “Investment Adviser”) normally will consider the following
factors, among others:
| ● | the
Investment Adviser’s own evaluations of the private market value (as defined below), cash flow, earnings per share and other
fundamental aspects of the underlying assets and business of the company; |
| ● | the
potential for capital appreciation of the securities; |
| ● | the
interest or dividend income generated by the securities; |
| ● | the
prices of the securities relative to other comparable securities; |
| ● | whether
the securities are entitled to the benefits of call protection or other protective covenants; |
| ● | the
existence of any anti-dilution protections or guarantees of the security; and |
| ● | the
diversification of the portfolio of the Fund as to issuers. |
The
Investment Adviser’s investment philosophy with respect to equity securities is to identify assets that are selling in
the public market at a discount to their private market value. The Investment Adviser defines private market value as the
value informed purchasers are willing to pay to acquire assets with similar characteristics. The Investment Adviser also
normally evaluates an issuer’s free cash flow and long term earnings trends. Finally, the Investment Adviser looks for
a catalyst, something indigenous to the company, its industry or country that will surface additional value.
Certain
Investment Practices
Corporate
Reorganizations. The Fund may invest without limit in securities of companies for which a tender or exchange offer has
been made or announced and in securities of companies for which a merger, consolidation, liquidation or similar reorganization
proposal has been announced if, in the judgment of the Investment Adviser, there is a reasonable prospect of capital appreciation
significantly greater than the added portfolio turnover expenses inherent in the short term nature of such transactions. The principal
risk is that such offers or proposals may not be consummated within the time and under the terms contemplated at the time of the
investment, in which case, unless such offers or proposals are replaced by equivalent or increased offers or proposals that are
consummated, the Fund may sustain a loss.
Temporary
Defensive Investments. Subject to the Fund’s investment restrictions, when a temporary defensive period is believed
by the Investment Adviser to be warranted (“temporary defensive periods”), the Fund may, without limitation, hold
cash or invest its assets in securities of United States government sponsored instrumentalities, in repurchase agreements in respect
of those instruments, and in certain high-grade commercial paper instruments. During temporary defensive periods, the Fund may
also invest in money market mutual funds that invest primarily in securities of United States government sponsored instrumentalities
and
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repurchase
agreements in respect of those instruments. Obligations of certain agencies and instrumentalities of the United States
government, such as the Government National Mortgage Association, are supported by the “full faith and credit” of
the United States government; others, such as those of the Export-Import Bank of the United States, are supported by the
right of the issuer to borrow from the United States Treasury; others, such as those of the Federal National Mortgage
Association, are supported by the discretionary authority of the United States 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 United States government would provide financial support to United
States 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.
Non-Investment
Grade Securities. The Fund may invest up to 25% 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 Standard
& Poor’s Ratings Services, a Division of The McGraw-Hill Companies, Inc. (“S&P”), or
“Caa” or lower by Moody’s Investors Services, Inc. (“Moody’s”), or unrated securities of
comparable quality. These securities, which may be preferred stock or debt, are predominantly speculative and involve major
risk exposure to adverse conditions. Debt securities that are not rated or that are rated lower than “BBB” by
S&P or lower than “Baa” by Moody’s are often referred to in the financial press as “junk
bonds.”
Generally,
such non-investment grade 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 securities. In addition, such securities generally present a higher degree
of credit risk. The risk of loss due to default by these issuers is significantly greater because such non-investment grade 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 Investment 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 operating history,
financial resources and its sensitivity to economic conditions and trends, the market support for the facility financed by the
issue, the perceived ability and integrity of the issuer’s management and regulatory matters.
In
addition, the market value of non-investment grade securities is more volatile than that of higher quality securities, and the
markets in which such non-investment grade 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 (“NAV”). 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 in response to changes in the economy or the financial markets.
Non-investment
grade securities also present risks based on payment expectations. If an issuer calls the obligation for redemption (often a feature
of fixed income securities), the Fund may have to replace the security
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with
a lower yielding security, resulting in a decreased return for investors. Also, as the principal value of nonconvertible
bonds and preferred stocks moves inversely with movements in interest rates, when interest rates rise, 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 regular income streams. The Fund may be subject to a greater risk of rising interest rates
due to the recent period of historically low interest rates. The Federal Reserve has recently begun to raise the federal
funds rate as part of its efforts to address rising inflation. There is a risk that interest rates will continue to rise,
which will likely drive down prices of bonds and other fixed-income securities. The magnitude of these price reductions in
the market price of bonds and other fixed-income securities is generally greater for those securities with longer maturities.
Fluctuations in the market price of the Fund’s investments will not affect interest income derived from instruments
already owned by the Fund, but will be reflected in the Fund’s NAV. The Fund may lose money if short-term or long-term
interest rates rise sharply in a manner not anticipated by the Investment Adviser.
As
part of its investment in non-investment grade securities, the Fund may invest in securities of issuers in default. The Fund will
make an investment in securities of issuers in default only when the Investment Adviser believes that such issuers will honor
their obligations or emerge from bankruptcy protection under a plan pursuant to which the securities received by the Fund in exchange
for its defaulted securities will have a value in excess of the Fund’s investment. 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 otherwise appreciate.
In
addition to using recognized rating agencies and other sources, the Investment 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 securities 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 Investment 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 issuer of securities may cease to be rated or its rating may be reduced. In addition, it is possible
that statistical rating agencies may change their ratings of a particular issuer to reflect subsequent events. Moreover, such
ratings do not assess the risk of a decline in market value. None of these events will require the sale of the securities by the
Fund, although the Investment Adviser will consider these events in determining whether the Fund should continue to hold the securities.
The
market for non-investment grade and comparable unrated securities has experienced several periods of significantly adverse price
and liquidity, particularly at or around times of economic recessions. Past market 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 or
to refinance such securities. The market for those securities may react in a similar fashion in the future.
Options.
On behalf of the Fund, the Investment Adviser may, subject to the guidelines of the Board, purchase or sell (i.e., write)
options on securities, securities indices and foreign currencies which are listed on a national
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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.
A
call option is “covered” if the Fund owns the underlying instrument covered by the call or has an absolute and immediate
right to acquire that instrument without additional cash consideration upon conversion or exchange of another instrument held
in its portfolio (or for additional cash consideration held in a segregated account by its custodian). A call option is also covered
if the Fund holds a call on the same instrument as the call written where the exercise price of the call held is (i) equal to
or less than the exercise price of the call written or (ii) greater than the exercise price of the call written if the difference
is maintained by the Fund in cash, U.S. government obligations or other high-grade short term obligations in a segregated account
with its custodian. A 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 with its custodian, or else holds a put on the same instrument
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 the Fund has been assigned an exercise
notice, it 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 with the same terms
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 it received from
writing the option or is more than the premium it 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 it received from writing
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the
option or is less than the premium it 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 Investment
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 that provides a secondary market for an option with the same terms 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 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 the stock index options prior to expiration by entering into a closing transaction
on an exchange or it may let the option expire unexercised.
The
Fund may also 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. OTC 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. OTC options are considered 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 Investment Adviser is satisfied with
the development, depth and liquidity of the market and the Investment Adviser believes the options can be closed out.
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Price
movements in the portfolio of the Fund may not correlate precisely with the 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 Investment 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 Fund may be forced to liquidate portfolio securities to meet settlement obligations.
Although
the Investment 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. On behalf of the Fund, the Investment Adviser may, subject to the Fund’s
investment restrictions and guidelines of the Board, 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.
These futures contracts and related options may be written on debt securities, financial indices, securities indices, United
States 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. A “sale” of a futures
contract (or a “short” futures position) means the assumption of a contractual obligation to deliver the assets
underlying the contract at a specified price at a specified future time. A “purchase” of a futures contract (or a
“long” futures position) means the assumption of a contractual obligation to acquire the assets underlying the
contract at a specified price 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 assets 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 a futures contract, the Fund may 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 prior 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 option, or is less than, in the case of a put option, the exercise
price of the option on the futures contract. The potential loss related to the purchase of an option on a futures contract 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.
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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 fluctuations, imperfect correlation between the contracts and the securities being hedged and losses from investing in futures
transactions that are potentially unlimited.
The
Investment Adviser has claimed an exclusion, granted to operators of registered investment companies like the Fund, from
registration as a commodity pool operator (“CPO”) with respect to the Fund under the Commodity Exchange Act (the
“CEA”), and, therefore, is not subject to registration or regulation with respect to the Fund under the CEA. As a
result, the Fund is limited in its ability to use commodity futures (which include futures on broad-based securities indices
and interest rate futures) or options on commodity futures, engage in certain swaps transactions or make certain other
investments (whether directly or indirectly through investments in other investment vehicles) for purposes other than
“bona fide hedging,” as defined in the rules of the Commodity Futures Trading Commission. With respect to
transactions other than for bona fide hedging purposes, either: (1) the aggregate initial margin and premiums required to
establish the Fund’s positions in such investments may not exceed 5% of the liquidation value of its portfolio (after
accounting for unrealized profits and unrealized losses on any such investments); or (2) the aggregate net notional value of
such instruments, determined at the time the most recent position was established, may not exceed 100% of the liquidation
value of its portfolio (after accounting for unrealized profits and unrealized losses on any such positions). In addition to
meeting one of the foregoing trading limitations, the Fund may not market itself as a commodity pool or otherwise as a
vehicle for trading in the futures, options or swaps markets. If the Investment Adviser were required to register as a CPO
with respect to the Fund, compliance with additional registration and regulatory requirements would increase Fund expenses.
Other potentially adverse regulatory initiatives could also develop.
Interest
Rate Futures Contracts and Options Thereon. The Fund may purchase or sell interest rate futures contracts to take advantage
of, or to protect against, fluctuations in interest rates affecting the value of debt securities which the Fund holds or intends
to acquire. For example, if interest rates are expected to increase, the Fund might sell futures contracts on debt securities,
the values of which historically have a high degree of positive correlation to the values of the Fund’s portfolio securities.
Such a sale would have an effect similar to selling an equivalent value of the Fund’s portfolio securities. If interest
rates increase, the value of the Fund’s portfolio securities will decline, but the value of the futures contracts to the
Fund will increase at approximately an equivalent rate, thereby keeping the NAV of the Fund from declining as much as it otherwise
would have. The Fund could accomplish similar results by selling debt securities with longer maturities and investing in debt
securities with shorter maturities when interest rates are expected to increase. However, since the futures market may be more
liquid than the cash market, the use of futures contracts as a risk management technique allows the Fund to maintain a defensive
position without having to sell its portfolio securities.
Similarly,
the Fund may purchase interest rate futures contracts when it is expected that interest rates may decline. The purchase of futures
contracts for this purpose constitutes a hedge against increases in the price of debt securities (caused by declining interest
rates) which the Fund intends to acquire. Since fluctuations in the value of appropriately selected futures contracts should approximate
that of the debt securities that will be purchased, the Fund can take advantage of the anticipated rise in the cost of the debt
securities without actually
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buying
them. Subsequently, the Fund can make its intended purchase of the debt securities in the cash market and concurrently liquidate
its futures position.
The
purchase of a call option on a futures contract is similar in some respects to the purchase of a call option on an individual
security. Depending on the pricing of the option compared to either the price of the futures contract upon which it is based or
the price of the underlying debt securities, it may or may not be less risky than ownership of the futures contract or underlying
debt securities. As with the purchase of futures contracts, when the Fund is not fully invested it may purchase a call option
on a futures contract to hedge against a market advance due to declining interest rates.
The
purchase of a put option on a futures contract is similar to the purchase of protective put options on portfolio securities. The
Fund will purchase a put option on a futures contract to hedge the Fund’s portfolio against the risk of rising interest
rates and a consequent reduction in the value of portfolio securities.
The
writing of a call option on a futures contract constitutes a partial hedge against declining prices of the securities that are
deliverable upon exercise of the futures contract. If the futures price at expiration of the option is below the exercise price,
the Fund will retain the full amount of the option premium, which provides a partial hedge against any decline that may have occurred
in the Fund’s portfolio holdings. The writing of a put option on a futures contract constitutes a partial hedge against
increasing prices of the securities that are deliverable upon exercise of the futures contract. If the futures price at expiration
of the option is higher than the exercise price, the Fund will retain the full amount of the option premium, which provides a
partial hedge against any increase in the price of debt securities that the Fund intends to purchase. If a put or call option
the Fund has written is exercised, the Fund will incur a loss which will be reduced by the amount of the premium it received.
Depending on the degree of correlation between changes in the value of its portfolio securities and changes in the value of its
futures positions, losses of the Fund from options on futures it has written may to some extent be reduced or increased by changes
in the value of its portfolio securities.
Swap
Contracts. On behalf of the Fund, the Investment Adviser may, subject to the Fund’s investment restrictions and
guidelines established by the Board, enter into swap transactions, including total rate of return, credit default, interest rate
or other types of swaps and related derivatives. Swap contracts generally will be used by the Fund for the purpose of seeking
to increase the income of the Fund. The use of swaps is a highly specialized activity that involves investment techniques and
risks different from those associated with ordinary portfolio security transactions. In a typical swap transaction on an equity
security, a set of future cash flows is exchanged between two counterparties. One of these cash flow streams will typically be
based on a reference interest rate combined with the performance of a notional value of shares of a stock. The other will be based
on the performance of the shares of a stock. Depending on the general state of short term interest rates and the returns on the
Fund’s portfolio securities at the time an equity swap transaction reaches its scheduled termination date, there is a risk
that the Fund will not be able to obtain a replacement transaction or that the terms of the replacement will not be as favorable
as on the expiring transaction.
Securities
Index Futures Contracts and Options Thereon. Purchases or sales of securities index futures contracts are used for hedging
purposes to attempt to protect the Fund’s current or intended investments from broad fluctuations in stock or bond prices.
For example, the Fund may sell securities index futures contracts in anticipation of or during a market decline to attempt to
offset the decrease in market value of its securities
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portfolio
that might otherwise result. If such decline occurs, the loss in value of portfolio securities may be offset, in whole or part,
by gains on the futures position. When the Fund is not fully invested in the securities market and anticipates a significant market
advance, it may purchase securities index futures contracts in order to gain rapid market exposure that may, in part or entirely,
offset increases in the cost of securities that it intends to purchase. As such purchases are made, the corresponding positions
in securities index futures contracts will be closed out. The Fund may write put and call options on securities index futures
contracts for hedging purposes.
Currency
Futures and Options Thereon. Generally, foreign currency futures contracts and options thereon are similar to the interest
rate futures contracts and options thereon discussed previously. By entering into currency futures and options thereon, the Fund
will seek to establish the rate at which it will be entitled to exchange U.S. dollars for another currency at a future time. By
selling currency futures, the Fund will seek to establish the number of dollars it will receive at delivery for a certain amount
of a foreign currency. In this way, whenever the Fund anticipates a decline in the value of a foreign currency against the U.S.
dollar, the Fund can attempt to “lock in” the U.S. dollar value of some or all of the securities held in its portfolio
that are denominated in that currency. By purchasing currency futures, the Fund can establish the number of dollars it will be
required to pay for a specified amount of a foreign currency in a future month. Thus, if the Fund intends to buy securities in
the future and expects the U.S. dollar to decline against the relevant foreign currency during the period before the purchase
is effected, the Fund can attempt to “lock in” the price in U.S. dollars of the securities it intends to acquire.
The
purchase of options on currency futures will allow the Fund, for the price of the premium and related transaction costs it
must pay for the option, to decide whether or not to buy (in the case of a call option) or to sell (in the case of a put
option) a futures contract at a specified price at any time during the period before the option expires. If the Investment
Adviser, in purchasing an option, has been correct in its judgment concerning the direction in which the price of a foreign
currency would move as against the U.S. dollar, the Fund may exercise the option and thereby take a futures position to hedge
against the risk it had correctly anticipated or close out the option position at a gain that will offset, to some extent,
currency exchange losses otherwise suffered by the Fund. If exchange rates move in a way the Fund did not anticipate,
however, the Fund will have incurred the expense of the option without obtaining the expected benefit; any such movement in
exchange rates may also thereby reduce, rather than enhance, the Fund’s profits on its underlying securities
transactions.
Forward
Currency Exchange Contracts. Subject to guidelines of the Board, 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
generally will be limited to hedging involving either specific transactions or portfolio positions. The Fund does not have an
independent limitation on its investments in foreign currency futures contracts and options on foreign currency futures contracts.
At
or before the maturity of a forward sale contract, the Fund may either sell a portfolio security and make delivery of the currency,
or retain the security and offset its contractual obligations to deliver the currency by
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purchasing
a second contract pursuant to which the Fund will obtain, on the same maturity date, the same amount of the currency which it
is obligated to deliver. If the Fund retains the portfolio security and engages in an offsetting transaction, the Fund, at the
time of execution of the offsetting transaction, will incur a gain or a loss to the extent that movement has occurred in forward
contract prices. Should forward prices decline during the period between entering into a forward contract by the Fund for the
sale of a currency and the date it enters into an offsetting contract for the purchase of the currency, the Fund will realize
a gain to the extent the price of the currency it has agreed to purchase is less than the price of the currency it has agreed
to sell. Should forward prices increase, the Fund will suffer a loss to the extent the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell. Closing out forward purchase contracts involves similar offsetting
transactions.
The
cost to the Fund of engaging in currency transactions varies with factors such as the currency involved, the length of the contract
period and the market conditions then prevailing. Because forward transactions in currency exchange are usually conducted on a
principal basis, no fees or commissions are involved. The use of foreign currency contracts does not eliminate fluctuations in
the underlying prices of the securities, but it does establish a rate of exchange that can be achieved in the future. In addition,
although forward currency contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit
any potential gain that might result if the value of the currency increases.
If
a decline in any currency is generally anticipated by the Investment Adviser, the Fund may not be able to contract to sell the
currency at a price above the level to which the currency is anticipated to decline.
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.
Short
Sales Against the Box. The Fund may from time to time make short sales of securities. The market value for the securities
sold short by any one issuer will not exceed 5% of the Fund’s total assets or 5% of such issuer’s voting securities.
The Fund may not make short sales or maintain a short position if it would cause more than 25% of the Fund’s total assets,
taken at market value, to be held as collateral for such sales. The Fund may also make short sales “against the box.”
A short sale is “against the box” to the extent that the Fund contemporaneously owns or has the right to obtain at
no added cost securities identical to those sold short. In a short sale, the Fund does not immediately deliver the securities
sold or receive the proceeds from the sale.
To
secure its obligations to deliver the securities sold short, the Fund will deposit in escrow in a separate account with its custodian
an equal amount to the securities sold short or securities convertible into, or exchangeable
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for
such securities. The Fund may close out a short position by purchasing and delivering an equal amount of the 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.
The
Fund may make a short sale in order to hedge against market risks when it believes that the price of a security may decline, causing
a decline in the value of a security owned by the Fund or a security convertible into, or exchangeable for, such security, or
when the Fund does not want to sell the security it owns. Such short sale transactions may be subject to special tax rules, one
of the effects of which may be to accelerate income to the Fund. Additionally, the Fund may use short sales in conjunction with
the purchase of a convertible security when it is determined that a convertible security can be bought at a small conversion premium
and has a yield advantage relative to the underlying common stock sold short.
Repurchase
Agreements. The Fund may enter into repurchase agreements with banks and non-bank dealers of United States government
securities which are listed as reporting dealers of the Federal Reserve Bank and which furnish collateral at least equal in value
or market price to the amount of their repurchase obligation. In a repurchase agreement, the Fund purchases a debt security from
a seller who undertakes to repurchase the security at a specified resale price on an agreed future date. Repurchase agreements
are generally for one business day and generally will not have a duration of longer than one week. The SEC has taken the position
that, in economic reality, a repurchase agreement is a loan by a fund to the other party to the transaction secured by securities
transferred to the fund. The resale price generally exceeds the purchase price by an amount which reflects an agreed upon market
interest rate for the term of the repurchase agreement. The Fund’s risk is primarily that, if the seller defaults, the proceeds
from the disposition of the underlying securities and other collateral for the seller’s obligation may be less than the
repurchase price. If the seller becomes insolvent, the Fund might be delayed in or prevented from selling the collateral. In the
event of a default or bankruptcy by a seller, the Fund will promptly seek to liquidate the collateral. To the extent that the
proceeds from any sale of the collateral upon a default in the obligation to repurchase is less than the repurchase price, the
Fund will experience a loss. If the financial institution that is a party to the repurchase agreement petitions for bankruptcy
or becomes subject to the United States Bankruptcy Code, the law regarding the rights of the Fund is unsettled. As a result, under
extreme circumstances, there may be a restriction on the Fund’s ability to sell the collateral and the Fund could suffer
a loss.
Leverage.
As provided in the Investment Company Act of 1940, as amended (the “1940 Act”), and subject to compliance
with the Fund’s investment limitations, the Fund may issue senior securities representing shares, such as preferred shares,
so long as immediately following such issuance of shares, its total assets exceed 200% of the amount of such shares. The use of
leverage magnifies the impact of changes in NAV. For example, a fund that uses 33% leverage will show a 1.5% increase or decline
in NAV for each 1% increase or decline in the value of its total assets. In addition, if the cost of leverage exceeds the return
on the securities acquired with the proceeds of leverage, the use of leverage will diminish, rather than enhance, the return to
the Fund. The use of leverage generally increases the volatility of returns to the Fund. Under Rule 18f-4 under the 1940 Act,
among other things, the Fund must either use derivatives in a limited manner or comply with an outer limit on fund leverage risk
based on value-at-risk. See “Risk Factors and Special Considerations—Special Risks of Derivatives Transactions—Derivatives
Transactions Subject to Rule 18f-4 Under the 1940 Act.”
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Investment
Restrictions. The Fund has adopted certain investment restrictions as fundamental policies of the Fund. Under the
1940 Act, a fundamental policy may not be changed without the vote of a majority, as defined in the 1940 Act, of the
outstanding voting securities of the Fund (voting together as a single class). The Fund’s fundamental investment
restrictions prohibit the Fund from: (1) concentrating its investments (i.e., investing more than 25% of the Fund’s
total assets) in securities of issuers in any industry other than the Utility Industry; (2) purchasing or selling commodities
or commodity contracts, except that the Fund may purchase or sell futures contracts and related options thereon if certain
conditions are met, and purchasing or selling 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; (3) making loans of
money, except by the purchase of a portion of private or publicly distributed debt obligations or the entering into of
repurchase agreements, and 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; (4) borrowing money, except to the extent
permitted by applicable law (i.e., the Fund generally may borrow money in amounts of up to one-third of the Fund’s
total assets for any purpose, subject to the requirement that the Fund have asset coverage of at least 300% of the amount of
its borrowings at the time the borrowing is incurred, and may borrow up to 5% of the Fund’s total assets for temporary
purposes (for up to 60 days) without maintaining such 300% asset coverage); (5) issuing senior securities, except to the
extent permitted by applicable law (i.e., the Fund may issue senior securities (which may be stock, such as preferred shares,
and/or securities representing debt, such as notes), subject to the requirement that the Fund maintain asset coverage as
required by the 1940 Act); and (6) underwriting securities of other issuers except insofar as the Fund may be deemed an
underwriter under the Securities Act of 1933, as amended, in selling portfolio securities.
Portfolio
Turnover. The Fund will buy and sell 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. The portfolio turnover rate is computed by dividing the
lesser of the amount of the 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). High portfolio turnover may also result in
the realization of substantial net short term capital gains and any distributions resulting from such gains will be taxable at
ordinary income rates for United States federal income tax purposes. The Fund’s portfolio turnover rates for the fiscal
years ended December 31, 2021 and 2022 were 10% and 7%, respectively.
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 benefit from 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 investing in
the Fund.
Loans
of Portfolio Securities. To increase income, the Fund may lend its portfolio securities to securities broker-dealers or
financial institutions if (i) the loan is collateralized in accordance with applicable regulatory
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requirements
and (ii) no loan will cause the value of all loaned securities to exceed 20% of the value of its total assets.
If
the borrower fails to maintain the requisite amount of collateral, the loan automatically terminates and the Fund could use the
collateral to replace the securities while holding the borrower liable for any excess of replacement cost over the value of the
collateral. As with any extension of credit, there are risks of delay in recovery and in some cases even loss of rights in collateral
should the borrower of the securities fail financially. While these loans of portfolio securities will be made in accordance with
guidelines approved by the Board, there can be no assurance that borrowers will not fail financially. On termination of the loan,
the borrower is required to return the securities to the Fund, and any gain or loss in the market price during the loan would
inure to the Fund. If the counterparty to the loan petitions for bankruptcy or becomes subject to the United States Bankruptcy
Code, the law regarding the Fund’s rights is unsettled. As a result, under these circumstances, there may be a restriction
on the Fund’s ability to sell the collateral and it would suffer a loss.
Borrowing.
The Fund may borrow money in accordance with its investment restrictions, including as a temporary measure for extraordinary
or emergency purposes.
Risk
Factors and Special Considerations
Investors
should consider the following risk factors and special considerations associated with investing in the Fund:
Industry
Risks
Under
normal market conditions, the Fund will invest at least 80% of its net assets (plus borrowings made for investment purposes) in
foreign and domestic companies involved in the Utility Industry and, as a result, the value of the common 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, technological innovations that may render existing products and equipment obsolete and increasing
interest rates resulting in high interest costs on borrowings needed for capital construction programs, including costs associated
with compliance with environmental and other regulations.
Sector
Risk. The Fund concentrates its investments in the Utility Industry. As a result, the Fund’s investments may be
subject to greater risk and market fluctuation than a fund that had securities representing a broader range of investment alternatives.
The prices of securities issued by traditional utility companies may change in response to interest rate changes. There is no
guarantee that this relationship will continue.
Government
Regulation. Companies in certain sectors of the Utility Industry (such as power generation and distribution) are subject
to extensive governmental regulatory requirements. Certain of these regulations that are intended to limit the concentration of
ownership and control of companies in these industries may prevent companies in which the Fund invests from making certain investments
that they would otherwise make. Other regulations may cause Utility Industry companies to incur substantial additional costs or
lengthy delays in connection with the completion of capital investments or the introduction of new products or services to market.
There are substantial differences between the regulatory practices and policies in various jurisdictions, and any given regulatory
agency may make major shifts in policy from time to time. There is no assurance that regulatory authorities will, in the future,
permit companies to implement rate increases or that such increases
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will
be adequate to permit the payment of dividends on such issuer’s common shares. Additionally, existing and possible future
regulatory legislation may make it even more difficult for companies in the Utility Industry to obtain adequate relief from rate
regulation.
Regulatory
considerations limit the percentage of the shares of a public utility held by a fund or by an adviser and its affiliates on
behalf of all their clients. Various types of ownership restrictions are imposed by the Federal Communications Commission
(“FCC”) on investment in media companies and cellular licensees. These rules limit the number of broadcast
stations both locally and nationally that a single entity is permitted to own, operate, or control and prohibit ownership of
certain competitive communications providers in the same location. The FCC also applies limited ownership restrictions on
cellular licensees serving rural areas. Attributable interests that may result from the role of the Investment Adviser and
its principals in connection with other funds, managed accounts and companies may limit the Fund’s ability to invest in
certain mass media and cellular companies. These limitations may unfavorably restrict the ability of the Fund to make certain
investments.
Deregulation. Changing
regulation constitutes one of the industry-specific risks for the Fund, especially with respect to its investments in
traditionally regulated public utilities and partially regulated utility companies. Domestic and foreign regulators
monitor and control utility revenues and costs, and therefore may limit utility profits and dividends paid to investors,
which could result in reduced income to the Fund. Regulatory authorities also may restrict a company’s access to new
markets, thereby diminishing the company’s long term prospects. The deregulation of certain utility companies may
eliminate restrictions on profits and dividends, but may also subject these companies to greater risks of loss. Deregulation
of the utility industry could have a positive or negative impact on the Fund. 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. Individual sectors of the utility market are subject to
additional risks. These risks can apply to all utility companies — regulated or fully or partially deregulated and
unregulated. For example, telecommunications companies have been affected by technological developments leading to increased
competition, as well as changing regulation of local and long-distance telephone services and other
telecommunications businesses. Certain telecommunications companies have been adversely affected by the new competitive
climate.
Financing.
Currently and historically, companies in the Utility Industry have encountered difficulties in obtaining financing for
construction programs during inflationary periods. Issuers experiencing difficulties in financing construction programs may also
experience lower profitability, which can result in reduced income to the Fund.
Equipment
and Supplies. Traditional utility companies face the risk of lengthy delays and increased costs associated with the design,
construction, licensing and operation of their facilities. Moreover, technological innovations may render existing plants, equipment
or products obsolete. Increased costs and a reduction in the availability of fuel (such as oil, coal, nuclear or natural gas)
also may adversely affect the profitability of utility companies.
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Electric
utilities may be burdened by unexpected increases in operating costs. They may also be negatively affected when long term interest
rates rise. Long term borrowings are used to finance most utility investments, and rising interest rates lead to higher financing
costs and reduced earnings. There are also the considerable costs associated with environmental compliance, nuclear waste clean-up,
cap and trade or other programs designed to reduce carbon dioxide and other greenhouse emissions, and safety regulation. Increasingly,
regulators are calling upon electric utilities to bear these added costs, and there is a risk that these costs will not be fully
recovered through an increase in revenues.
Among
gas companies, there has been a move to diversify into oil and gas exploration and development, making investment returns more
sensitive to energy prices. In the case of the water utility sector, the industry is highly fragmented, and most water supply
companies find themselves in mature markets, although upgrading of fresh water and waste water systems is an expanding business.
Long
Term Objective: Not a Complete Investment Program
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 exploit 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 Fund’s investment objective as well as the shareholder’s
other investments when considering an investment in the Fund.
Market
Value and Net Asset Value
The
Fund is a diversified, closed-end management investment company. Shares of closed-end funds are bought and sold in the securities
markets and may trade at either a premium to or discount from NAV. Listed shares of closed-end investment companies often trade
at discounts from NAV. This characteristic of shares of a closed-end fund is a risk separate and distinct from the risk that its
NAV may decrease. The Fund cannot predict whether its listed shares will trade at, below or above NAV. The risk of holding shares
of a closed-end fund that might trade at a discount 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. Shortly after the inception of the Fund, the market price of the Fund exceeded the NAV and the
premium continues today. Shareholders desiring liquidity may, subject to applicable securities laws, trade their Fund shares on
the NYSE or other markets on which such shares may trade at the then-current market value, which may differ from the then-current
NAV. Shareholders will incur brokerage or other transaction costs to sell shares.
Non-Investment
Grade Securities
The
Fund may invest up to 25% of its total assets in fixed income securities rated below investment grade by recognized statistical
rating agencies or unrated securities of comparable quality. These securities, which may be preferred stock or debt, are predominantly
speculative and involve major risk exposure to adverse conditions. Debt securities that are not rated or that are rated lower
than “BBB” by S&P or lower than “Baa” by Moody’s are
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referred
to in the financial press as “junk bonds.” Such securities are subject to greater risks than investment grade securities,
which reflect their speculative character, including the following:
| ● | potentially
greater sensitivity to general economic or industry conditions; |
| ● | potential
lack of attractive resale opportunities (illiquidity); and |
| ● | additional
expenses to seek recovery from issuers who default |
Fixed
income securities purchased by the Fund may be rated as low as C by Moody’s or D by S&P or may be unrated securities
considered to be of equivalent quality. Securities that are rated C by Moody’s are the lowest rated class and can be regarded
as having extremely poor prospects of ever obtaining investment-grade standing. Debt rated D by S&P is in default or is expected
to default upon maturity of payment date.
The
market value of non-investment grade securities may be more volatile than the market value of higher rated securities and
generally tends to reflect the market’s perception of the creditworthiness of the issuer and short term market
developments to a greater extent than more highly rated securities, which primarily reflect fluctuations in general levels of
interest rates. Generally, such non-investment grade 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
securities. In addition, such securities generally present a higher degree of credit risk. The risk of loss due to default by
these issuers is significantly greater because such non-investment grade 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 Investment 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 operating history, financial
resources and its sensitivity to economic conditions and trends, the market support for the facility financed by the issue,
the perceived ability and integrity of the issuer’s management, and regulatory matters.
Non-investment
grade securities also present risks based on payment expectations. If an issuer calls the obligation for redemption (often a feature
of fixed income securities), 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 nonconvertible bonds and preferred stocks moves inversely with movements
in interest rates, when interest rates rise 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 regular income streams.
Ratings
are relative and subjective, and are not absolute standards of quality. Securities ratings are based largely on the issuer’s
historical financial condition and the rating agencies’ analysis at the time of rating. Consequently, the rating assigned
to any particular security is not necessarily a reflection of the issuer’s current financial condition.
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As
part of its investment in non-investment grade securities, the Fund may invest in securities of issuers in default. The Fund will
make an investment in securities of issuers in default only when the Investment Adviser believes that such issuers will honor
their obligations or emerge from bankruptcy protection under a plan pursuant to which the securities received by the Fund in exchange
for its defaulted securities will have a value in excess of the Fund’s investment. 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 otherwise appreciate.
Equity
Risk
Investing
in the Fund involves equity risk, which is the risk that the securities held by the Fund will fall in market value due to adverse
market and economic conditions, perceptions regarding the industries in which the issuers of securities held by the Fund participate
and the particular circumstances and performance of particular companies whose securities the Fund holds. An investment in the
Fund represents an indirect economic stake in the securities owned by the Fund, which are for the most part traded on securities
exchanges or in the OTC markets. The market value of these securities, like other market investments, may move up or down, sometimes
rapidly and unpredictably. The NAV of the Fund may at any point in time be worth less than the amount at the time the shareholder
invested in the Fund, even after taking into account any reinvestment of distributions.
Foreign
Securities
The
Fund may invest its assets in foreign securities without limitation, including securities of issuers whose primary operations
or principal trading market is in an “emerging market.” Investments in the securities of foreign issuers involve certain
considerations and risks not ordinarily associated with investments in securities of domestic issuers. Foreign companies are not
generally subject to uniform accounting, auditing and financial standards and requirements comparable to those applicable to United
States companies. Foreign securities exchanges, brokers and listed companies may be subject to less government supervision and
regulation than exists in the United States. Dividend and interest income may be subject to withholding and other foreign taxes,
which may adversely affect the net return on such investments. There may be difficulty in obtaining or enforcing a court judgment
abroad. In addition, it may be difficult to effect repatriation of capital invested in certain countries. In addition, with respect
to certain countries, there are risks of expropriation, confiscatory taxation, political or social instability or diplomatic developments
that could affect assets of the Fund held in foreign countries. Dividend income that the Fund receives from foreign securities
may not be eligible for the special tax treatment applicable to qualified dividend income.
There
may be less publicly available information about a foreign company than a United States company. Foreign securities markets may
have substantially less volume than United States securities markets and some foreign company securities are less liquid than
securities of otherwise comparable United States companies. A portfolio of foreign securities may also be adversely affected by
fluctuations in the rates of exchange between the currencies of different nations and by exchange control regulations. Foreign
markets also have different clearance and settlement procedures that could cause the Fund to encounter difficulties in purchasing
and selling securities on such markets and may result in the Fund missing attractive investment opportunities or experiencing
loss. In addition, a portfolio that includes foreign securities can expect to have a higher expense
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ratio
because of the increased transaction costs on non-United States securities markets and the increased costs of maintaining the
custody of foreign securities.
The
Fund also may purchase sponsored American Depositary Receipts (“ADRs”) or United States dollar denominated securities
of foreign issuers. ADRs are receipts issued by United States banks or trust companies in respect of securities of foreign issuers
held on deposit for use in the United States securities markets. While ADRs may not necessarily be denominated in the same currency
as the securities into which they may be converted, many of the risks associated with foreign securities may also apply to ADRs.
In addition, the underlying issuers of certain depositary receipts, particularly unsponsored or unregistered depositary receipts,
are under no obligation to distribute shareholder communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities.
Emerging
Markets
An
“emerging market” country is any country that is considered to be an emerging or developing country by the International
Bank for Reconstruction and Development (the “World Bank”). Investing in securities of companies in emerging markets
may entail special risks relating to potential political and economic instability and the risks of expropriation, nationalization,
confiscation or the imposition of restrictions on foreign investment, the lack of hedging instruments and restrictions on repatriation
of capital invested. Emerging securities markets are substantially smaller, less developed, less liquid and more volatile than
the major securities markets. The limited size of emerging securities markets and limited trading value compared to the volume
of trading in U.S. securities could cause prices to be erratic for reasons apart from factors that affect the quality of the securities.
For example, limited market size may cause prices to be unduly influenced by traders who control large positions. Adverse publicity
and investors’ perceptions, whether or not based on fundamental analysis, may decrease the value and liquidity of portfolio
securities, especially in these markets. Other risks include high concentration of market capitalization and trading volume in
a small number of issuers representing a limited number of industries, as well as a high concentration of investors and financial
intermediaries; overdependence on exports, including gold and natural resources exports, making these economies vulnerable to
changes in commodity prices; overburdened infrastructure and obsolete or unseasoned financial systems; environmental problems;
potential for sanctions; less developed legal systems, and deficiencies in regulatory oversight, market infrastructure, shareholder
protections; differences in regulatory, accounting, auditing and financial reporting and recordkeeping standards; and less reliable
securities custodial services and settlement practices.
Small
and Mid-Cap Stock Risk
The
Fund may invest in companies with small or medium capitalizations. Smaller and medium company stocks can be more volatile than,
and perform differently from, larger company stocks. There may be less trading in a smaller or medium company’s stock, which
means that buy and sell transactions in that stock could have a larger impact on the stock’s price than is the case with
larger company stocks. Smaller and medium company stocks may be particularly sensitive to changes in interest rates, borrowing
costs and earnings. Smaller and medium companies may have fewer business lines; changes in any one line of business, therefore,
may have a greater impact on a smaller and medium company’s stock price than is the case for a larger company. As a result,
the purchase or sale of more than a limited number of shares of a small and medium company may
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affect
its market price. The Fund may need a considerable amount of time to purchase or sell its positions in these securities. In addition,
smaller or medium company stocks may not be well known to the investing public.
Special
Risks of Derivative Transactions
The
Fund may participate in derivative transactions. Such transactions entail certain execution, market, liquidity, hedging and tax
risks. Participation in the options, futures or swaps 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, swaps contracts, futures contracts and options on futures contracts, swap contracts, securities indices and
foreign currencies include:
| ● | dependence
on the Investment Adviser’s ability to predict correctly movements in the direction of interest rates, securities prices
and currency markets; |
| ● | 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; |
| ● | the
fact that skills needed to use these strategies are different from those needed to select portfolio securities; |
| ● | the
possible absence of a liquid secondary market for any particular instrument at any time; |
| ● | the
possible need to defer closing out certain hedged positions to avoid adverse tax consequences; |
| ● | 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; and |
| ● | the
creditworthiness of counterparties. |
Options,
futures contracts, swaps contracts, and options thereon and forward contracts on securities and currencies may be traded on foreign
exchanges. Such transactions may not be regulated as effectively as similar transactions in the United States, may not involve
a clearing mechanism and related guarantees, and are subject to the risk of governmental actions affecting trading in, or the
prices of, foreign securities. The value of such positions also could be adversely affected by (i) other complex foreign political,
legal and economic factors, (ii) lesser availability than in the United States of data on which to make trading decisions, (iii)
delays in the ability of the Fund to act upon economic events occurring in the foreign markets during non-business hours in the
United States, (iv) the imposition of different exercise and settlement terms and procedures and margin requirements than in the
United States and (v) less trading volume. Exchanges on which options, futures, swaps, and options on futures or swaps are traded
may impose limits on the positions that the Fund may take in certain circumstances.
Many
OTC derivatives are valued on the basis of dealers’ pricing of these instruments. However, the price at which dealers value
a particular derivative and the price which the same dealers would actually be willing to pay for such derivative should the Fund
wish or be forced to sell such position may be materially different. Such differences can result in an overstatement of the Fund’s
NAV and may materially adversely affect the Fund in situations in which the Fund is required to sell derivative instruments. Exchange-traded
derivatives and OTC derivative transactions submitted for clearing through a central counterparty have become subject
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to
minimum initial and variation margin requirements set by the relevant clearinghouse, as well as possible margin requirements mandated
by the SEC or the Commodity Futures Trading Commission. These regulators also have broad discretion to impose margin requirements
on non-cleared OTC derivatives. These margin requirements will increase the overall costs for the Fund.
While
hedging can reduce or eliminate losses, it can also reduce or eliminate gains. Hedges are sometimes subject to imperfect matching
between the derivative and the underlying security, and there can be no assurance that the Fund’s hedging transactions will
be effective.
Derivatives
may give rise to a form of leverage and may expose the Fund to greater risk and increase its costs.
Under
Rule 18f-4 under the 1940 Act, among other things, the Fund must either use derivatives in a limited manner or comply with an
outer limit on fund leverage risk based on value-at-risk. See “—Derivatives Transactions Subject to Rule18f-4 Under
the 1940 Act” below.
Derivatives
Transactions Subject to Rule 18f-4 Under the 1940 Act. Rule 18f-4 under the 1940 Act governs the Fund’s use of derivative
instruments and certain other transactions that create future payment and/or delivery obligations by the Fund. Rule 18f-4 permits
the Fund to enter into Derivatives Transactions (as defined below) and certain other transactions notwithstanding the restrictions
on the issuance of “senior securities” under Section 18 of the 1940 Act. Section 18 of the Investment Company Act,
among other things, prohibits closed-end funds, including the Trust, from issuing or selling any “senior security”
representing indebtedness (unless the fund maintains 300% “asset coverage”) or any senior security representing stock
(unless the fund maintains 200% “asset coverage”). In connection with the adoption of Rule 18f-4, the SEC eliminated
the asset segregation framework arising from prior SEC guidance for covering Derivatives Transactions and certain financial instruments.
Under
Rule 18f-4, “Derivatives Transactions” include the following: (i) any swap, security-based swap (including a contract
for differences), futures contract, forward contract, option (excluding purchased options), any combination of the foregoing,
or any similar instrument, under which the Fund is or may be required to make any payment or delivery of cash or other assets
during the life of the instrument or at maturity or early termination, whether as margin or settlement payment or otherwise; (ii)
any short sale borrowing; (iii) reverse repurchase agreements and similar financing transactions, if the Fund elects to treat
these transactions as Derivatives Transactions under Rule 18f-4; and (iv) when-issued or forward-settling securities (e.g., firm
and standby commitments, including to-be-announced (“TBA”) commitments, and dollar rolls) and non-standard settlement
cycle securities, unless the Fund intends to physically settle the transaction and the transaction will settle within 35 days
of its trade date.
Unless
the Fund is relying on the Limited Derivatives User Exception (as defined below), the Fund must comply with Rule 18f-4 with respect
to its Derivatives Transactions. Rule 18f-4, among other things, requires the Fund to (i) appoint a Derivatives Risk Manager,
(ii) maintain a Derivatives Risk Management Program designed to identify, assess, and reasonably manage the risks associated with
Derivatives Transactions; (iii) comply with certain value-at-risk (VaR)-based leverage limits (VaR is an estimate of an instrument’s
or portfolio’s potential losses over a given time horizon and at a specified confidence level); and (iv) comply with certain
Board reporting and recordkeeping requirements.
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Rule
18f-4 provides an exception from the requirements to appoint a Derivatives Risk Manager, adopt a Derivatives Risk Management Program,
comply with certain VaR-based leverage limits, and comply with certain Board oversight and reporting requirements if the Fund’s
“derivatives exposure” (as defined in Rule 18f-4) is limited to 10% of its net assets (as calculated in accordance
with Rule 18f-4) and the Fund adopts and implements written policies and procedures reasonably designed to manage its derivatives
risks (the “Limited Derivatives User Exception”).
Pursuant
to Rule 18f-4, if the Fund enters into reverse repurchase agreements or similar financing transactions, the Fund will (i)
aggregate the amount of indebtedness associated with all of its reverse repurchase agreements or similar financing
transactions with the amount of any other “senior securities” representing indebtedness (e.g., bank borrowings,
if applicable) when calculating the Fund’s asset coverage ratio or (ii) treat all such transactions as Derivatives
Transactions.
The
requirements of Rule 18f-4 may limit the Fund’s ability to engage in Derivatives Transactions as part of its investment
strategies. These requirements may also increase the cost of the Fund’s investments and cost of doing business, which could
adversely affect the value of the Fund’s investments and/or the performance of the Fund.
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 or price fluctuations; |
| ● | imperfect
correlation between the contracts and the securities being hedged; and |
| ● | losses
from investing in futures transactions that are potentially unlimited. |
The
Fund’s ability to establish and close out positions in futures contracts and options thereon will be subject to the development
and maintenance of liquid markets. Although the Fund generally will purchase or sell only those futures contracts and options
thereon for which there appears to be a liquid market, there is no assurance that a liquid market on an exchange will exist for
any particular futures contract or option thereon at any particular time.
In
the event no liquid market exists for a particular futures contract or option thereon in which the Fund maintains a position,
it will not be possible to effect a closing transaction in that contract or to do so at a satisfactory price and the Fund would
have to either make or take delivery under the futures contract or, in the case of a written option, wait to sell the underlying
securities until the option expires or is exercised or, in the case of a purchased option, exercise the option. In the case of
a futures contract or an option thereon which the Fund has written and which the Fund is unable to close, the Fund would be required
to maintain margin deposits on the futures contract or option thereon and to make variation margin payments until the contract
is closed.
Successful
use of futures contracts and options thereon and forward contracts by the Fund is subject to the ability of the Investment Adviser
to predict correctly movements in the direction of interest and foreign currency rates. If the Investment Adviser’s expectations
are not met, the Fund will be in a worse position than if a hedging
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strategy
had not been pursued. For example, if the Fund has hedged against the possibility of an increase in interest rates that would
adversely affect the price of securities in its portfolio and the price of such securities increases instead, the Fund will lose
part or all of the benefit of the increased value of its securities because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Fund has insufficient cash to meet daily variation margin requirements, it may have to
sell securities to meet the requirements. These sales may be, but will not necessarily be, at increased prices that reflect the
rising market. The Fund may have to sell securities at a time when it is disadvantageous to do so.
Swap
Agreements
Swap
agreements involve the risk that the party with whom the Fund has entered into the swap will default on its obligation to
pay the Fund and the risk that the Fund will not be able to meet its obligations to pay the other party to the agreement.
Whether the Fund’s use of swap agreements will be successful in furthering its investment objective will depend on the
Investment Adviser’s ability to correctly predict whether certain types of investments are likely to produce greater
returns than other investments. Because they are two party contracts and because they may have terms of greater than seven
days, some swap agreements may be considered by the Fund to be illiquid. Restrictions imposed by the tax rules applicable to
regulated investment companies may limit the Fund’s ability to use swap agreements. The swap market currently is
largely unregulated. It is possible that developments in the swap market, including potential significant government
regulation as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank
Act”) or otherwise, could adversely affect the Fund’s ability to enter into or terminate swap agreements or to
realize amounts to be received under these agreements. Swap transactions may involve substantial leverage.
Forward
Currency Exchange Contracts
The
use of forward currency exchange contracts may involve certain risks, including the failure of the counterparty to perform its
obligations under the contract and that the use of forward contracts 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.
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.
Coronavirus
(“COVID-19”) and Global Health Event Risk
As
of the date of this annual report, there is an outbreak of a highly contagious form of a novel coronavirus known as “COVID
19.” COVID 19 has been declared a pandemic by the World Health Organization and, in response to the outbreak, the U.S. Health
and Human Services Secretary has declared a public health emergency in the United States. COVID 19 had a devastating impact on
the global economy, including the U.S. economy, and resulted in a global economic recession. Many states issued orders requiring
the closure of non essential businesses and/ or requiring residents to stay at home. The COVID 19 pandemic and preventative measures
taken to contain
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or
mitigate its spread have caused, and are continuing to cause, business shutdowns, cancellations of events and travel, significant
reductions in demand for certain goods and services, reductions in business activity and financial transactions, supply chain
interruptions and overall economic and financial market instability both globally and in the United States. Such effects will
likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter. While several countries,
as well as certain states, counties, and cities in the United States, began to relax the early public health restrictions with
a view to partially or fully reopening their economies, many cities, both globally and in the United States, continue to experience,
from time to time, surges in the reported number of cases and hospitalizations related to the COVID 19 pandemic. Recurring COVID
19 outbreaks, newly discovered variant and sub variant strains of the virus and increases in cases can, and has, led to the re
introduction of restrictions and business shutdowns in certain states, counties, and cities in the United States and globally,
and could continue to lead to the re introduction of such restrictions elsewhere. Even after the COVID 19 pandemic subsides, the
U.S. economy and most other major global economies may continue to experience a substantial economic downturn or recession, and
our business and operations, as well as the business and operations of our portfolio companies, could be materially adversely
affected by a prolonged economic downturn or recession in the United States and other major markets.
The
current economic situation and the unprecedented measures taken by state, local and national governments around the world to combat
the spread of COVID 19, as well as various social, political and psychological tensions in the United States and around the world,
may continue to contribute to severe market disruptions and volatility and reduced economic activity, may have long-term negative
effects on the U.S. and worldwide financial markets and economy and may cause further economic uncertainties in the United States
and worldwide. The prolonged continuation or further deterioration of the current U.S. and global economic downturn could adversely
impact the Fund’s portfolio. It is difficult to predict how long the financial markets and economic activity will continue
to be impacted by these events and the Fund cannot predict the effects of these or similar events in the future on the U.S. economy
and securities markets.
Despite
actions of the U.S. federal government and foreign governments, the uncertainty surrounding the COVID 19 pandemic and other
factors has contributed to significant volatility in the global public equity markets and global debt capital markets,
including the NAV of the Fund’s shares. These events could have, and/or have had, a significant impact on the
Fund’s performance, NAV, income, operating results and ability to pay distributions, as well as the performance,
income, operating results and viability of issuers in which it invests.
It
is virtually impossible to determine the ultimate impact of COVID 19 at this time. Further, the extent and strength of any economic
recovery after the COVID 19 pandemic abates, including following any intensifying of the pandemic, is uncertain and subject to
various factors and conditions. Accordingly, an investment in the Fund is subject to an elevated degree of risk as compared to
other market environments.
Market
Disruption and Geopolitical Risk
The
consequences of the conflict between Russia and Ukraine, including international sanctions, further impact on inflation and increased
disruption to supply chains may impact our portfolio companies, result in an economic downturn or recession either globally or
locally in the U.S. or other economies, reduce business activity, spawn additional conflicts (whether in the form of traditional
military action, reignited “cold” wars or in the form of virtual
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warfare
such as cyberattacks) with similar and perhaps wider ranging impacts and consequences and have an adverse impact on the Fund’s
returns and NAV.
The
occurrence of events similar to those in recent years, such as localized wars, instability, new and ongoing pandemics (such
as COVID-19), epidemics or outbreaks of infectious diseases in certain parts of the world, natural/environmental disasters,
terrorist attacks in the United States and around the world, social and political discord, debt crises sovereign debt
downgrades, increasingly strained relations between the United States and a number of foreign countries, new and continued
political unrest in various countries, the exit or potential exit of one or more countries from the European Union
(“EU”) or the Economic and Monetary Union, continued changes in the balance of political power among and within
the branches of the U.S. government, government shutdowns, among others, may result in market volatility, may have long term
effects on the U.S. and worldwide financial markets, and may cause further economic uncertainties in the United States and
worldwide. The current contentious domestic political environment, as well as political and diplomatic events within the
United States and abroad, such as the U.S. government’s inability at times to agree on a long-term budget and deficit
reduction plan, may in the future result in government shutdowns, which could have a material adverse effect on the
Fund’s investments and operations. In addition, the Fund’s ability to raise additional capital in the future
through the sale of securities could be materially affected by a government shutdown. Additional and/ or prolonged U.S.
government shutdowns may affect investor and consumer confidence and may adversely impact financial markets and the broader
economy, perhaps suddenly and to a significant degree. In particular, the escalation of the conflict between Russia and
Ukraine, including international sanctions, further impact on inflation and increased disruption to supply chains may
impact our portfolio companies. Such unfavorable economic conditions also may also be expected to increase our funding costs,
limit our access to the capital markets or result in a decision by lenders not to extend credit to us. The current political
climate has intensified concerns about a potential trade war between China and the United States, as each country has
recently imposed tariffs on the other country’s products. These actions may trigger a significant reduction in
international trade, the oversupply of certain manufactured goods, substantial price reductions of goods and possible failure
of individual companies and/or large segments of China’s export industry, which could have a negative impact on our
performance. U.S. companies that source material and goods from China and those that make large amounts of sales in China
would be particularly vulnerable to an escalation of trade tensions. Uncertainty regarding the outcome of the trade tensions
and the potential for a trade war could cause the U.S. dollar to decline against safe haven currencies, such as the Japanese
yen and the euro. Events such as these and their consequences are difficult to predict and it is unclear whether further
tariffs may be imposed or other escalating actions may be taken in the future. Any of these effects could have a material
adverse effect on our business, financial condition and results of operations.
On
January 31, 2020, the United Kingdom (“UK”) officially withdrew from the EU (commonly known as “Brexit”).
The UK and EU reached a preliminary trade agreement, which became effective on January 1, 2021, regarding the terms of their future
trading relationship relating principally to the trading of goods; however, negotiations are ongoing for matters not covered by
the agreement, such as the trade of financial services. Due to uncertainty of the current political environment, it is not possible
to foresee the form or nature of the future trading relationship between the UK and the EU. The longer term economic, legal, political
and social framework to be put in place between the UK and the EU remains unclear and the ongoing political and economic uncertainty
and periods of exacerbated volatility in both the UK and in wider European markets may continue for some time. In particular,
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Brexit
may lead to a call for similar referendums in other European jurisdictions which may cause increased economic volatility in
the European and global markets and may destabilize some or all of the other EU member countries. This uncertainty may have
an adverse effect on the economy generally and on the ability of the Fund and its investments to execute their respective
strategies, to receive attractive returns and/or to exit certain investments at an advantageous time or price. In particular,
currency volatility may mean that the returns of the Fund and its investments are adversely affected by market movements and
may make it more difficult, or more expensive, if the Fund elects to execute currency hedges. Potential decline in the value
of the British Pound and/or the Euro against other currencies, along with the potential downgrading of the UK’s
sovereign credit rating, may also have an impact on the performance of portfolio companies or investments located in the UK
or Europe. In light of the above, no definitive assessment can currently be made regarding the impact that Brexit will have
on the Fund, its investments or its organization more generally.
While
the extreme volatility and disruption that U.S. and global markets experienced for an extended period of time beginning in 2007
and 2008 had, until the recent coronavirus (COVID-19) outbreak, generally subsided, uncertainty and periods of volatility still
remain, and risks to a robust resumption of growth persist. Federal Reserve policy, including with respect to certain interest
rates, may adversely affect the value, volatility and liquidity of dividend and interest paying securities. Market volatility,
dramatic changes to interest rates and/or a return to unfavorable economic conditions may lower the Fund’s performance or
impair the Fund’s ability to achieve its investment objective.
Cybersecurity
incidents affecting particular companies or industries may adversely affect the economies of particular countries, regions or
parts of the work in which the Fund invests.
The
occurrence of any of these above events could have a significant adverse impact on the value and risk profile of the Fund’s
portfolio. The Fund does not know how long the securities markets may be affected by similar events and cannot predict the effects
of similar events in the future on the U.S. economy and securities markets. There can be no assurance that similar events and
other market disruptions will not have other material and adverse implications.
Economic
Events and Market Risk
Periods
of market volatility may continue to occur in the future, in response to various political, social and economic events both within
and outside of the United States. These conditions have resulted in, and in many cases continue to result in, greater price volatility,
less liquidity, widening credit spreads and a lack of price transparency, with many securities remaining illiquid and of uncertain
value. Such market conditions may adversely affect the Fund, including by making valuation of some of the Fund’s securities
uncertain and/or result in sudden and significant valuation increases or declines in the Fund’s holdings. If there is a
significant decline in the value of the Fund’s portfolio, this may impact the asset coverage levels for the Fund’s
outstanding leverage.
Risks
resulting from any future debt or other economic crisis could also have a detrimental impact on the global economic recovery,
the financial condition of financial institutions and our business, financial condition and results of operation. Market and economic
disruptions have affected, and may in the future affect, consumer confidence levels and spending, personal bankruptcy rates, levels
of incurrence and default on consumer debt and home prices, among other factors. To the extent uncertainty regarding the U.S.
or global economy negatively impacts consumer confidence and consumer credit factors, our business, financial condition and
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results
of operations could be significantly and adversely affected. Downgrades to the credit ratings of major banks could result in increased
borrowing costs for such banks and negatively affect the broader economy. Moreover, Federal Reserve policy, including with respect
to certain interest rates, may also adversely affect the value, volatility and liquidity of dividend- and interest-paying securities.
Market volatility, rising interest rates and/ or a return to unfavorable economic conditions could impair the Fund’s ability
to achieve its investment objective.
Regulation
and Government Intervention Risk.
Federal,
state, and other governments, their regulatory agencies or self-regulatory organizations may take actions that affect the
regulation of the issuers in which the Fund invests in ways that are unforeseeable. Legislation or regulation may also change
the way in which the Fund is regulated. Such legislation or regulation could limit or preclude the Fund’s ability to
achieve its investment objective.
In
light of popular, political and judicial focus on finance related consumer protection. Financial institution practices are also
subject to greater scrutiny and criticism generally. In the case of transactions between financial institutions and the general
public, there may be a greater tendency toward strict interpretation of terms and legal rights in favor of the consuming public,
particularly where there is a real or perceived disparity in risk allocation and/or where consumers are perceived as not having
had an opportunity to exercise informed consent to the transaction. In the event of conflicting interests between retail investors
holding common shares of a closed-end investment company such as the Fund and a large financial institution, a court may similarly
seek to strictly interpret terms and legal rights in favor of retail investors.
The
Fund may be affected by governmental action in ways that are not foreseeable, and there is a possibility that such actions could
have a significant adverse effect on the Fund and its ability to achieve its investment objective.
Inflation
Risk
Inflation
risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the
value of money. Inflation rates may change frequently and drastically as a result of various factors, including unexpected shifts
in the domestic or global economy. As inflation increases, the real value of the Fund’s shares and distributions therefore
may decline. In addition, during any periods of rising inflation, dividend rates of any debt securities issued by the Fund would
likely increase, which would tend to further reduce returns to common shareholders.
Deflation
Risk
Deflation
risk is the risk that prices throughout the economy decline over time, which may have an adverse effect on the market valuation
of companies, their assets and their revenues. In addition, deflation may have an adverse effect on the creditworthiness of issuers
and may make issuer default more likely, which may result in a decline in the value of the Fund’s portfolio.
Anti-Takeover
Provisions of the Fund’s Governing Documents
The
Fund’s Governing Documents include provisions that could limit the ability of other entities or persons to acquire control
of the Fund or convert the Fund to an open-end fund.
The
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Additional
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Special
Risks Related to Fund Investments in Preferred Securities
There
are special risks associated with the Fund’s investing in preferred securities, including:
| ● | Deferral.
Preferred securities may include provisions that permit the issuer, at its discretion, to defer dividends or distributions
for a stated period without any adverse consequences to the issuer. If the Fund owns a preferred security that is deferring its
dividends or distributions, the Fund may be required to report income for tax purposes although it has not yet received such income. |
| ● | Non-Cumulative
Dividends. Some preferred securities are non-cumulative, meaning that the dividends do not accumulate and need not ever be
paid. A portion of the portfolio may include investments in non-cumulative preferred securities, whereby the issuer does not have
an obligation to make up any arrearages to its shareholders. Should an issuer of a non-cumulative preferred security held by the
Fund determine not to pay dividends or distributions on such security, the Fund’s return from that security may be adversely
affected. There is no assurance that dividends or distributions on non-cumulative preferred securities in which the Fund invests
will be declared or otherwise made payable. |
| ● | Subordination.
Preferred securities are subordinated to bonds and other debt instruments in an issuer’s capital structure in terms
of priority to corporate income and liquidation payments, and therefore will be subject to greater credit risk than more senior
debt security instruments. |
| ● | Liquidity.
Preferred securities may be substantially less liquid than many other securities, such as common stocks or U.S. government
securities. |
| ● | Limited
Voting Rights. Generally, preferred security holders (such as the Fund) have no voting rights with respect to the issuing
company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security
holders may be entitled to elect a number of directors to the issuer’s board. Generally, once all the arrearages have been
paid, the preferred security holders no longer have voting rights. |
| ● | Special
Redemption Rights. In certain varying circumstances, an issuer of preferred securities may redeem the securities prior to
a specified date. For instance, for certain types of preferred securities, a redemption may be triggered by a change in federal
income tax or securities laws. A redemption by the issuer may negatively impact the return of the security held by the Fund. |
| ● | Phantom
Income. Some preferred securities are classified as debt for U.S. federal income tax purposes. |
Special
Risks to Holders of Notes
There
may not be an established market for our notes. To the extent that our notes trade, they may trade at a price either higher or
lower than their principal amount depending on interest rates, the rating (if any) on such notes and other factors.
Special
Risks of Notes to Holders of Common Shares
If
the interest rate on the notes approaches the net rate of return on the Fund’s investment portfolio, the benefit of leverage
to the holders of the common shares would be reduced. Any decline in the NAV of the Fund’s investments would be borne entirely
by the holders of common shares. Therefore, if the market value of the Fund’s portfolio declines, the leverage will result
in a greater decrease in NAV to the holders of common shares
The
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Additional
Fund Information (Continued) (Unaudited)
than
if the Fund were not leveraged. This greater NAV decrease will also tend to cause a greater decline in the market price for the
common shares. The Fund might be in danger of failing to maintain the required asset coverage of the notes. Holders of notes may
have different interests than holders of common shares and at times may have disproportionate influence over the Fund’s
affairs. In the event the Fund fails to maintain the specified level of asset coverage of any notes outstanding, the holders of
the notes will have the right to elect a majority of the Fund’s trustees.
Special
Risks for Holders of Subscription Rights
The
issuance of subscription rights to purchase our common shares may substantially dilute the aggregate NAV of the common
shares owned by shareholders who do not fully exercise their rights in the offering. Shareholders who do not exercise their
rights to purchase common shares will own a smaller proportional interest in the Fund than they did before the offering. In
the case of subscription rights for preferred shares, there is a risk that changes in yield or changes in the credit quality
of the Fund may result in the underlying preferred shares purchasable upon exercise of the subscription rights being less
attractive to investors at the conclusion of the subscription period. This may reduce or eliminate the value of the
subscription rights for the preferred shares. Investors who receive subscription rights may find that there is no market to
sell rights they do not wish to exercise. If investors exercise only a portion of the rights, the number of preferred shares
or common shares issued may be reduced, and the preferred shares or common shares may trade at less favorable prices than
larger offerings for similar securities.
Investment
Companies
The
Fund may invest in the securities of other investment companies to the extent permitted by law. To the extent the Fund invests
in the common equity of investment companies, the Fund will bear its ratable share of any such investment company’s expenses,
including management fees. The Fund will also remain obligated to pay management fees to the Investment Adviser with respect to
the assets invested in the securities of other investment companies. In these circumstances holders of the Fund’s common
shares will be subject to duplicative investment expenses.
Counterparty
Risk
The
Fund will be subject to credit risk with respect to the counterparties to the derivative contracts purchased by the Fund. If a
counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to financial difficulties,
the Fund may experience significant delays in obtaining any recovery under the derivative contract in bankruptcy or other reorganization
proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in such circumstances.
Loans
of Portfolio Securities
Consistent
with applicable regulatory requirements and the Fund’s investment restrictions, the Fund may lend its portfolio securities
to securities broker-dealers or financial institutions, provided that such loans are callable at any time by the Fund (subject
to certain notice provisions) and are at all times secured by cash or cash equivalents, which are maintained in a segregated account
pursuant to applicable regulations and that are at
The
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Additional
Fund Information (Continued) (Unaudited)
least
equal to the market value, determined daily, of the loaned securities. The advantage of such loans is that the Fund continues
to receive the income on the loaned securities while at the same time earning interest on the cash amounts deposited as collateral,
which will be invested in short term obligations. The Fund will not lend its portfolio securities if such loans are not permitted
by the laws or regulations of any state in which its shares are qualified for sale. The Fund’s loans of portfolio securities
will be collateralized in accordance with applicable regulatory requirements.
Management
Risk
The
Fund is subject to management risk because it is an actively managed portfolio. The Investment Adviser applies investment techniques
and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these will produce the desired
results.
Status
as a Regulated Investment Company
The
Fund has qualified, and intends to remain qualified, for federal income tax purposes as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Qualification requires, among other
things, compliance by the Fund with certain distribution requirements. Statutory limitations on distributions on the common
shares if the Fund fails to satisfy the 1940 Act’s asset coverage requirements could jeopardize the Fund’s
ability to meet such distribution requirements. The Fund presently intends, however, to purchase or redeem preferred shares
to the extent necessary in order to maintain compliance with such asset coverage requirements.
Leverage
Risk
The
Fund’s leveraged capital structure creates special risks not associated with unleveraged funds having similar investment
objectives and policies. The Fund uses financial leverage for investment purposes by issuing preferred shares. As of December
31, 2022, the amount of leverage represented approximately 21% of the Fund’s total net assets. All series of the Fund’s
preferred shares have the same seniority with respect to distributions and liquidation preference. Preferred shares have seniority
over common shares with respect to distributions and upon liquidation of the Fund.
The
Fund’s use of leverage, which can be described as exposure to changes in price at a ratio greater than the amount of equity
invested, either through the issuance of preferred shares, borrowing or other forms of market exposure, magnifies both the favorable
and unfavorable effects of price movements in the investments made by the Fund. The Fund’s leveraged capital structure creates
special risks not associated with unleveraged funds having similar investment objectives and policies. The Fund cannot assure
that the issuance of preferred shares will result in a higher yield or return to the holders of the common shares. Also, as the
Fund is utilizing leverage, a decline in NAV could affect the ability of the Fund to make common share distributions and such
a failure to pay dividends or make distributions could result in the Fund ceasing to qualify as a regulated investment company
under the Code.
| ● | Preferred
Share Risk. The issuance of preferred shares causes the NAV and market value of the common shares to become more volatile.
If the dividend rate on the preferred shares approaches the net rate of return on the Fund’s investment portfolio, the benefit
of leverage to the holders of the common shares |
The
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Additional
Fund Information (Continued) (Unaudited)
would
be reduced. If the dividend rate on the preferred shares plus the management fee annual rate of 1.00% (as applicable) exceeds
the net rate of return on the Fund’s portfolio, the leverage will result in a lower rate of return to the holders of common
shares than if the Fund had not issued preferred shares.
Any
decline in the NAV of the Fund’s investments would be borne entirely by the holders of common shares. Therefore, if the
market value of the Fund’s portfolio declines, the leverage will result in a greater decrease in NAV to the holders of common
shares than if the Fund were not leveraged. This greater NAV decrease will also tend to cause a greater decline in the market
price for the common shares. The Fund might be in danger of failing to maintain the required asset coverage of the preferred shares
or of losing its ratings on the preferred shares or, in an extreme case, the Fund’s current investment income might not
be sufficient to meet the dividend requirements on the preferred shares. In order to counteract such an event, the Fund might
need to liquidate investments in order to fund a redemption of some or all of the preferred shares.
In
addition, the Fund would pay (and the holders of common shares will bear) all costs and expenses relating to the issuance and
ongoing maintenance of the preferred shares, including the advisory fees on the incremental assets attributable to such shares.
Holders
of preferred shares may have different interests than holders of common shares and may at times have disproportionate influence
over the Fund’s affairs. Holders of preferred shares, voting separately as a single class, would have the right to elect
two members of the Board at all times and in the event dividends become two full years in arrears would have the right to elect
a majority of the Trustees until such arrearage is completely eliminated. In addition, preferred shareholders have class voting
rights on certain matters, including changes in fundamental investment restrictions and conversion of the Fund to open-end status,
and accordingly can veto any such changes.
Restrictions
imposed on the declarations and payment of dividends or other distributions to the holders of the Fund’s common shares and
preferred shares, both by the 1940 Act and by requirements imposed by rating agencies, might impair the Fund’s ability to
maintain its qualification as a regulated investment company for federal income tax purposes. While the Fund intends to redeem
its preferred shares to the extent necessary to enable the Fund to distribute its income as required to maintain its qualification
as a regulated investment company under the Code, there can be no assurance that such actions can be effected in time to meet
the Code requirements.
| ● | Portfolio
Guidelines of Rating Agencies for Preferred Shares and/or Credit Facility. In order to obtain and maintain attractive credit
quality ratings for preferred shares or borrowings, the Fund must comply with investment quality, diversification and other guidelines
established by the relevant rating agencies. These tests tend to require over-collateralization and may be more difficult to
satisfy to the extent the Fund’s portfolio securities are of lower credit quality, longer maturity or not diversified by
issuer and industry within the meaning of such rating agencies’ collateralization tests. These guidelines could affect portfolio
decisions and may be more stringent than those imposed by the 1940 Act. In the event that a rating on the Fund’s preferred
shares or notes is lowered or withdrawn by the relevant rating agency, the |
The
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Additional
Fund Information (Continued) (Unaudited)
Fund
may also be required to redeem all or part of its outstanding preferred shares or notes, and the common shares of the Fund will
lose the potential benefits associated with a leveraged capital structure.
| ● | Impact
on Common Shares. Assuming that leverage will (1) be equal in amount to approximately % of the Fund’s total net assets,
and (2) charge interest or involve dividend payments at a projected blended annual average leverage dividend or interest rate
of 4.35%, then the annual return generated by the Fund’s portfolio (net of estimated expenses) must exceed approximately
0.93% of the Fund’s total net assets in order to cover such interest or dividend payments and other expenses specifically
related to leverage. These numbers are merely estimates, used for illustration. Actual dividend rates, interest or payment rates
may vary frequently and may be significantly higher or lower than the rate estimated above. The following table is furnished in
response to requirements of the SEC. It is designed to illustrate the effect of leverage on common share total return, assuming
investment portfolio total returns (comprised of net investment income of the Fund, realized gains or losses of the Fund and changes
in the value of the securities held in the Fund’s portfolio) of –10%, –5%, 0%, 5% and 10%. These assumed investment
portfolio returns are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced
or expected to be experienced by the Fund. See “Risks.” The table further reflects leverage representing 21% of the
Fund’s total assets, the Fund’s current projected blended annual average leverage dividend or interest rate of 4.35%,
a management fee at an annual rate of 1.00% of the liquidation preference of any outstanding preferred shares and estimated annual
incremental expenses attributable to any outstanding preferred shares of 0.02% of the Fund’s net assets attributable to
common shares. |
| Assumed
Return on Portfolio (Net of Expenses) |
(10.00)% |
(5.00)% |
0.00% |
5.00% |
10.00% |
| Corresponding
Return to Common Shareholder |
(14.18)% |
(7.84)% |
(1.51)% |
4.83% |
11.17% |
Common
share total return is composed of two elements — the common share distributions paid by the Fund (the amount of which is
largely determined by the taxable income of the Fund (including realized gains or losses) after paying interest on any debt and/or
dividends on any preferred shares) and unrealized gains or losses on the value of the securities the Fund owns. As required by
SEC rules, the table assumes that the Fund is more likely to suffer capital losses than to enjoy total return. For example, to
assume a total return of 0% the Fund must assume that the income it receives on its investments is entirely offset by expenses
and losses in the value of those investments. The Fund’s shares are leveraged and the risks and special considerations related
to leverage described in this prospectus apply. Such leveraging of the shares cannot be fully achieved until the proceeds resulting
from the use of leverage have been invested in accordance with the Fund’s investment objectives and policies.
Special
Risks to Holders of Fixed Rate Preferred Shares
| ● | Illiquidity
Prior to Exchange Listing. Prior to the offering, there will be no public market for any additional series of Fixed Rate
Preferred Shares. In the event any additional series of Fixed Rate Preferred |
The
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Additional
Fund Information (Continued) (Unaudited)
Shares
are issued, prior application will have been made to list such shares on a national securities exchange, which will likely be
the NYSE. However, during an initial period, which is not expected to exceed 30 days after the date of its initial issuance, such
shares may not be listed on any securities exchange. During such period, the underwriters may make a market in such shares, though,
they will have no obligation to do so. Consequently, an investment in such shares may be illiquid during such period.
| ● | Market
Price Fluctuation. Fixed Rate Preferred Shares may trade at a premium to or discount from liquidation value for various reasons,
including changes in interest rates. |
Common
Share Distribution Policy Risk
The
Fund has adopted a policy, which may be changed at any time by the Board, of paying distributions on its common shares of
$0.05 per share per month. In the event the Fund does not generate a total return from dividends and interest received and
net realized capital gains in an amount equal to or in excess of its stated distribution in a given year, the Fund may return
capital as part of such distribution, which may have the effect of decreasing the asset coverage per share with respect to
the Fund’s preferred shares. Any return of capital should not be considered by investors as yield or total return on
their investment in the Fund. Shareholders should not assume that a distribution from the Fund is comprised exclusively of
net profits. For the fiscal year ended December 31, 2022, the Fund made distributions of $0.60 per common share, of which
approximately $0.49 per share is deemed a return of capital. The Fund has made monthly distributions with respect to its
common shares since October 1999. A portion of the distributions to holders of common shares during seventeen of the
twenty-two fiscal years since the Fund’s inception has constituted a return of capital. The composition of each
distribution is estimated based on the earnings of the Fund as of the record date for each distribution. The actual
composition of each of the current year’s distributions will be based on the Fund’s investment activity through
the end of the calendar year.
Investment
Restrictions
The
Fund has adopted certain investment limitations designed to limit investment risk and maintain portfolio diversification.
These limitations are fundamental and may not be changed without the approval of the holders of a majority, as defined in the
1940 Act, of the outstanding shares of common shares and preferred shares voting together as a single class. The Fund may
become subject to guidelines that are more limiting than the investment restrictions set forth above in order to obtain and
maintain ratings from Moody’s or Fitch Ratings Inc. on its preferred shares. See “Leverage Risk — Portfolio
Guidelines of Rating Agencies for Preferred Shares and/or Credit Facility.
Interest
Rate Transactions
The
Fund may enter into interest rate swap or cap transactions in relation to all or a portion of the Fund’s Series B Auction
Market Preferred Shares (the “Series B Preferred”) in order to manage the impact on its portfolio of changes in the
dividend rate of such shares. At present, the Fund has not entered into an interest rate swap on a percentage of its outstanding
Series B Preferred. Through these transactions the Fund may, for example, obtain the equivalent of a fixed rate for the Series
B Preferred that is lower than the Fund would have to pay if it issued Fixed Rate Preferred Shares. The use of interest rate swaps
and caps is a highly specialized activity that involves certain risks to the Fund including, among others, counterparty risk and
early termination risk.
The
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Additional
Fund Information (Continued) (Unaudited)
The
use of interest rate swaps and caps is a highly specialized activity that involves investment techniques and risks different from
those associated with ordinary portfolio security transactions. In an interest rate swap, the Fund would agree to pay to the other
party to the interest rate swap (which is known as the “counterparty”) periodically a fixed rate payment in exchange
for the counterparty agreeing to pay to the Fund periodically a variable rate payment that is intended to approximate the Fund’s
variable rate payment obligation on its Series B Preferred. In an interest rate cap, the Fund would pay a premium to the counterparty
to the interest rate cap and, to the extent that a specified variable rate index exceeds a predetermined fixed rate, would receive
from the counterparty payments of the difference based on the notional amount of such cap. Interest rate swap and cap transactions
introduce additional risk because the Fund would remain obligated to pay preferred shares dividends or distributions when due
in accordance with the statement of preferences of the Series B Preferred even if the counterparty defaulted. Depending on the
general state of short term interest rates and the returns on the Fund’s portfolio securities at that point in time, such
a default could negatively affect the Fund’s ability to make dividend or distribution payments on the Series B Preferred.
In addition, at the time an interest rate swap or cap transaction reaches its scheduled termination date, there is a risk that
the Fund will not be able to obtain a replacement transaction or that the terms of the replacement will not be as favorable as
on the expiring transaction. If this occurs, it could have a negative impact on the Fund’s ability to make dividend or distribution
payments on the Series B Preferred. To the extent there is a decline in interest rates, the value of the interest rate swap or
cap could decline, resulting in a decline in the asset coverage for the Series B Preferred. A sudden and dramatic decline in interest
rates may result in a significant decline in the asset coverage. Under the statement of preferences for each series of the preferred
shares, if the Fund fails to maintain the required asset coverage on the outstanding preferred shares or fails to comply with
other covenants, the Fund may be required to redeem some or all of these shares. The Fund generally may redeem the Series B Preferred,
in whole or in part, at its option at any time (usually on a dividend or distribution payment date), other than during a non-call
period. Such redemption would likely result in the Fund seeking to terminate early all or a portion of any swap or cap transactions.
Early termination of a swap could result in a termination payment by the Fund to the counterparty, while early termination of
a cap could result in a termination payment to the Fund.
The
Fund will usually enter into swaps or caps on a net basis; that is, the two payment streams will be netted out in a cash settlement
on the payment date or dates specified in the instrument, with the Fund receiving or paying, as the case may be, only the net
amount of the two payments. The Fund will monitor any such swap with a view to ensuring that the Fund remains in compliance with
all applicable regulatory investment policy and tax requirements.
Legislation
Risk
At
any time after the date of this report, legislation may be enacted that could negatively affect the assets of the Fund. Legislation
or regulation may change the way in which the Fund itself is regulated. The Investment Adviser cannot predict the effects of any
new governmental regulation that may be implemented and there can be no assurance that any new governmental regulation will not
adversely affect the Fund’s ability to achieve its investment objective.
The
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Additional
Fund Information (Continued) (Unaudited)
Reliance
on Service Providers Risk
The
Fund must rely upon the performance of service providers to perform certain functions, which may include functions that are integral
to the Fund’s operations and financial performance. Failure by any service provider to carry out its obligations to the
Fund in accordance with the terms of its appointment, to exercise due care and skill or to perform its obligations to the Fund
at all as a result of insolvency, bankruptcy or other causes could have a material adverse effect on the Fund’s performance
and returns to shareholders. The termination of the Fund’s relationship with any service provider, or any delay in appointing
a replacement for such service provider, could materially disrupt the business of the Fund and could have a material adverse effect
on the Fund’s performance and returns to shareholders.
Cyber
Security Risk
The
Fund and its service providers are susceptible to cyber security risks that include, among other things, theft, unauthorized
monitoring, release, misuse, loss, destruction or corruption of confidential and highly restricted data; denial of service
attacks; unauthorized access to relevant systems, compromises to networks or devices that the Fund and its service providers
use to service the Fund’s operations; or operational disruption or failures in the physical infrastructure or operating
systems that support the Fund and its service providers. Cyber attacks against or security breakdowns of the Fund or its
service providers may adversely impact the Fund and its shareholders, potentially resulting in, among other things, financial
losses; the inability of Fund shareholders to transact business and the Fund to process transactions; inability to calculate
the Fund’s NAV; violations of applicable privacy and other laws; regulatory fines, penalties, reputational damage,
reimbursement or other compensation costs; and/or additional compliance costs. The Fund may incur additional costs for cyber
security risk management and remediation purposes. In addition, cyber security risks may also impact issuers of securities in
which the Fund invests, which may cause the Fund’s investment in such issuers to lose value. There can be no assurance
that the Fund or its service providers will not suffer losses relating to cyber attacks or other information security
breaches in the future.
Misconduct
of Employees and of Service Providers Risk
Misconduct
or misrepresentations by employees of the Investment Adviser or the Fund’s service providers could cause significant losses
to the Fund. Employee misconduct may include binding the Fund to transactions that exceed authorized limits or present unacceptable
risks and unauthorized trading activities, concealing unsuccessful trading activities (which, in any case, may result in unknown
and unmanaged risks or losses) or making misrepresentations regarding any of the foregoing. Losses could also result from actions
by the Fund’s service providers, including, without limitation, failing to recognize trades and misappropriating assets.
In addition, employees and service providers may improperly use or disclose confidential information, which could result in litigation
or serious financial harm, including limiting the Fund’s business prospects or future marketing activities. Despite the
Investment Adviser’s due diligence efforts, misconduct and intentional misrepresentations may be undetected or not fully
comprehended, thereby potentially undermining the Investment Adviser’s due diligence efforts. As a result, no assurances
can be given that the due diligence performed by the Investment Adviser will identify or prevent any such misconduct.
The
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Additional
Fund Information (Continued) (Unaudited)
Senior
Securities / leverage
As
of December 31, 2022, the Fund uses leverage through the issuance of preferred shares.
Effects
of Leverage
The
following information is furnished in response to requirements of the SEC. It is designed to, among other things, illustrate
the effects of leverage through the use of senior securities, as that term is defined under Section 18 of the 1940 Act, on
Common Share total return, assuming investment portfolio total returns (consisting of income and changes in the value of
investments held in a Fund’s portfolio) of -10%, -5%, 0%, 5% and 10%. The table below reflects the Fund’s
continued use of preferred shares, as of December 31, 2022 as a percentage of total managed assets (including assets
attributable to such leverage), the estimated annual effective preferred shares dividend rate and interest expense rate
payable by the Fund on such instruments (based on market conditions as of December 31, 2022), and the annual return that the
Fund’s portfolio must experience (net of expenses) in order to cover such costs. The information below does not reflect
the Fund’s use of certain other forms of economic leverage achieved through the use of other instruments or
transactions not considered to be senior securities under the 1940 Act, such as derivative instruments.
| Preferred
Shares as a Percentage of Total Managed Assets (Including Assets Attributable to Preferred Shares) |
21% |
| Estimated Annual Effective Preferred
Share Dividend Rate |
4.35% |
| Annual
Return Fund Portfolio Must Experience (net of expenses) to Cover Estimated Annual Effective Preferred Share Dividend Rate |
0.93% |
| Common Share Total Return for
(10.00)% Assumed Portfolio Total Return |
|
| Common Share Total Return for
(5.00)% Assumed Portfolio Total Return |
(7.77)% |
| Common Share Total Return for
0.00% Assumed Portfolio Total Return |
(1.43)% |
| Common Share Total Return for
5.00% Assumed Portfolio Total Return |
4.90% |
| Common Share Total Return for
10.00% Assumed Portfolio Total Return |
11.24% |
Common
shares total return is composed of two elements — the distributions paid by a Fund to holders of common shares (the amount
of which is largely determined by the net investment income of the Fund after paying dividend payments on any preferred shares
issued by the Fund and expenses on any forms of leverage outstanding) and gains or losses on the value of the securities and other
instruments the Fund owns. As required by SEC rules, the table assumes that a Fund is more likely to suffer capital losses than
to enjoy capital appreciation. For example, to assume a total return of 0%, a Fund must assume that the income it receives on
its investments is entirely offset by losses in the value of those investments. This table reflects hypothetical
The
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Additional
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performance
of the Fund’s portfolio and not the actual performance of the Fund’s common shares, the value of which is determined
by market forces and other factors. Should the Fund elect to add additional leverage to its portfolio, any benefits of such additional
leverage cannot be fully achieved until the proceeds resulting from the use of such leverage have been received by the Fund and
invested in accordance with the Fund’s investment objectives and policies. As noted above, the Fund’s willingness
to use additional leverage, and the extent to which leverage is used at any time, will depend on many factors, including, among
other things, the Fund’s assessment of the yield curve environment, interest rate trends, market conditions and other factors.
SUMMARY
OF FUND EXPENSES
The
following table is intended to assist you in understanding the various costs and expenses directly or indirectly associated with
investing in shares of common Shares, as a percentage of net assets attributable to common Shares. All expenses of the Fund will
be borne, directly or indirectly, by the common shareholders. Amounts are for the current fiscal year.
| Annual
Expenses |
|
Percentages
of Net Assets |
| |
Attributable
to Common Shares |
| Management Fees(a) |
|
1.27% |
| Other Expense(b) |
|
0.38% |
| Total Annual Expenses |
|
1.65% |
| Dividends on Preferred Shares(c) |
|
1.16% |
| Total Annual Expenses and Dividends
on Preferred |
|
2.81% |
| (a) | The
Investment Adviser’s fee is 1.00% annually of the Fund’s average weekly net
assets. The Fund’s average weekly net assets will be deemed to be the average weekly
value of the Fund’s total assets minus the sum of the Fund’s liabilities
(such liabilities exclude (i) the aggregate liquidation preference of outstanding shares
of preferred Shares and accumulated dividends, if any, on those shares and (ii) the liabilities
for any money borrowed). Consequently, because the Fund has preferred Shares outstanding,
the investment management fees and other expenses as a percentage of net assets attributable
to common Shares will be higher than if the Fund did not utilize a leveraged capital
structure. |
| (b) | “Other
Expenses” are based on the amounts for the year ended December 31, 2022. |
| (c) | Dividends
on Preferred Stock represent the estimated annual distributions on the existing preferred
stock outstanding. |
The
following example illustrates the expenses you would pay on a $1,000 investment in common Shares, assuming a 5% annual portfolio
total return.*
| |
1
Year |
|
3
Year |
|
5
Year |
|
10
Year |
| Total
Expenses Incurred |
$28 |
|
$87 |
|
$148 |
|
$313 |
| * | The
example should not be considered a representation of future expenses. The example is
based on Total Annual Expenses and Dividends on Preferred Shares shown in the table above
and assumes that |
The
Gabelli Utility Trust
Additional
Fund Information (Continued) (Unaudited)
the
amounts set forth in the table do not change and that all distributions are reinvested at net asset value. Actual expenses may
be greater or less than those assumed. Moreover, the Fund’s actual rate of return may be greater or less than the hypothetical
5% return shown in the example.
The
above example includes Dividends on Preferred Shares. If Dividends on Preferred Shares were not included in the example calculation,
the expenses would be as follows (based on the same assumptions as above).
| |
1
Year |
|
3
Year |
|
5
Year |
|
10
Year |
| Total
Expenses Incurred |
$17 |
|
$52 |
|
$89 |
|
$195 |
Share
Price Data The following table sets forth for the quarters indicated, the high and low closing prices on the NYSE per
share of the Fund’s common shares and the NAV and the premium or discount from NAV at which the common shares was
trading, expressed as a percentage of NAV, at each of the high and low NYSE closing prices provided.
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Corresponding |
|
|
|
|
| |
|
|
|
|
Net
Asset |
|
Corresponding |
| |
|
|
|
|
Value |
|
Premium
or |
| |
Common
Share |
|
(“NAV”)
Per |
|
Discount
as a % |
| |
Market
Price |
|
Share |
|
of
NAV |
| Quarter
Ended |
High |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
| March 31, 2021 |
$8.00 |
|
$6.64 |
|
$4.23 |
|
$3.79 |
|
89.12% |
|
75.12% |
| June 30, 2021 |
$8.02 |
|
$6.81 |
|
$4.36 |
|
$4.53 |
|
83.94% |
|
50.33% |
| September 30, 2021 |
$8.28 |
|
$7.58 |
|
$4.36 |
|
$4.28 |
|
89.90% |
|
77.10% |
| December 31, 2021 |
$8.25 |
|
$7.82 |
|
$4.28 |
|
$4.15 |
|
92.75% |
|
88.43% |
| March 31, 2022 |
$8.34 |
|
$6.90 |
|
$4.25 |
|
$4.09 |
|
96.24% |
|
68.70% |
| June 30, 2022 |
$7.35 |
|
$6.41 |
|
$4.33 |
|
$3.74 |
|
69.75% |
|
71.39% |
| September 30, 2022 |
$7.98 |
|
$6.57 |
|
$4.08 |
|
$3.58 |
|
95.59% |
|
83.52% |
| December 31, 2022 |
$7.51 |
|
$6.68 |
|
$3.65 |
|
$3.35 |
|
105.75% |
|
99.40% |
| |
|
|
|
|
|
|
|
|
|
|
|
Portfolio
Managers
During
the year ended December 31, 2022, there were no changes to the management team of the Fund.
Unresolved
Staff Comments
The
Fund does not believe that there are any material unresolved written comments, received 180 days or more before December 31, 2022
from the Staff of the SEC regarding any of the Fund’s periodic or current reports under the Securities Exchange Act or the
Investment Company Act, or its registration statement.
The
Gabelli Utility Trust
Additional
Fund Information (Continued) (Unaudited)
AUTOMATIC
DIVIDEND REINVESTMENT AND VOLUNTARY CASH PURCHASE PLANS
Under
the Fund’s Automatic Dividend Reinvestment Plan and Voluntary Cash Purchase Plan (the “Plan”), a shareholder
whose shares of common stock are registered in his or her own name will have all distributions reinvested automatically by Computershare
Trust Company, N.A. (“Computershare”), which is an 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 shares of 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 Computershare as dividend-disbursing
agent.
Enrollment
in the Plan
It
is the policy of The Gabelli Utility Trust (the “Fund”) to automatically reinvest dividends payable to common shareholders.
As a “registered” shareholder you automatically become a participant in the Fund’s Automatic Dividend Reinvestment
Plan (the “Plan”). The Plan authorizes the Fund to credit common shares to participants upon an income dividend or
a capital gains distribution regardless of whether the shares are trading at a discount or a premium to net asset value.
Be
advised that the common shares of The Gabelli Utility Trust have traded at excessive premiums (whereby the market price is much
greater than the underlying net asset value.) Dividend reinvestment may be made at an excessive premium, which is not likely to
be sustainable.
All
distributions to shareholders whose shares are registered in their own names will be automatically reinvested pursuant to
the Plan in additional shares of the Fund. Plan participants may send their share certificates to Computershare Trust
Company, N.A. (“Computershare”) to be held in their dividend reinvestment account. Registered shareholders
wishing to receive their distributions in cash may submit this request through the Internet, by telephone or in writing
to:
The
Gabelli Utility Trust
P.O.
Box 505000
Louisville,
KY 40233-5000
Telephone:
(800) 336-6983
Website: www.computershare.com/investor
Shareholders
requesting this cash election must include the shareholder’s name and address as they appear on the Fund’s records.
Shareholders with additional questions regarding the Plan or requesting a copy of the terms of the Plan, may contact Computershare
at the website or telephone number above.
If
your shares are held in the name of a broker, bank, or nominee, you should contact such institution. If such institution is not
participating in the Plan, your account will be credited with a cash dividend. In order to participate in the Plan through such
institution, it may be necessary for you to have your shares taken out of
The
Gabelli Utility Trust
Additional
Fund Information (Continued) (Unaudited)
“street
name” and re-registered in your own name. Once registered in your own name, your distributions will be automatically reinvested.
Certain brokers participate in the Plan. Shareholders holding shares in “street name” at participating institutions
will have dividends automatically reinvested. Shareholders wishing a cash dividend at such institution must contact their broker
to make this change.
The
number of common shares distributed to participants in the Plan in lieu of cash dividends is determined in the following manner.
Under the Plan, whenever the market price of the Fund’s common shares is equal to or exceeds net asset value at the time
shares are valued for purposes of determining the number of shares equivalent to the cash dividends or capital gains distribution,
participants are issued common shares 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 Fund’s common shares. The valuation date is the dividend or distribution payment
date or, if that date is not a New York Stock Exchange (“NYSE”) trading day, the next trading day. If the net asset
value of the common shares at the time of valuation exceeds the market price of the common shares, participants will receive common
shares from the Fund valued at market price. If the Fund should declare a dividend or capital gains distribution payable only
in cash, Computershare will buy common shares in the open market, or on the NYSE or elsewhere, for the participants’ accounts,
except that Computershare 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 the common shares exceeds the then current net asset
value.
The
automatic reinvestment of dividends and capital gains distributions will not relieve participants of any income tax which may
be payable on such distributions. A participant in the Plan will be treated for federal income tax purposes as having received,
on a dividend payment date, a dividend or distribution in an amount equal to the cash the participant could have received instead
of shares.
Voluntary
Cash Purchase Plan
The
Voluntary Cash Purchase Plan is yet another vehicle for our shareholders to increase their investment in the Fund. In order to
participate in the Voluntary Cash Purchase Plan, shareholders must have their shares registered in their own name.
Participants
in the Voluntary Cash Purchase Plan have the option of making additional cash payments to Computershare for investments in
the Fund’s shares at the then current market price. Shareholders may send an amount from $250 to $10,000. Computershare
will use these funds to purchase shares in the open market on or about the 1st and 15th of each month. Computershare will
charge each shareholder who participates $0.75, plus a per share fee (currently $0.02 per share). Per share fees include any
applicable brokerage commissions Computershare is required to pay and fees for such purchases are expected to be less than
the usual fees for such transactions. It is suggested that any voluntary cash payments be sent to Computershare, P.O. Box
6006, Carol Stream, IL 60197-6006 such that Computershare receives such payments approximately two business days before the
1st and 15th of the month. Funds not received at least two business days before the investment date shall be held for
investment until the next purchase date. A payment may be withdrawn without charge if notice is received by Computershare at
least two business days before such payment is to be invested.
Shareholders
wishing to liquidate shares held at Computershare may do so through the Internet, in writing or by telephone to the above-mentioned
website, address or telephone number. Include in your request your name, address, and account number. Computershare will sell
such shares through a broker-dealer selected by
The
Gabelli Utility Trust
Additional
Fund Information (Continued) (Unaudited)
Computershare
within 5 business days of receipt of the request. The sale price will equal the weighted average price of all shares sold through
the Plan on the day of the sale, less applicable fees. Participants should note that Computershare is unable to accept instructions
to sell on a specific date or at a specific price. The cost to liquidate shares is $2.50 per transaction as well as the per share
fee (currently $0.10 per share) Per share fees include any applicable brokerage commissions Computershare is required to pay and
are expected to be less than the usual fees for such transactions.
For
more information regarding the Automatic Dividend Reinvestment Plan and Voluntary Cash Purchase Plan, brochures are available
by calling (914) 921-5070 or by writing directly to the Fund.
The
Fund reserves the right to amend or terminate the Plan as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to written notice of the change sent to the members of the Plan at least 30 days before the record date for such
dividend or distribution. The Plan also may be amended or terminated by Computershare on at least 30 days written notice to participants
in the Plan.
The
Gabelli Utility Trust
Additional
Fund Information (Continued) (Unaudited)
Selected
data for a share of beneficial interest outstanding throughout each year:
| | |
Year
Ended December 31, |
| |
2017 | | |
2016 | | |
2015 | | |
2014 | | |
2013 | |
| Operating Performance: | |
| | |
| | |
| | |
| |
| Net
asset value, beginning of year | |
$ | 5.45 | | |
$ | 5.13 | | |
$ | 6.16 | | |
$ | 5.98 | | |
$ | 5.48 | |
| Net investment
income | |
| 0.11 | | |
| 0.11 | | |
| 0.13 | | |
| 0.13 | | |
| 0.14 | |
| Net realized
and unrealized gain/(loss) on investments, swap contracts, and
foreign currency transactions | |
| 0.48 | | |
| 0.92 | | |
| (0.53 | ) | |
| 0.69 | | |
| 1.01 | |
| Total
from investment operations | |
| 0.59 | | |
| 1.03 | | |
| (0.40 | ) | |
| 0.82 | | |
| 1.15 | |
| Distributions
to Preferred Shareholders: (a) | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net investment
income | |
| (0.02 | ) | |
| (0.01 | ) | |
| (0.01 | ) | |
| (0.01 | ) | |
| (0.04 | ) |
| Net realized
gain | |
| (0.09 | ) | |
| (0.07 | ) | |
| (0.03 | ) | |
| (0.04 | ) | |
| (0.01 | ) |
| Total
distributions to preferred shareholders | |
| (0.11 | ) | |
| (0.08 | ) | |
| (0.04 | ) | |
| (0.05 | ) | |
| (0.05 | ) |
| Net
Increase/(Decrease) in Net Assets Attributable to Common Shareholders
Resulting from Operations | |
| 0.48 | | |
| 0.95 | | |
| (0.44 | ) | |
| 0.77 | | |
| 1.10 | |
| Distributions
to Common Shareholders: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net investment
income | |
| (0.10 | ) | |
| (0.09 | ) | |
| (0.11 | ) | |
| (0.11 | ) | |
| (0.12 | ) |
| Net realized
gain | |
| (0.49 | ) | |
| (0.48 | ) | |
| (0.27 | ) | |
| (0.40 | ) | |
| (0.42 | ) |
| Return
of capital | |
| (0.01 | ) | |
| (0.03 | ) | |
| (0.22 | ) | |
| (0.09 | ) | |
| (0.06 | ) |
| Total
distributions to common shareholders | |
| (0.60 | ) | |
| (0.60 | ) | |
| (0.60 | ) | |
| (0.60 | ) | |
| (0.60 | ) |
| Fund
Share Transactions: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Increase
in net asset value from common share transactions | |
| 0.01 | | |
| 0.01 | | |
| 0.01 | | |
| 0.01 | | |
| 0.00 | (b) |
| Offering
costs and adjustments to offering costs for preferred shares charged
or credited to paid-in capital | |
| 0.00 | (b) | |
| (0.04 | ) | |
| — | | |
| — | | |
| 0.00 | (b) |
| Total
Fund share transactions | |
| 0.01 | | |
| (0.03 | ) | |
| 0.01 | | |
| 0.01 | | |
| 0.00 | (b) |
| Net
Asset Value Attributable to Common Shareholders, End of Year | |
$ | 5.34 | | |
$ | 5.45 | | |
$ | 5.13 | | |
$ | 6.16 | | |
$ | 5.98 | |
| NAV
total return† | |
| 9.27 | % | |
| 18.62 | % | |
| (7.12 | )% | |
| 13.87 | % | |
| 20.99 | % |
| Market
value, end of year | |
$ | 7.10 | | |
$ | 6.30 | | |
$ | 5.70 | | |
$ | 7.32 | | |
$ | 6.39 | |
| Investment
total return†† | |
| 23.48 | % | |
| 22.08 | % | |
| (14.15 | )% | |
| 25.32 | % | |
| 14.13 | % |
| Ratios
to Average Net Assets and Supplemental Data: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net assets
including liquidation value of preferred shares, end of
year (in 000’s) | |
$ | 336,165 | | |
$ | 337,831 | | |
$ | 270,508 | | |
$ | 311,044 | | |
$ | 300,389 | |
| Net assets
attributable to common shares, end of year (in 000’s) | |
$ | 234,833 | | |
$ | 236,498 | | |
$ | 219,176 | | |
$ | 259,711 | | |
$ | 249,057 | |
| Ratio
of net investment income to average net assets attributable to common
shares before preferred share distributions | |
| 2.04 | % | |
| 2.02 | % | |
| 2.41 | % | |
| 2.06 | % | |
| 2.36 | % |
| Ratio
of operating expenses to average net assets attributable to common shares
before fee waived | |
| 1.80 | %(c) | |
| 1.71 | %(c) | |
| 1.57 | %(c) | |
| 1.59 | % | |
| 1.55 | % |
| Ratio
of operating expenses to average net assets attributable to common shares
net of advisory fee reduction, if any | |
| 1.80 | %(c) | |
| 1.71 | %(c) | |
| 1.35 | %(c) | |
| 1.59 | % | |
| 1.55 | % |
| Ratio
of operating expenses to average net assets including liquidation value
of preferred shares before fee waived | |
| 1.26 | %(c) | |
| 1.27 | %(c) | |
| 1.29 | %(c) | |
| 1.32 | % | |
| 1.28 | % |
| Ratio
of operating expenses to average net assets including liquidation value
of preferred shares net of advisory fee reduction, if any | |
| 1.26 | %(c) | |
| 1.27 | %(c) | |
| 1.11 | %(c) | |
| 1.32 | % | |
| 1.28 | % |
| Portfolio
turnover rate | |
| 18 | % | |
| 22 | % | |
| 9 | % | |
| 17 | % | |
| 16 | % |
The
Gabelli Utility Trust
Additional
Fund Information (Continued) (Unaudited)
Selected
data for a share of beneficial interest outstanding throughout each year:
| | |
| | |
| | |
| | |
| | |
| |
| | |
Year
Ended December 31, | |
| |
2017 | | |
2016 | | |
2015 | | |
2014 | | |
2013 | |
| Cumulative Preferred Shares: | |
| | |
| | |
| | |
| |
| 5.625%
Series A Preferred | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liquidation
value, end of year (in 000’s) | |
$ | 28,832 | | |
$ | 28,832 | | |
$ | 28,832 | | |
$ | 28,832 | | |
$ | 28,832 | |
| Total
shares outstanding (in 000’s) | |
| 1,153 | | |
| 1,153 | | |
| 1,153 | | |
| 1,153 | | |
| 1,153 | |
| Liquidation
preference per share | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | | |
$ | 25.00 | |
| Average
market value (d) | |
$ | 25.68 | | |
$ | 25.88 | | |
$ | 25.55 | | |
$ | 25.14 | | |
$ | 25.25 | |
| Asset
coverage per share (e) | |
$ | 82.94 | | |
$ | 83.35 | | |
$ | 131.74 | | |
$ | 151.49 | | |
$ | 146.30 | |
| Series
B Auction Market Preferred | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liquidation
value, end of year (in 000’s) | |
$ | 22,500 | | |
$ | 22,500 | | |
$ | 22,500 | | |
$ | 22,500 | | |
$ | 22,500 | |
| Total
shares outstanding (in 000’s) | |
| 1 | | |
| 1 | | |
| 1 | | |
| 1 | | |
| 1 | |
| Liquidation
preference per share | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | |
| Liquidation
value (f) | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | | |
$ | 25,000 | |
| Asset
coverage per share (e) | |
$ | 82,936 | | |
$ | 83,347 | | |
$ | 131,744 | | |
$ | 151,486 | | |
$ | 146,297 | |
| 5.375%
Series C Preferred | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liquidation
value, end of year (in 000’s) | |
$ | 50,000 | | |
$ | 50,000 | | |
| — | | |
| — | | |
| — | |
| Total
shares outstanding (in 000’s) | |
| 2,000 | | |
| 2,000 | | |
| — | | |
| — | | |
| — | |
| Liquidation
preference per share | |
$ | 25.00 | | |
$ | 25.00 | | |
| — | | |
| — | | |
| — | |
| Average
market value (d) | |
$ | 25.32 | | |
$ | 25.28 | | |
| — | | |
| — | | |
| — | |
| Asset
coverage per share (e) | |
$ | 82.94 | | |
$ | 83.35 | | |
| — | | |
| — | | |
| — | |
| Asset
Coverage (g) | |
| 332 | % | |
| 333 | % | |
| 527 | % | |
| 606 | % | |
| 585 | % |
| † | Based
on net asset value per share, adjusted for reinvestment of distributions at the net asset
value per share on the ex-dividend dates. |
| †† | Based
on market value per share, adjusted for reinvestment of distributions at prices determined
under the Fund’s dividend reinvestment plan. |
| (a) | Calculated
based on average common shares outstanding on the record dates throughout the years. |
| (b) | Amount
represents less than $0.005 per share. |
| (c) | The
Fund received credits from a designated broker who agreed to pay certain Fund operating
expenses. For the years ended December 31, 2017, 2016, and 2015, there was no impact
on the expense ratios. |
| (d) | Based
on weekly prices. |
| (e) | Asset
coverage per share is calculated by combining all series of preferred shares. |
| (f) | Since
February 2008, the weekly auctions have failed. Holders that have submitted orders have
not been able to sell any or all of their shares in the auction. |
| (g) | Asset
coverage is calculated by combining all series of preferred shares. |
The
Gabelli Utility Trust
Additional
Fund Information (Unaudited) (Continued)
MANAGEMENT
OF THE FUND
Trustees
and Officers
The
business and affairs of the Fund are managed under the direction of the Fund’s Board of Trustees. Information pertaining
to the Trustees and Officers of the Fund is set forth below. The Fund’s Statement of Additional Information includes additional
information about the Fund’s Trustees and is available without charge, upon request, by calling 800-GABELLI (800-422-3554)
or by writing to The Gabelli Utility Trust at One Corporate Center, Rye, NY 10580-1422.
Name, Position(s)
Address1
and Year of Birth |
|
Term of Office
and
Length of
Time Served2 |
|
Number of
Funds
in Fund
Complex
Overseen
by Trustee3 |
|
Principal Occupation(s)
During Past Five Years |
|
Other Directorships
Held by Trustee3 |
| |
|
|
|
|
|
|
|
|
| INTERESTED TRUSTEES4: |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Mario J. Gabelli, CFA
Chairman and Chief
Investment Officer
1942 |
|
Since
1999*** |
|
31 |
|
Chairman,
Chief Executive Officer, and Chief Investment Officer– Value Portfolios of GAMCO Investors, Inc. and Chief Investment
Officer – Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management, Inc.; Director/ Trustee or Chief Investment
Officer of other registered investment companies within the Gabelli Fund Complex; Chief Executive Officer of GGCP, Inc.; Executive
Chairman of Associated Capital Group, Inc. |
|
Director
of Morgan Group Holding, Co. (holding company) (2001-2019); Chairman of the Board and Chief Executive Officer of LICT Corp.
(multimedia and communication services company); Director of CIBL, Inc. (broadcasting and wireless communications); Director
of ICTC Group Inc. (communications) (2013-2018) |
| |
|
|
|
|
|
|
|
|
John D. Gabelli
Trustee
1944 |
|
Since
1999** |
|
12 |
|
Former
Senior Vice President of G.research, LLC (and its predecessor) (1991-2019) |
|
— |
| |
|
|
|
|
|
|
|
|
| INDEPENDENT
TRUSTEES5: |
|
|
|
|
|
|
| |
|
|
|
|
|
|
John Birch6,7
Trustee
1950 |
|
Since
2018* |
|
8 |
|
Partner,
The Cardinal Partners Global; Chief Operating Officer of Sentinel Asset Management and Chief Financial Officer and Chief Risk
Officer of Sentinel Group Funds (2005-2015) |
|
— |
| |
|
|
|
|
|
|
|
|
Elizabeth C. Bogan
Trustee
1944 |
|
Since
2018*** |
|
12 |
|
Senior
Lecturer in Economics at Princeton University |
|
— |
| |
|
|
|
|
|
|
|
|
James P. Conn6
Trustee
1938 |
|
Since
1999** |
|
23 |
|
Former
Managing Director and Chief Investment Officer of Financial Security Assurance Holdings Ltd. (1992-1998) |
|
— |
The
Gabelli Utility Trust
Additional
Fund Information (Unaudited) (Continued)
Name, Position(s)
Address1
and Year of Birth |
|
Term of Office
and
Length of
Time Served2 |
|
Number of
Funds
in Fund
Complex
Overseen
by Trustee3 |
|
Principal Occupation(s)
During Past Five Years |
|
Other Directorships
Held by Trustee3 |
| |
|
|
|
|
|
|
|
|
Vincent D. Enright8
Trustee
1943 |
|
Since
1999*** |
|
17 |
|
Former
Senior Vice President and Chief Financial Officer of KeySpan Corp. (public utility) (1994-1998) |
|
Director
of Echo Therapeutics, Inc. (therapeutics and diagnostics) (2008-2014); Director of The LGL Group, Inc. (diversified manufacturing)
(2011-2014) |
| |
|
|
|
|
|
|
|
|
Frank J. Fahrenkopf, Jr.7
Trustee
1939 |
|
Since
1999* |
|
11 |
|
Co-Chairman
of the Commission on Presidential Debates; Former President and Chief Executive Officer of the American Gaming Association
(1995-2013); Former Chairman of the Republican National Committee (1983- 1989) |
|
Director
of First Republic Bank (banking); Director of Eldorado Resorts, Inc. (casino entertainment company) |
| |
|
|
|
|
|
|
|
|
Michael Ferrantino9
Trustee
1971 |
|
Since
2017** |
|
6 |
|
Chief
Executive Officer of InterEx Inc. |
|
President,
CEO, and Director of LGL Group; Director of LGL Systems Acquisition Corp. (Aerospace and Defense Communications) |
| |
|
|
|
|
|
|
|
|
Leslie F. Foley7
Trustee
1968 |
|
Since
2021** |
|
15 |
|
Attorney;
Serves on the Boards of the Addison Gallery of American Art at Phillips Academy Andover, Vice President, Global Ethics &
Compliance and Associate General Counsel for News Corporation (2008-2010) |
|
— |
| |
|
|
|
|
|
|
|
|
Michael J. Melarkey
Trustee
1949 |
|
Since
2016** |
|
23 |
|
Of Counsel
in the law firm of McDonald Carano Wilson LLP; Partner in the law firm of Avansino, Melarkey, Knobel, Mulligan & McKenzie
(1980-2015) |
|
Chairman
of Southwest Gas Corporation (natural gas utility) |
| |
|
|
|
|
|
|
|
|
Robert J. Morrissey
Trustee
1939 |
|
Since
1999* |
|
7 |
|
Partner
in the law firm of Morrissey, Hawkins & Lynch |
|
Chairman
of the Board of Directors, Belmont Savings Bank |
| |
|
|
|
|
|
|
|
|
Kuni Nakamura
Trustee
1968 |
|
Since
2012*** |
|
36 |
|
President
of Advanced Polymer, Inc. (chemical manufacturing company); President of KEN Enterprises, Inc. (real estate); Trustee on Long
Island University Board of Trustees; Trustee on Fordham Preparatory School Board of Trustees |
|
— |
The
Gabelli Utility Trust
Additional
Fund Information (Unaudited) (Continued)
Name, Position(s)
Address1
and Year of Birth |
|
Term of Office
and
Length of
Time Served2 |
|
Number of
Funds
in Fund
Complex
Overseen
by Trustee3 |
|
Principal Occupation(s)
During Past Five Years |
|
Other Directorships
Held by Trustee3 |
| |
|
|
|
|
|
|
|
|
Salvatore J. Zizza10
Trustee
1945 |
|
Since
1999* |
|
34 |
|
President
of Zizza & Associates Corp. (private holding company); Chairman of Bergen Cove Realty Inc. (residential real estate) |
|
Director
and Chairman of Trans-Lux Corporation (business services); Director and Chairman of Harbor Diversified Inc. (pharmaceuticals)
(2009-2018); Retired Chairman of BAM (semiconductor and aerospace manufacturing) |
The
Gabelli Utility Trust
Additional
Fund Information (Unaudited) (Continued)
Name, Position(s)
Address1
and Year of Birth |
|
Term of Office
and Length of
Time Served2 |
|
Principal Occupation(s)
During Past Five Years |
| |
|
|
|
|
| OFFICERS: |
|
|
|
|
| |
|
|
|
|
|
John C. Ball
President and Treasurer
1976 |
|
Since
2017 |
|
Officer
of registered investment companies within the Gabelli Fund Complex since 2017; Vice President and Assistant Treasurer of AMG
Funds, 2014-2017; Chief Executive Officer, G.distributors, LLC since December 2020 |
| |
|
|
|
|
Peter Goldstein
Secretary and Vice President
1953 |
|
Since
2020 |
|
General
Counsel, GAMCO Investors, Inc. and Chief Legal Officer, Associated Capital Group, Inc. since 2021; General Counsel and Chief
Compliance Officer, Buckingham Capital Management, Inc. (2012-2020); Chief Legal Officer and Chief Compliance Officer, The
Buckingham Research Group, Inc. (2012-2020) |
| |
|
|
|
|
Richard J. Walz
Chief Compliance Officer
1959 |
|
Since
2013 |
|
Chief
Compliance Officer of registered investment companies within the Fund Complex since 2013 |
| |
|
|
|
|
David I. Schachter
Vice President and Ombudsman
1953 |
|
Since
1999 |
|
Vice
President and/or Ombudsman of closed-end funds within the Gabelli Fund Complex; Senior Vice President (since 2015) and Vice
President (1999-2015) of G.research, LLC |
| 1 | Address:
One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. |
| 2 | The
Fund’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 Fund’s 2023 Annual Meeting of Shareholders or until their successors
are duly elected and qualified. |
| ** | Term
expires at the Fund’s 2024 Annual Meeting of Shareholders or until their successors
are duly elected and qualified. |
| *** | Term
expires at the Fund’s 2025 Annual Meeting of Shareholders or until their successors
are duly elected and qualified. |
Each
officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected
and qualified.
| 3 | This
column includes only directorships of companies required to report to the SEC under the
Securities Exchange Act of 1934, as amended, i.e., public companies, or other investment
companies registered under the 1940 Act. |
| 4 | “Interested
person” of the Fund as defined in the 1940 Act. Messrs. Mario J. Gabelli and John
D. Gabelli, who are brothers, are each considered an “interested person”
because of their affiliation with Gabelli Funds, LLC, which acts as the Fund’s
investment adviser. |
| 5 | Trustees
who are not considered to be “interested persons” of the Fund as defined
in the 1940 Act are considered to be “Independent” Trustees. |
| 6 | This
Trustee is elected solely by and represents the stockholders of the preferred stock issued
by the Fund. |
| 7 | Mr.
Fahrenkopf’s daughter, Leslie F. Foley, serves as a director of other funds in
the Fund Complex. Mr. Birch is a director of Gabelli Merger Plus+ Trust Plc and GAMCO
International SICAV, which may be deemed to be controlled by Mario Gabelli and/or affiliates
and, in that event, would be deemed to be under common control with the Fund’s
Advisor.. |
| 8 | Mr.
Enright is a Director of The LGL Group, Inc., which may be deemed to be controlled by
Mario J. Gabelli and/or affiliates and, in that event, would be deemed to be under common
control with the Fund’s Adviser. |
| 9 | Mr.
Ferrantino is the President, CEO and a Director of The LGL Group, Inc. and a Director
of LGL Systems Acquisition Corp., all of which may be deemed to be controlled by Mario
J. Gabelli and/or affiliates and, in that event, would be deemed to be under common control
with the Fund’s Adviser. |
| 10 | Mr.
Zizza is an independent director of Gabelli International Ltd., which may be deemed to
be controlled by Mario J. Gabelli and/or affiliates and in that event would be deemed
to be under common control with the Fund’s Adviser. On September 9, 2015, Mr. Zizza
entered into a |
The
Gabelli Utility Trust
Additional
Fund Information (Unaudited) (Continued)
settlement
with the SEC to resolve an inquiry relating to an alleged violation regarding the making of false statements or omissions to the
accountants of a company concerning a related party transaction. The company in question is not an affiliate of, nor has any connection
to, the Fund. Under the terms of the settlement, Mr. Zizza, without admitting or denying the SEC’s findings and allegation,
paid $150,000 and agreed to cease and desist committing or causing any future violations of Rule 13b2-2 of the Securities Exchange
Act of 1934, as amended. The Board has discussed this matter and has determined that it does not disqualify Mr. Zizza from serving
as an independent director.
The
Gabelli Utility Trust
Additional
Fund Information (Continued) (Unaudited)
General
The
Fund’s Board has overall responsibility for the management of the Fund. The Board decides upon matters of general policy
and reviews the actions of the Investment Adviser, Gabelli Funds, LLC, One Corporate Center, Rye, New York 10580-1422, and the
Sub-Administrator (as defined below). Pursuant to an investment advisory agreement between the Fund and the Investment Adviser
(the “Investment Advisory Agreement”), the Investment Adviser, under the supervision of the Board, 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 Trustees of the Fund who are officers or employees of the Investment Adviser or its affiliates.
As compensation for its services rendered and the related expenses borne by the Investment Adviser, the Fund pays the Investment
Adviser a monthly fee, computed an annual rate of 1.00% of the Fund’s average weekly net assets. The Fund’s average
weekly net assets shall be determined at the end of each month on the basis of the Fund’s average net assets for each week
during the month. The assets for each weekly period shall be determined by averaging the net assets at the end of a week with
the net assets at the end of the prior week. The value of the Fund’s average weekly net assets shall be deemed to be the
average weekly value of the Fund’s total assets minus the sum of the Fund’s liabilities (such liabilities do not include
the aggregate liquidation preference of any outstanding preferred shares and accumulated dividends, if any, on those shares).
Therefore, the Fund will pay an advisory fee on any assets attributable to certain types of leverage it uses. Consequently, if
the Fund has preferred shares outstanding, the investment management fees and other expenses as a percentage of net assets attributable
to common shares may be higher than if the Fund does not utilize a capital structure leveraged with preferred equity.
Because
the investment advisory fee is based on a percentage of the Fund’s net assets without deduction for the liquidation preference
of any outstanding preferred shares, the Investment Adviser may have a conflict of interest in the input it provides to the Board
regarding whether to use or increase the Fund’s use of preferred share leverage. The Board bases its decision, with input
from the Investment Adviser, regarding whether and how much preferred share leverage to use for the Fund on its assessment of
whether such use of leverage is in the best interests of the Fund, and the Board seeks to manage the Investment Adviser’s
potential conflict of interest by retaining the final decision on these matters and by periodically reviewing the Fund’s
performance and use of leverage.
The
Investment Adviser
The
Investment Adviser is a New York limited liability company which serves as an investment adviser to registered investment
companies with combined aggregate net assets of approximately $18.5 billion as of September 30, 2022. The Investment Adviser
is a registered adviser under the Investment Advisers Act of 1940, as amended, and is a wholly owned subsidiary of GAMCO
Investors, Inc. (“GAMI”). Mr. Mario J. Gabelli owns a majority of the stock of GGCP, Inc. (“GGCP”),
which holds a majority of the capital stock and voting power of GAMI. The Investment Adviser has several affiliates that
provide investment advisory services: GAMCO Asset Management Inc., a wholly owned subsidiary of GAMI, acts as investment
adviser for individuals, pension trusts, profit sharing trusts, endowments, and as a sub-adviser to certain third party
investment funds, which include registered investment companies, having assets under management of approximately of $10.7
billion as of September 30, 2022; Teton Advisors, Inc., and its wholly owned investment adviser, Keeley Teton
Advisers,
The
Gabelli Utility Trust
Additional
Fund Information (Continued) (Unaudited)
LLC,
with assets under management of approximately $1.4 billion as of September 30, 2022, acts as investment adviser to The TETON
Westwood Funds, the KEELEY Funds, and separately managed accounts; and Gabelli & Company Investment Advisers, Inc.
(formerly, Gabelli Securities, Inc.), a wholly owned subsidiary of Associated Capital Group, Inc. (“Associated
Capital”), acts as investment adviser for certain alternative investment products, consisting primarily of risk
arbitrage and merchant banking limited partnerships and offshore companies, with assets under management of approximately
$1.8 billion as of September 30, 2022. Teton Advisors, Inc. was spun off by GAMI in March 2009 and is an affiliate of GAMI by
virtue of Mr. Gabelli’s ownership of GGCP, the principal shareholder of Teton Advisors, Inc., as of December 31, 2022.
Associated Capital was spun off from GAMI on November 30, 2015, and is an affiliate of GAMI by virtue of Mr. Gabelli’s
ownership of GGCP, the principal shareholder of Associated Capital.
A
discussion regarding the basis for the Fund’s Board approval of the Investment Advisory Agreement with the Investment Adviser
is available in this Annual Report.
Payment
of Expenses
The
Investment Adviser is obligated to pay expenses associated with providing the services contemplated by the Investment 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 (but excluding costs associated with the calculation of the net
asset value and allocated costs of the chief compliance officer function and officers of the Fund who are employed by the Fund
and are not employed by the Investment Adviser although such officers may receive incentive based variable compensation from affiliates
of the Investment Adviser), as well as the fees of all Trustees of the Fund who are officers or employees of the Investment Adviser
or its affiliates.
In
addition to the fees of the Investment Adviser, the Fund, and indirectly the holders of its common shares, is responsible
for the payment of all its other expenses incurred in the operation of the Fund, which include, among other things,
underwriting compensation and reimbursements in connection with sales of the Fund’s securities, expenses for legal and
the Fund’s independent registered public accounting firm’s services, stock exchange listing fees and expenses,
costs of printing proxies, share certificates and shareholder reports, charges of the Fund’s Custodian, any
sub-custodian and any transfer agent and distribution disbursing agent, expenses in connection with the Automatic Dividend
Reinvestment Plan and the Voluntary Cash Purchase Plan, SEC fees and preparation of filings with the SEC, fees and expenses
of Trustees who are not officers or employees of the Investment Adviser or its affiliates, accounting and printing costs, the
Fund’s pro rata portion of membership fees in trade organizations, compensation and other expenses of officers and
employees of the Fund (including, but not limited to, the Chief Compliance Officer, Vice President and Ombudsman) as approved
by the Fund’s Trustees, fidelity bond coverage for the Fund’s officers and employees, Trustees’ and
officers’ errors and omissions insurance coverage, interest, brokerage costs, taxes, expenses of qualifying the
Fund’s shares for sale in various states, expenses of personnel performing shareholder servicing functions, rating
agency fees, organizational expenses, litigation and other extraordinary or non-recurring expenses and other expenses
properly payable by the Fund.
The
Gabelli Utility Trust
Additional
Fund Information (Continued) (Unaudited)
Selection
of Securities Brokers
The
Investment Advisory Agreement contains provisions relating to the selection of securities brokers to effect the portfolio transactions
of the Fund. Under those provisions, the Investment Adviser may (i) direct Fund portfolio brokerage to G.research, LLC (“G.research”),
an affiliate of the Investment Adviser, or to other broker-dealer affiliates of the Investment Adviser and (ii) pay commissions
to brokers other than G.research that 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 investment advisory accounts or those of any investment adviser affiliated with it. The SAI contains further information
about the Investment Advisory Agreement, including a more complete description of the investment advisory and expense arrangements,
exculpatory and brokerage provisions, as well as information on the brokerage practices of the Fund.
Portfolio
Managers
There
were no changes to the portfolio management team during the year ended December 31, 2022.
Sub-Administrator
The
Investment Adviser has entered into a sub-administration agreement with BNY Mellon Investment Servicing (US) 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 and portfolio management services provided by the
Investment Adviser. For these services and the related expenses borne by the Sub-Administrator, the Investment Adviser pays
an annual fee based on the value of the aggregate average daily net assets of all funds under its administration managed by
the Investment Adviser, GAMCO and Teton Advisors, Inc. as follows: 0.0275%—first $10 billion, 0.0125%—exceeding
$10 billion but less than $15 billion, 0.01%— over $15 billion but less than $20 billion and 0.008% over $20 billion.
The Sub-Administrator has its principal office at 301 Bellevue Parkway, Wilmington, Delaware 19809.
NET
ASSET VALUE
The
NAV of the Fund’s shares is computed based on the market value of the securities it holds and determined daily as of the
close of the regular trading day on the NYSE, normally 4:00 p.m., Eastern Time. The Investment Adviser has been designated as
the Fund’s valuation designee to perform fair value determinations for the Fund pursuant to Rule 2a-5 under the 1940 Act,
in accordance with established procedures and under the general oversight of the Board.
For
purposes of determining the Fund’s NAV per share, portfolio securities listed or traded on a nationally recognized securities
exchange or traded in the U.S. OTC market for which market quotations are readily available are valued at the last quoted sale
price or a market’s official closing price as of the close of business on the day the securities are being valued. If there
were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices
quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on
such day, the security is valued at the most recently available price or by such other method as the Investment Adviser shall
determine in good faith to
The
Gabelli Utility Trust
Additional
Fund Information (Continued) (Unaudited)
reflect
its fair market value. Portfolio securities traded on more than one national securities exchange or market are valued according
to the broadest and most representative market, as determined by the Investment Adviser.
Portfolio
securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the
relevant market, but may be fair valued in good faith by the Investment Adviser pursuant to established procedures if market conditions
change significantly after the close of the foreign market but prior to the close of business on the day the securities are being
valued. Debt instruments with remaining maturities of 60 days or less that are not credit impaired are valued at amortized cost,
unless the Investment Adviser determines such amount does not reflect the securities’ fair value, in which case these securities
will be fair valued as determined by the Investment Adviser in good faith. Debt instruments having a maturity greater than 60
days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there
were no asked prices quoted on such day, the security is valued using the closing bid price. Futures contracts are valued at the
closing settlement price of the exchange or board of trade on which the applicable contract is traded.
Options
are valued using market quotations. When market quotations are not readily available, options are valued from broker quotes. In
limited circumstances when neither market quotations nor broker quotes are readily available, options are valued using a Black
Scholes model.
Securities
and assets for which market quotations are not readily available are fair valued in good faith by the Investment Adviser. Fair
valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial
information about the company; comparisons to the valuation and changes in valuation of similar securities, including a comparison
of foreign securities to the equivalent U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of
any other information that could be indicative of the value of the security.
The
Fund obtains valuations on the basis of prices provided by one or more pricing services approved by the Board. All other investment
assets, including restricted and not readily marketable securities, are fair valued in good faith by the Investment Adviser under
established procedures and under the general oversight of the Board.
In
addition, whenever developments in one or more securities markets after the close of the principal markets for one or more
portfolio securities and before the time as of which the Fund determines its NAV would, if such developments had been
reflected in such principal markets, likely have had more than a minimal effect on the Fund’s NAV per share, the Fund
may fair value such portfolio securities based on available market information as of the time the Fund determines its
NAV.
NYSE
American Closings. The holidays (as observed) on which the NYSE is closed, and therefore days upon which shareholders
cannot purchase or sell shares, currently are: New Year’s Day, Dr. Martin Luther King, Jr. Day, Presidents’ Day,
Good Friday, Memorial Day, Juneteenth, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day and on the preceding
Friday or subsequent Monday when a holiday falls on a Saturday or Sunday, respectively.
The
Gabelli Utility Trust
Board
Consideration and Re-Approval of Investment Advisory Agreement (Unaudited)
At
its meeting on November 9, 2022, the Board of Trustees (Board) of the Fund approved the continuation of the investment advisory
agreement with the Adviser for the Fund on the basis of the recommendation by the trustees who are not interested persons of the
Fund (the Independent Board Members). The following paragraphs summarize the material information and factors considered by the
Independent Board Members as well as their conclusions relative to such factors.
Nature,
Extent, and Quality of Services. The Independent Board Members considered information regarding the portfolio managers, the
depth of the analyst pool available to the Adviser and the portfolio managers, the nature, quality and extent of administrative
and shareholder services supervised or provided by the Adviser, including portfolio management, supervision of Fund operations
and compliance and regulatory filings and disclosures to shareholders, general oversight of other service providers, review of
Fund legal issues, assisting the Independent Board Members in their capacity as directors, and other services, and the absence
of significant service problems reported to the Board. The Independent Board Members concluded that the services are extensive
in nature and that the Adviser consistently delivered a high level of service.
Investment
Performance of the Fund and Adviser. The Independent Board Members considered short term and long term investment performance
for the Fund over various periods of time as compared with relevant equity indices and the performance of other closed-end funds
included in the Broadridge peer category. The Board noted that the Fund’s total return performance was below the average
but equal to the median of a select group of peers for the one-year and five-year periods, above the average and the median of
a select group of peers for the three-year period, and modestly above the average but below the median of a select group of peers
for the ten-year period ended September 30, 2022. The Board also noted that the Fund’s common shares consistently trade
at a meaningful premium to NAV. The Independent Board Members concluded that the Adviser was delivering satisfactory performance
results consistent with the investment strategies being pursued by the Fund and disclosed to investors.
Costs
of Services and Profits Realized by the Adviser. (a) Costs of Services to Fund: Fees and Expenses. The Independent Board Members
considered the Fund’s advisory fee rate and expense ratio relative to industry averages for the Fund’s Broadridge
peer group category and the advisory fees charged by the Adviser and its affiliates to other fund and non-fund clients. The Independent
Board Members considered the Adviser’s fee structure as compared to that of the Adviser’s affiliate, GAMCO Asset Management
Inc. (“GAMCO”), for services provided to institutional and high net worth accounts and in connection with sub-advisory
arrangements, noting that the service level for GAMCO accounts and sub-advisory relationships is materially different than the
services provided by the Adviser to its registered funds and investors in such funds, which is reflected in the difference in
fee structure. The Independent Board Members noted that the mix of services under the Advisory Agreement is more extensive than
those under the advisory agreements for non-fund clients. The Independent Board Members noted the level of management and gross
advisory fees, other non-management expenses, and total expenses paid by the Fund relative to the average and median for the Fund’s
select group of peers. They took note of the fact that the use of leverage impacts comparative expenses to peer funds, not all
of which utilize leverage and certain of which are open-end funds. The Independent Board Members were aware that the Adviser has
agreed to waive its management fee on the incremental assets attributable to the Fund’s Series B Preferred Shares during
a fiscal year if the total return on NAV of the Fund’s common shares, including distributions and advisory fees subject
to reduction for that year, does not exceed the stated dividend rate or
The
Gabelli Utility Trust
Board
Consideration and Re-Approval of Investment Advisory Agreement (Unaudited) (Continued)
corresponding
swap rate for the Series B Preferred Shares for the year and that the comparative total expense ratio and other non-management
expense information reflected these waivers, if applicable. The Independent Board Members concluded that the advisory fee is not
excessive based upon the qualifications, experience, reputation, and performance of the Adviser and the other factors considered.
(b) Profitability and Costs of Services to Adviser. The Independent Board Members considered the Adviser’s overall profitability
and costs. The Independent Board Members referred to the Board Materials for the pro forma income statements for the Adviser and
the Fund for the period ended December 31, 2021. They noted the pro forma estimates of the Adviser’s profitability and costs
attributable to the Fund. The Independent Board Members also considered whether the amount of profit is a fair entrepreneurial
profit for the management of the Fund and noted that the Adviser has continued to increase its resources devoted to Fund matters,
including portfolio management resources, in response to regulatory requirements and new or enhanced Fund policies and procedures.
The Independent Board Members concluded that the profitability to the Adviser of managing the Fund was not excessive.
Extent
of Economies of Scale as Fund Grows. The Independent Board Members considered whether there have been economies of scale with
respect to the management of the Fund and whether the Fund has appropriately benefited from any economies of scale, noting that
assets under management for the Fund were below $400 million for the period. The Independent Board Members noted that, although
the ability of the Fund to realize economies of scale through growth is more limited than for an open-end fund, economies of scale
may develop for certain funds as their assets increase and their fund-level expenses decline as a percentage of assets, but that
fund-level economies of scale may not necessarily result in Adviser-level economies of scale. The Independent Board Members were
aware that economies can be shared through an adviser’s investment in its fund advisory business and noted the Adviser’s
increase in personnel and resources devoted to the Gabelli/ GAMCO fund complex in recent years, which could benefit the Fund.
Whether
Fee Levels Reflect Economies of Scale. The Independent Board Members also considered whether the advisory fee rate is reasonable
in relation to the asset size of the Fund and any economies of scale that may exist, and concluded that the Fund’s current
fee schedule (without breakpoints) was considered reasonable, particularly in light of the Fund’s performance over time.
Other
Relevant Considerations. (a) Adviser Personnel and Methods. The Independent Board Members considered the size, education,
and experience of the Adviser’s staff, the Adviser’s fundamental research capabilities, and the Adviser’s approach
to recruiting, training, and retaining portfolio managers and other research and management personnel, and concluded that, in
each of these areas, the Adviser was structured in such a way to support the high level of services being provided to the Fund.
(b) Other Benefits to the Adviser. The Independent Board Members also considered the character and amount of other incidental
benefits received by the Adviser and its affiliates from their association with the Fund. The Independent Board Members considered
the brokerage commissions paid to an affiliate of the Adviser. The Independent Board Members concluded that potential “fall-out”
benefits that the Adviser and its affiliates may receive, such as brokerage commissions paid to an affiliated broker, greater
name recognition, or increased ability to obtain research services, appear to be reasonable and may in some cases benefit the
Fund.
Conclusions.
In considering the Advisory Agreement, the Independent Board Members did not identify any factor as all-important or all-controlling,
and instead considered these factors collectively in light of the Fund’s
The
Gabelli Utility Trust
Board
Consideration and Re-Approval of Investment Advisory Agreement (Unaudited) (Continued)
surrounding
circumstances. Based on this review, it was the judgment of the Independent Board Members that shareholders had received satisfactory
absolute and relative performance over time consistent with the investment strategies being pursued by the Fund at reasonable
fees and, therefore, continuation of the Advisory Agreement was in the best interests of the Fund and its shareholders. As a part
of its decision making process, the Independent Board Members noted that the Adviser has managed the Fund since its inception,
and the Independent Board Members believe that a long term relationship with a capable, conscientious adviser is in the best interests
of the Fund. The Independent Board Members considered, generally, that shareholders invested in the Fund knowing that the Adviser
managed the Fund and knowing its investment advisory fee. As such, the Independent Board Members considered, in particular, whether
the Adviser managed the Fund in accordance with its investment objectives and policies as disclosed to shareholders. The Independent
Board Members concluded that the Fund was managed by the Adviser in a manner consistent with its investment objectives and policies.
The Independent Board Members also confirmed that they were satisfied with the information provided by the Adviser, that it included
all information the Independent Board Members believed was necessary to evaluate the terms of the Advisory Agreement, and that
the Independent Board Members were satisfied that any questions they had were appropriately addressed. On the basis of the foregoing
and without assigning particular weight to any single conclusion, the Independent Board Members determined to recommend continuation
of the Advisory Agreement to the full Board.
Based
on a consideration of all these factors in their totality, the Board Members, including all of the Independent Board Members,
determined that the Fund’s advisory fee was fair and reasonable with respect to the nature and quality of services provided
and in light of the other factors described above that the Board deemed relevant. Accordingly, the Board Members determined to
approve the continuation of the Fund’s Advisory Agreement.
THE
GABELLI UTILITY TRUST
INCOME
TAX INFORMATION (Unaudited)
December
31, 2022
Cash
Dividends and Distributions
| | |
| |
| |
Ordinary | |
Long Term | |
| |
Total Amount | |
Dividend |
| | |
Payable | |
Record | |
Investment | |
Capital | |
Return of | |
Paid | |
Reinvestment |
| | |
Date | |
Date | |
Income
(a) | |
Gains | |
Capital
(b) | |
Per
Share (c) | |
Price |
| Common Stock | |
| |
| |
|
| | |
01/24/22 | |
01/14/22 | |
$0.00450 | |
$0.00500 | |
$0.04050 | |
$0.05000 | |
$7.66650 |
| | |
02/18/22 | |
02/11/22 | |
0.00450 | |
0.00500 | |
0.04050 | |
0.05000 | |
7.73000 |
| | |
03/24/22 | |
03/17/22 | |
0.00450 | |
0.00500 | |
0.04050 | |
0.05000 | |
7.03950 |
| | |
04/22/22 | |
04/14/22 | |
0.00450 | |
0.00500 | |
0.04050 | |
0.05000 | |
6.70700 |
| | |
05/23/22 | |
05/16/22 | |
0.00450 | |
0.00500 | |
0.04050 | |
0.05000 | |
6.70700 |
| | |
06/23/22 | |
06/15/22 | |
0.00450 | |
0.00500 | |
0.04050 | |
0.05000 | |
6.35550 |
| | |
07/22/22 | |
07/15/22 | |
0.00450 | |
0.00500 | |
0.04050 | |
0.05000 | |
7.27700 |
| | |
08/24/22 | |
08/17/22 | |
0.00450 | |
0.00500 | |
0.04050 | |
0.05000 | |
7.45750 |
| | |
09/23/22 | |
09/16/22 | |
0.00450 | |
0.00500 | |
0.04050 | |
0.05000 | |
6.39350 |
| | |
10/24/22 | |
10/17/22 | |
0.00450 | |
0.00500 | |
0.04050 | |
0.05000 | |
6.71000 |
| | |
11/22/22 | |
11/15/22 | |
0.00450 | |
0.00500 | |
0.04050 | |
0.05000 | |
6.65000 |
| | |
12/16/22 | |
12/09/22 | |
0.00450 | |
0.00500 | |
0.04050 | |
0.05000 | |
7.21000 |
| | |
| |
| |
$0.05400 | |
$0.06000 | |
$0.48600 | |
$0.60000 | |
|
| 5.625% Series A Cumulative Preferred Shares | |
| |
| |
|
| | |
01/31/22 | |
01/31/22 | |
$0.0639456 | |
$0.0727732 | |
— | |
$0.1367188 | |
|
| | |
| |
| |
$0.0639456 | |
$0.0727732 | |
— | |
$0.1367188 | |
|
| | |
| |
| |
| |
| |
| |
| |
|
| 5.375% Series C Cumulative Preferred Shares | |
| |
| |
|
| | |
03/28/22 | |
03/21/22 | |
$0.1571234 | |
$0.1788141 | |
— | |
$0.3359375 | |
|
| | |
06/27/22 | |
06/17/22 | |
0.1571234 | |
0.1788141 | |
— | |
0.3359375 | |
|
| | |
09/26/22 | |
09/19/22 | |
0.1571234 | |
0.1788141 | |
— | |
0.3359375 | |
|
| | |
12/27/22 | |
12/19/22 | |
0.1571234 | |
0.1788141 | |
— | |
0.3359375 | |
|
| | |
| |
| |
$0.6284936 | |
$0.7152564 | |
— | |
$1.3437500 | |
|
A
Form 1099-DIV has been mailed to all shareholders of record for the distributions mentioned above, setting forth specific amounts
to be included in the 2022 tax returns. Ordinary income distributions include net investment income and net realized short term
capital gains, if any. Ordinary income is reported in box 1a of Form 1099-DIV. Capital gain distributions are reported in box
2a of Form 1099-DIV. The long term gain distributions for the year ended December 31, 2022 were $4,267,694 or the maximum allowable.
Series
B Auction Rate Cumulative Preferred Shares
Auction
Rate Preferred Stocks pay dividends weekly based on the maximum rate. The distributions derived from long term gains for the Auction
Rate Series B Cumulative Preferred Shares were $1,755,325.
Corporate
Dividends Received Deduction, Qualified Dividend Income, and U.S. Government Securities Income
In
2022, the Fund paid to common, 5.625% Series A Cumulative Preferred, and 5.375% Series C Cumulative Preferred shareholders ordinary
income dividends of $0.054, $0.0639456, and $0.6284936 per share, respectively. The Fund paid weekly distributions to Series B
Auction Rate Cumulative Preferred shareholders at varying rates throughout the year, including an ordinary income dividend totaling
$245.401262443 per share in 2022. For 2022, 100% of the ordinary dividend qualified for the dividend received deduction available
to corporations, 100% of the ordinary income distribution was deemed qualified dividend income, and 9.68% of ordinary income distribution
was qualified interest income and 100% of the ordinary income distribution was qualified short term capital gain. The percentage
of ordinary income dividends paid by the Fund during 2022 derived from U.S. Government securities was 9.87%. Such income is exempt
from state and local taxes in all states. However, many states, including New York and California, allow a tax exemption for a
portion of the income earned only if a mutual fund has invested at least 50% of its
THE
GABELLI UTILITY TRUST
INCOME
TAX INFORMATION (Unaudited) (Continued)
December
31, 2022
assets
at the end of each quarter of its year in U.S. Government securities. The Fund did not meet this strict requirement in 2022. The
percentage of U.S. Government securities held as of December 31, 2022 was 16.5% of total investments.
THE
GABELLI UTILITY TRUST
INCOME
TAX INFORMATION (Unaudited) (Continued)
December
31, 2022
Historical
Distribution Summary
| | |
| |
Short
Term | |
Long
Term | |
| |
| |
Adjustment |
| | |
Investment | |
Capital | |
Capital | |
Return
of | |
Total | |
to
Cost |
| | |
Income
(a) | |
Gains
(a) | |
Gains | |
Capital
(b) | |
Distributions
(c) | |
Basis
(d) |
| Common
Shares | |
| |
|
| 2022 | |
$0.05280 | |
$0.00120 | |
$0.06000 | |
$0.48600 | |
$0.60000 | |
$0.48600 |
| 2021 | |
0.04440 | |
0.00480 | |
0.04440 | |
0.50640 | |
0.60000 | |
0.50640 |
| 2020 | |
0.00120 | |
– | |
– | |
0.59880 | |
0.60000 | |
0.59880 |
| 2019 | |
0.10080 | |
0.02520 | |
0.36720 | |
0.10680 | |
0.60000 | |
0.10680 |
| 2018
(e) | |
0.10440 | |
0.02880 | |
0.45000 | |
0.01680 | |
0.60000 | |
0.01680 |
| 2017 | |
0.09960 | |
– | |
0.49200 | |
0.00840 | |
0.60000 | |
0.00840 |
| 2016 | |
0.09360 | |
0.01320 | |
0.46440 | |
0.02880 | |
0.60000 | |
0.02880 |
| 2015 | |
0.10800 | |
0.02160 | |
0.25200 | |
0.21840 | |
0.60000 | |
0.21840 |
| 2014 | |
0.09960 | |
0.00804 | |
0.40104 | |
0.09132 | |
0.60000 | |
0.09132 |
| 2013 | |
0.14232 | |
0.00576 | |
0.39180 | |
0.06012 | |
0.60000 | |
0.06012 |
| 5.625%
Series A Cumulative Preferred Shares | |
| |
|
| 2022 | |
$0.06371 | |
$0.00024 | |
$0.07277 | |
– | |
$0.13672 | |
– |
| 2021 | |
0.66492 | |
0.07655 | |
0.66478 | |
– | |
1.40625 | |
– |
| 2020 | |
1.40625 | |
– | |
– | |
– | |
1.40625 | |
– |
| 2019 | |
0.28623 | |
0.07260 | |
1.04742 | |
– | |
1.40625 | |
– |
| 2018 | |
0.25125 | |
0.06991 | |
1.08509 | |
– | |
1.40625 | |
– |
| 2017 | |
0.23774 | |
– | |
1.16851 | |
– | |
1.40625 | |
– |
| 2016 | |
0.23026 | |
0.03347 | |
1.14252 | |
– | |
1.40625 | |
– |
| 2015 | |
0.39725 | |
0.07765 | |
0.93135 | |
– | |
1.40625 | |
– |
| 2014 | |
0.27528 | |
0.02227 | |
1.10870 | |
– | |
1.40625 | |
– |
| 2013 | |
0.37067 | |
0.01489 | |
1.02069 | |
– | |
1.40625 | |
– |
| Series
B Auction Market Cumulative Preferred Shares | |
| |
|
| 2022 | |
$244.48530 | |
$0.91597 | |
$279.27874 | |
– | |
$524.68000 | |
– |
| 2021 | |
248.69508 | |
28.63046 | |
248.64445 | |
– | |
525.96999 | |
– |
| 2020 | |
527.67000 | |
– | |
– | |
– | |
527.67000 | |
– |
| 2019 | |
186.42761 | |
47.28547 | |
682.19692 | |
– | |
915.91000 | |
– |
| 2018 | |
156.15811 | |
43.44635 | |
674.40554 | |
– | |
874.01000 | |
– |
| 2017 | |
109.26415 | |
– | |
537.03585 | |
– | |
646.30000 | |
– |
| 2016 | |
80.27810 | |
11.66970 | |
398.32200 | |
– | |
490.26980 | |
– |
| 2015 | |
118.61073 | |
23.18474 | |
278.08453 | |
– | |
419.88000 | |
– |
| 2014 | |
80.26781 | |
6.49443 | |
323.28776 | |
– | |
410.05000 | |
– |
| 2013 | |
110.25405 | |
4.42978 | |
303.60617 | |
– | |
418.29000 | |
– |
| 5.375%
Series C Cumulative Preferred Shares | |
| |
|
| 2022 | |
$0.62615 | |
$0.00235 | |
$0.71526 | |
– | |
$1.34375 | |
– |
| 2021 | |
0.63537 | |
0.07314 | |
0.63524 | |
– | |
1.34375 | |
– |
| 2020 | |
1.34375 | |
– | |
– | |
– | |
1.34375 | |
– |
| 2019 | |
0.27351 | |
0.06937 | |
1.00086 | |
– | |
1.34375 | |
– |
| 2018 | |
0.24009 | |
0.06680 | |
1.03686 | |
– | |
1.34375 | |
– |
| 2017 | |
0.22718 | |
– | |
1.11657 | |
– | |
1.34375 | |
– |
| 2016 | |
0.12591 | |
0.01830 | |
0.62471 | |
– | |
0.76892 | |
– |
THE
GABELLI UTILITY TRUST
INCOME
TAX INFORMATION (Unaudited) (Continued)
December
31, 2022
| (a) | Taxable
as ordinary income for Federal tax purposes. |
| (c) | Total
amounts may differ due to rounding. |
| (d) | Decrease
in cost basis. |
| (e) | On
March 11, 2021, the Fund also distributed rights equivalent to $0.27 per share based upon full subscription of all issued common
shares. |
| (f) | On
March 29, 2018, the Fund also distributed rights equivalent to $0.18 per share based upon full subscription of all issued common
shares. |
| (g) | On
March 29, 2012, the Fund also distributed rights equivalent to $0.18 per share based upon full subscription of all issued common
shares. |
All
designations are based on financial information available as of the date of this annual report and, accordingly, are subject to
change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code
and the regulations thereunder.
THE
GABELLI UTILITY TRUST
AND
YOUR PERSONAL PRIVACY
Who
are we?
The
Gabelli Utility Trust is a closed-end management investment company registered with the Securities and Exchange Commission
under the Investment Company Act of 1940. We are managed by Gabelli Funds, LLC, which is affiliated with GAMCO Investors,
Inc., a publicly held company that has subsidiaries that provide investment advisory services for a variety of
clients.
What
kind of non-public information do we collect about you if you become a fund shareholder?
When
you purchase shares of the Fund on the New York Stock Exchange, you have the option of registering directly with our transfer
agent in order, for example, to participate in our dividend reinvestment plan.
| ● | Information
you give us on your application form. This could include your name, address, telephone number, social security number, bank
account number, and other information. |
| ● | Information
about your transactions with us. This would include information about the shares that you buy or sell; it may also include
information about whether you sell or exercise rights that we have issued from time to time. If we hire someone else to provide
services — like a transfer agent — we will also have information about the transactions that you conduct through them. |
What
information do we disclose and to whom do we disclose it?
We
do not disclose any non-public personal information about our customers or former customers to anyone other than our affiliates,
our service providers who need to know such information, and as otherwise permitted by law. If you want to find out what the law
permits, you can read the privacy rules adopted by the Securities and Exchange Commission. They are in volume 17 of the Code of
Federal Regulations, Part 248. The Commission often posts information about its regulations on its website, www.sec.gov.
What
do we do to protect your personal information?
We
restrict access to non-public personal information about you to the people who need to know that information in order to provide
services to you or the fund and to ensure that we are complying with the laws governing the securities business. We maintain physical,
electronic, and procedural safeguards to keep your personal information confidential.
This
page was intentionally left blank.
THE
GABELLI UTILITY TRUST
One
Corporate Center
Rye,
NY 10580-1422
Portfolio
Manager Biography
Mario
J. Gabelli, CFA,
is Chairman, Chief Executive Officer, and Chief Investment Officer - Value Portfolios of GAMCO Investors, Inc. that he founded
in 1977, and Chief Investment Officer - Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. He is also Executive
Chairman of Associated Capital Group, Inc. Mr. Gabelli is a summa cum laude graduate of Fordham University and holds an MBA degree
from Columbia Business School and Honorary Doctorates from Fordham University and Roger Williams University.
Timothy
M. Winter, CFA,
joined Gabelli in 2009 and covers the utility industry. He has over 25 years of experience as an equity research analyst covering
the industry. Currently, he continues to specialize in the utility industry and also serves as a portfolio manager of Gabelli
Funds, LLC. Mr. Winter received his BA in Economics from Rollins College and MBA degree in Finance from Notre Dame.
Justin
Bergner, CFA,
is a Vice President at Gabelli & Company and a portfolio manager for Gabelli Funds LLC. Justin rejoined Gabelli & Company
in 2013 as a research analyst covering Diversified Industrials, Home Improvement, and Transport companies. He began his investment
career at Gabelli & Company in 2005 as a metals and mining analyst, and subsequently spent five years at Axiom International
Investors as a senior analyst focused on industrial and healthcare stocks. Prior to business school, Mr. Bergner worked in management
consulting at both Bain & Company and Dean & Company. Mr. Bergner graduated cum laude from Yale University with a BA in
Economics & Mathematics and received an MBA in Finance and Accounting from the Wharton School at the University of Pennsylvania.
Brett
Kearney, CFA, is a portfolio
manager covering industrials with a focus on the flow control and other niche manufacturing sectors. He joined the Firm in 2017.
Previously he was an analyst at Schultze Asset Management, an analyst at Fidus Mezzanine Capital, and an investment analyst at
the Bond & Corporate Finance Group of John Hancock Financial Services. Brett graduated cum laude with a BS in Business Administration
from Washington and Lee University and holds an MBA from Columbia Business School, where he participated in the school’s
Value Investing Program.
The
Net Asset Value per share appears in the Publicly Traded Funds column, under the heading “Specialized Equity Funds,”
in Monday’s The Wall Street Journal. It is also listed in Barron’s Mutual Funds/Closed End Funds section under the
heading “Specialized Equity Funds.”
The
Net Asset Value per share may be obtained each day by calling (914) 921-5070 or visiting www.gabelli.com.
The
NASDAQ symbol for the Net Asset Value is “XGUTX.”
| Notice
is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the Fund may from
time to time purchase its common shares in the open market when the Fund’s shares are trading at a discount of 10% or
more from the net asset value of the shares. The Fund may also, from time to time, purchase its preferred shares in the open
market when the preferred shares are trading at a discount to the liquidation value. |
Item 2.
Code of Ethics.
| (a) | The
registrant, as of the end of the period covered by this report, has adopted a code of ethics
that applies to the registrant’s principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions, regardless
of whether these individuals are employed by the registrant or a third party. |
| (c) | There
have been no amendments, during the period covered by this report, to a provision of the
code of ethics that applies to the registrant’s principal executive officer, principal
financial officer, principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the registrant or a third
party, and that relates to any element of the code of ethics description. |
| (d) | The
registrant has not granted any waivers, including an implicit waiver, from a provision of
the code of ethics that applies to the registrant’s principal executive officer, principal
financial officer, principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the registrant or a third
party, that relates to one or more of the items set forth in paragraph (b) of this item’s
instructions. |
Item 3.
Audit Committee Financial Expert.
As
of the end of the period covered by the report, the registrant’s Board of Trustees has determined that Vincent D. Enright is qualified
to serve as an audit committee financial expert serving on its audit committee and that he is “independent,” as defined by
Item 3 of Form N-CSR.
Item 4.
Principal Accountant Fees and Services.
Audit
Fees
| (a) | The
aggregate fees billed for each of the last two fiscal years for professional services rendered
by the principal accountant for the audit of the registrant’s annual financial statements
or services that are normally provided by the accountant in connection with statutory and
regulatory filings or engagements for those fiscal years are $37,446 for 2021 and $39,318
for 2022. |
Audit-Related
Fees
| (b) | The
aggregate fees billed in each of the last two fiscal years for assurance and related services
by the principal accountant that are reasonably related to the performance of the audit of
the registrant’s financial statements and are not reported under paragraph (a) of this
Item are $0 for 2021 and $0 for 2022. |
Tax
fees
| (c) | The
aggregate fees billed in each of the last two fiscal years for professional services rendered
by the principal accountant for tax compliance, tax advice, and tax planning are $4,335 for
2021 and $4,550 for 2022. Tax fees represent tax compliance services provided in connection
with the review of the Registrant’s tax returns. |
All
Other Fees
| (d) | The
aggregate fees billed in each of the last two fiscal years for products and services provided
by the principal accountant, other than the services reported in paragraphs (a) through (c)
of this Item are $13,500 for 2021 and $0 for 2022. The fees relate to review of the Registrant’s
registration statement. |
| (e)(1) | Disclose
the audit committee’s pre-approval policies and procedures described in paragraph (c)(7)
of Rule 2-01 of Regulation S-X. |
Pre-Approval
Policies and Procedures. The Audit Committee (“Committee”) of the registrant is responsible for pre-approving (i) all audit
and permissible non-audit services to be provided by the independent registered public accounting firm to the registrant and (ii) all
permissible non-audit services to be provided by the independent registered public accounting firm to the Adviser, Gabelli Funds, LLC,
and any affiliate of Gabelli Funds, LLC (“Gabelli”) that provides services to the registrant (a “Covered Services Provider”)
if the independent registered public accounting firm’s engagement related directly to the operations and financial reporting of
the registrant. The Committee may delegate its responsibility to pre-approve any such audit and permissible non-audit services to the
Chairperson of the Committee, and the Chairperson must report to the Committee, at its next regularly scheduled meeting after the Chairperson’s
pre-approval of such services, his or her decision(s). The Committee may also establish detailed pre-approval policies and procedures
for pre-approval of such services in accordance with applicable laws, including the delegation of some or all of the Committee’s
pre-approval responsibilities to the other persons (other than Gabelli or the registrant’s officers). Pre-approval by the Committee
of any permissible non-audit services is not required so long as: (i) the permissible non-audit services were not recognized by the registrant
at the time of the engagement to be non-audit services; and (ii) such services are promptly brought to the attention of the Committee
and approved by the Committee or Chairperson prior to the completion of the audit.
| (e)(2) | The
percentage of services described in each of paragraphs (b) through (d) of this Item that
were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation
S-X are as follows: |
(b)
N/A
(c)
0%
(d)
0%
| (f) | The
percentage of hours expended on the principal accountant’s engagement to audit the
registrant’s financial statements for the most recent fiscal year that were attributed
to work performed by persons other than the principal accountant’s full-time, permanent
employees was less than fifty percent. |
| (g) | The
aggregate non-audit fees billed by the registrant’s accountant for services rendered
to the registrant, and rendered to the registrant’s investment adviser (not including
any sub-adviser whose role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to the registrant for each
of the last two fiscal years of the registrant was $13,500 for 2021 and $0 for 2022. |
| (h) | The
registrant’s audit committee of the board of directors has considered whether the provision
of non-audit services that were rendered to the registrant’s investment adviser (not
including any sub-adviser whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity controlling, controlled by,
or under common control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation
S-X is compatible with maintaining the principal accountant’s independence. |
| (j) | The
registrant is not a foreign issuer. |
Item 5.
Audit Committee of Listed Registrants.
| (a) | The
registrant has a separately designated audit committee consisting of the following members:
John Birch, Vincent D. Enright, and Michael J. Melarkey. |
Item 6.
Investments.
| (a) | Schedule
of Investments in securities of unaffiliated issuers as of the close of the reporting period
is included as part of the report to shareholders filed under Item 1(a) of this form. |
| (b) | Not
applicable due to no such divestments during the semi-annual period covered since the previous
Form N-CSR filing |
Item
7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
The
Proxy Voting Policies are attached herewith.
SECTION
HH
The
Voting of Proxies on Behalf of Clients
(This
section pertains to all affiliated SEC registered investment advisers)
Rule
206(4)-6 under the Investment Advisers Act of 1940 and Rule 30b1-4 under the Investment Company Act of 1940 require investment advisers
to adopt written policies and procedures governing the voting of proxies on behalf of their clients.
These
procedures will be used by GAMCO Asset Management Inc., Gabelli Funds, LLC, Gabelli & Company Investment Advisers, Inc., and Teton
Advisors, Inc. (collectively, the “Advisers”) to determine how to vote proxies relating to portfolio securities held by their
clients, including the procedures that the Advisers use when a vote presents a conflict between the interests of the shareholders of
an investment company managed by one of the Advisers, on the one hand, and those of the Advisers; the principal underwriter; or any affiliated
person of the investment company, the Advisers, or the principal underwriter. These procedures will not apply where the Advisers do not
have voting discretion or where the Advisers have agreed to with a client to vote the client’s proxies in accordance with specific
guidelines or procedures supplied by the client (to the extent permitted by ERISA).
I. Proxy
Voting Committee
The
Proxy Voting Committee was originally formed in April 1989 for the purpose of formulating guidelines and reviewing proxy statements within
the parameters set by the substantive proxy voting guidelines originally published in 1988 and updated periodically, a copy of which
are appended as Exhibit A. The Committee will include representatives of Research, Administration, Legal, and the Advisers. Additional
or replacement members of the Committee will be nominated by the Chairman and voted upon by the entire Committee.
Meetings
are held on an as needed basis to form views on the manner in which the Advisers should vote proxies on behalf of their clients.
In
general, the Director of Proxy Voting Services, using the Proxy Guidelines, and the analysts of GAMCO Investors, Inc. (“GBL”),
will determine how to vote on each issue. For non-controversial matters, the Director of Proxy Voting Services may vote the proxy if
the vote is: (1) consistent with the recommendations of the issuer’s Board of Directors and not contrary to the Proxy Guidelines;
(2) consistent with the recommendations of the issuer’s Board of Directors and is a non-controversial issue not covered by the
Proxy Guidelines; or (3) the vote is contrary to the recommendations of the Board of Directors but is consistent with the Proxy Guidelines.
In those instances, the Director of Proxy Voting Services or the Chairman of the Committee may sign and date the proxy statement indicating
how each issue will be voted.
All
matters identified by the Chairman of the Committee, the Director of Proxy Voting Services or the Legal Department as controversial,
taking into account the recommendations of the analysts of GBL, will be presented to the Proxy Voting Committee. If the Chairman of the
Committee, the Director of Proxy Voting Services or the Legal Department has identified the matter as one that (1) is controversial;
(2) would benefit from deliberation by the Proxy Voting Committee; or (3) may give rise to a conflict of interest between the Advisers
and their clients, the Chairman of the Committee will initially determine what vote to recommend that the Advisers should cast and the
matter will go before the Committee.
The
Advisers have implemented these proxy voting procedures in order to prevent conflicts of interest from influencing their proxy voting
decisions. By following the Proxy Guidelines and the analysts of GBL, the Advisers are able to avoid, wherever possible, the influence
of potential conflicts of interest. Nevertheless, circumstances may arise in which one or more of the Advisers are faced with a conflict
of interest or the appearance of a conflict of interest in connection with its vote. In general, a conflict of interest may arise when
an Adviser knowingly does business with an issuer, and may appear to have a material conflict between its own interests and the interests
of the shareholders of an investment company managed by one of the Advisers regarding how the proxy is to be voted. A conflict also may
exist when an Adviser has actual knowledge of a material business arrangement between an issuer and an affiliate of the Adviser.
In
practical terms, a conflict of interest may arise, for example, when a proxy is voted for a company that is a client of one of the Advisers,
such as GAMCO Asset Management Inc. A conflict also may arise when a client of one of the Advisers has made a shareholder proposal in
a proxy to be voted upon by one or more of the Advisers. The Director of Proxy Voting Services, together with the Legal Department, will
scrutinize all proxies for these or other situations that may give rise to a conflict of interest with respect to the voting of proxies.
B. Operation
of Proxy Voting Committee
For
matters submitted to the Committee, each member of the Committee will receive, prior to the meeting, a copy of the proxy statement, a
summary of any views provided by the Chief Investment Officer and any recommendations by GBL analysts. The Chief Investment Officer or
the GBL analysts may be invited to present their viewpoints. If the Director of Proxy Voting Services or the Legal Department believe
that the matter before the committee is one with respect to which a conflict of interest may exist between the Advisers and their clients,
counsel may provide an opinion to the Committee concerning the conflict. If the matter is one in which the interests of the clients of
one or more of the Advisers may diverge, counsel may so advise and the Committee may make different recommendations as to different clients.
For any matters where the recommendation may trigger appraisal rights, counsel may provide an opinion concerning the likely risks and
merits of such an appraisal action.
Each
matter submitted to the Committee will be determined by the vote of a majority of the members present at the meeting. Should the vote
concerning one or more recommendations be tied in a vote of the Committee, the Chairman of the Committee will cast the deciding vote.
The Committee will notify the proxy department of its decisions and the proxies will be voted accordingly.
Although
the Proxy Guidelines express the normal preferences for the voting of any shares not covered by a contrary investment guideline provided
by the client, the Committee is not bound by the preferences set forth in the Proxy Guidelines and will review each matter on its own
merits. The Advisers subscribe to Institutional Shareholder Services Inc (“ISS”) and Glass Lewis & Co., LLC (“Glass
Lewis”), which supply current information on companies, matters being voted on, regulations, trends in proxy voting and information
on corporate governance issues. The information provided by ISS and GL is for informational purposes only.
If
the vote cast either by the analyst or as a result of the deliberations of the Proxy Voting Committee runs contrary to the recommendation
of the Board of Directors of the issuer, the matter may be referred to legal counsel to determine whether an amendment to the most recently
filed Schedule 13D is appropriate.
| II. | Social
Issues and Other Client Guidelines |
If
a client has provided and the Advisers have accepted special instructions relating to the voting of proxies, they should be noted in
the client’s account file and forwarded to the proxy department. This is the responsibility of the investment professional or sales
assistant for the client. In accordance with Department of Labor guidelines, the Advisers’ policy is to vote on behalf of ERISA
accounts in the best interest of the plan participants with regard to social issues that carry an economic impact. Where an account is
not governed by ERISA, the Advisers will vote shares held on behalf of the client in a manner consistent with any individual investment/voting
guidelines provided by the client. Otherwise the Advisers may abstain with respect to those shares.
Specific
to the Gabelli ESG Fund and the Gabelli Love Our Planet & People ETF, the Proxy Voting Committee will rely on the advice of the portfolio
managers of the Gabelli ESG Fund and the Gabelli Love Our Planet & People ETF to provide voting recommendations on the securities
held in the portfolios.
| III. | Client
Retention of Voting Rights |
If
a client chooses to retain the right to vote proxies or if there is any change in voting authority, the following should be notified
by the investment professional or sales assistant for the client.
-
Operations
-
Proxy Department
-
Investment professional assigned to the account
In
the event that the Board of Directors (or a Committee thereof) of one or more of the investment companies managed by one of the Advisers
has retained direct voting control over any security, the Proxy Voting Department will provide each Board Member (or Committee member)
with a copy of the proxy statement together with any other relevant information.
| IV. | Proxies
of Certain Non-U.S. Issuers |
Proxy
voting in certain countries requires “share-blocking.” Shareholders wishing to vote their proxies must deposit their shares
shortly before the date of the meeting with a designated depository. During the period in which the shares are held with a depository,
shares that will be voted at the meeting cannot be sold until the meeting has taken place and the shares are returned to the clients’
custodian. Absent a compelling reason to the contrary, the Advisers believe that the benefit to the client of exercising the vote is
outweighed by the cost of voting and therefore, the Advisers will not typically vote the securities of non-U.S. issuers that require
share-blocking.
In
addition, voting proxies of issuers in non-U.S. markets may also give rise to a number of administrative issues or give rise to circumstances
under which voting would impose a cost (real or implied) on its client which may cause the Advisers to abstain from voting such proxies.
For example, the Advisers may receive the notices for shareholder meetings without adequate time to consider the proposals in the proxy
or after the cut-off date for voting. Other markets require the Advisers to provide local agents with power of attorney prior to implementing
their respective voting instructions on the proxy. Other markets may require disclosure of certain ownership information in excess of
what is required to vote in the U.S. market. Although it is the Advisers’ policies to vote the proxies for its clients for which
they have proxy voting authority, in the case of issuers in non-U.S. markets, we vote client proxies on a best efforts basis.
The
Proxy Voting Department will retain a record of matters voted upon by the Advisers for their clients. The Advisers will supply information
on how they voted a client’s proxy upon request from the client.
The
complete voting records for each registered investment company (the “Fund”) that is managed by the Advisers will be filed
on Form N-PX for the twelve months ended June 30th, no later than August 31st of each year. A description of the Fund’s proxy voting
policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by (i)
calling 800-GABELLI (800-422-3554); (ii) writing to Gabelli Funds, LLC at One Corporate Center, Rye, NY 10580-1422; or (iii) visiting
the SEC’s website at www.sec.gov.
The
Advisers’ proxy voting records will be retained in compliance with Rule 204-2 under the Investment Advisers Act.
1.
Custodian banks, outside brokerage firms and clearing firms are responsible for forwarding proxies directly to the Advisers.
Proxies
are received in one of two forms:
| ● | Shareholder
Vote Instruction Forms (“VIFs”) - Issued by Broadridge Financial Solutions, Inc.
(“Broadridge”). Broadridge is an outside service contracted by the various institutions
to issue proxy materials. |
| ● | Proxy
cards which may be voted directly. |
2.
Upon receipt of the proxy, the number of shares each form represents is logged into the proxy system, electronically or manually, according
to security.
3.
Upon receipt of instructions from the proxy committee, the votes are cast and recorded for each account.
Records
have been maintained on the ProxyEdge system.
ProxyEdge
records include:
Security
Name and CUSIP Number
Date
and Type of Meeting (Annual, Special, Contest)
Directors’
Recommendation (if any)
How
the Adviser voted for the client on item
4.
VIFs are kept alphabetically by security. Records for the current proxy season are located in the Proxy Voting Department office. In
preparation for the upcoming season, files are transferred to an offsite storage facility during January/February.
5.
If a proxy card or VIF is received too late to be voted in the conventional matter, every attempt is made to vote including:
| ● | When
a solicitor has been retained, the solicitor is called. At the solicitor’s direction,
the proxy is faxed or sent electronically. |
| ● | In
some circumstances VIFs can be faxed or sent electronically to Broadridge up until the time
of the meeting. |
6.
In the case of a proxy contest, records are maintained for each opposing entity.
7.
Voting in Person
a)
At times it may be necessary to vote the shares in person. In this case, a “legal proxy” is obtained in the following manner:
| ● | Banks
and brokerage firms using the services at Broadridge: |
Broadridge
is notified that we wish to vote in person. Broadridge issues individual legal proxies and sends them back via email or overnight (or
the Adviser can pay messenger charges). A lead-time of at least two weeks prior to the meeting is needed to do this. Alternatively, the
procedures detailed below for banks not using Broadridge may be implemented.
| ● | Banks
and brokerage firms issuing proxies directly: |
The
bank is called and/or faxed and a legal proxy is requested.
All
legal proxies should appoint:
“Representative
of [Adviser name] with full power of substitution.”
b)
The legal proxies are given to the person attending the meeting along with the limited power of attorney.
Appendix
A
Proxy
Guidelines
PROXY
VOTING GUIDELINES
General
Policy Statement
It
is the policy of GAMCO Investors, Inc, and its affiliated advisers (collectively “the Advisers”) to vote in the best economic
interests of our clients. As we state in our Magna Carta of Shareholders Rights, established in May 1988, we are neither for nor
against management. We are for shareholders.
At
our first proxy committee meeting in 1989, it was decided that each proxy statement should be evaluated on its own merits within the
framework first established by our Magna Carta of Shareholders Rights. The attached guidelines serve to enhance that broad framework.
We
do not consider any issue routine. We take into consideration all of our research on the company, its directors, and their short and
long-term goals for the company. In cases where issues that we generally do not approve of are combined with other issues, the negative
aspects of the issues will be factored into the evaluation of the overall proposals but will not necessitate a vote in opposition to
the overall proposals.
Board
of Directors
We
do not consider the election of the Board of Directors a routine issue. Each slate of directors is evaluated on a case-by-case basis.
Factors
taken into consideration include:
| ● | Historical
responsiveness to shareholders |
This
may include such areas as:
-Paying
greenmail
-Failure
to adopt shareholder resolutions receiving a majority of shareholder votes
| ● | Nominating
committee in place |
| ● | Number
of outside directors on the board |
Selection
of Auditors
In
general, we support the Board of Directors’ recommendation for auditors.
Blank
Check Preferred Stock
We
oppose the issuance of blank check preferred stock.
Blank
check preferred stock allows the company to issue stock and establish dividends, voting rights, etc. without further shareholder approval.
Classified
Board
A
classified board is one where the directors are divided into classes with overlapping terms. A different class is elected at each annual
meeting.
While
a classified board promotes continuity of directors facilitating long range planning, we feel directors should be accountable to shareholders
on an annual basis. We will look at this proposal on a case-by-case basis taking into consideration the board’s historical responsiveness
to the rights of shareholders.
Where
a classified board is in place we will generally not support attempts to change to an annually elected board.
When an annually
elected board is in place, we generally will not support attempts to classify the board.
Increase
Authorized Common Stock
The
request to increase the amount of outstanding shares is considered on a case-by-case basis.
Factors
taken into consideration include:
| ● | Future
use of additional shares |
-Stock
split
-Stock
option or other executive compensation plan
-Finance
growth of company/strengthen balance sheet
-Aid
in restructuring
-Improve
credit rating
-Implement
a poison pill or other takeover defense
| ● | Amount
of stock currently authorized but not yet issued or reserved for stock option plans |
| ● | Amount
of additional stock to be authorized and its dilutive effect |
We will support
this proposal if a detailed and verifiable plan for the use of the additional shares is contained in the proxy statement.
Confidential
Ballot
We support
the idea that a shareholder’s identity and vote should be treated with confidentiality.
However, we
look at this issue on a case-by-case basis.
In order to
promote confidentiality in the voting process, we endorse the use of independent Inspectors of Election.
Cumulative
Voting
In
general, we support cumulative voting.
Cumulative
voting is a process by which a shareholder may multiply the number of directors being elected by the number of shares held on record
date and cast the total number for one candidate or allocate the voting among two or more candidates.
Where
cumulative voting is in place, we will vote against any proposal to rescind this shareholder right.
Cumulative
voting may result in a minority block of stock gaining representation on the board. When a proposal is made to institute cumulative voting,
the proposal will be reviewed on a case-by-case basis. While we feel that each board member should represent all shareholders, cumulative
voting provides minority shareholders an opportunity to have their views represented.
Director
Liability and Indemnification
We
support efforts to attract the best possible directors by limiting the liability and increasing the indemnification of directors, except
in the case of insider dealing.
Equal
Access to the Proxy
The SEC’s
rules provide for shareholder resolutions. However, the resolutions are limited in scope and there is a 500 word limit on proponents’
written arguments. Management has no such limitations. While we support equal access to the proxy, we would look at such variables as
length of time required to respond, percentage of ownership, etc.
Fair
Price Provisions
Charter
provisions requiring a bidder to pay all shareholders a fair price are intended to prevent two-tier tender offers that may be abusive.
Typically, these provisions do not apply to board-approved transactions.
We
support fair price provisions because we feel all shareholders should be entitled to receive the same benefits.
Reviewed on
a case-by-case basis.
Golden
Parachutes
Golden
parachutes are severance payments to top executives who are terminated or demoted after a takeover.
We
support any proposal that would assure management of its own welfare so that they may continue to make decisions in the best interest
of the company and shareholders even if the decision results in them losing their job. We do not, however, support excessive golden parachutes.
Therefore, each proposal will be decided on a case-by- case basis.
Anti-Greenmail
Proposals
We do not
support greenmail. An offer extended to one shareholder should be extended to all shareholders equally across the board.
Limit
Shareholders’ Rights to Call Special Meetings
We support
the right of shareholders to call a special meeting.
Reviewed on
a case-by-case basis.
Consideration
of Nonfinancial Effects of a Merger
This proposal
releases the directors from only looking at the financial effects of a merger and allows them the opportunity to consider the merger’s
effects on employees, the community, and consumers.
As a fiduciary,
we are obligated to vote in the best economic interests of our clients. In general, this proposal does not allow us to do that. Therefore,
we generally cannot support this proposal.
Reviewed on
a case-by-case basis.
Mergers,
Buyouts, Spin-Offs, Restructurings
Each of the
above is considered on a case-by-case basis. According to the Department of Labor, we are not required to vote for a proposal simply
because the offering price is at a premium to the current market price. We may take into consideration the long term interests of the
shareholders.
Military
Issues
Shareholder
proposals regarding military production must be evaluated on a purely economic set of criteria for our ERISA clients. As such, decisions
will be made on a case-by-case basis.
In voting
on this proposal for our non-ERISA clients, we will vote according to the client’s direction when applicable. Where no direction
has been given, we will vote in the best economic interests of our clients. It is not our duty to impose our social judgment on others.
Northern
Ireland
Shareholder
proposals requesting the signing of the MacBride principles for the purpose of countering the discrimination of Catholics in hiring practices
must be evaluated on a purely economic set of criteria for our ERISA clients. As such, decisions will be made on a case-by-case basis.
In
voting on this proposal for our non-ERISA clients, we will vote according to client direction when applicable. Where no direction has
been given, we will vote in the best economic interests of our clients. It is not our duty to impose our social judgment on others.
Opt
Out of State Anti-Takeover Law
This
shareholder proposal requests that a company opt out of the coverage of the state’s takeover statutes. Example: Delaware law requires
that a buyer must acquire at least 85% of the company’s stock before the buyer can exercise control unless the board approves.
We
consider this on a case-by-case basis. Our decision will be based on the following:
| ● | Management
history of responsiveness to shareholders |
| ● | Other
mitigating factors |
Poison
Pill
In
general, we do not endorse poison pills.
In
certain cases where management has a history of being responsive to the needs of shareholders and the stock is very liquid, we will reconsider
this position.
Reincorporation
Generally,
we support reincorporation for well-defined business reasons. We oppose reincorporation if proposed solely for the purpose of reincorporating
in a state with more stringent anti-takeover statutes that may negatively impact the value of the stock.
Stock
Incentive Plans
Director
and Employee Stock incentive plans are an excellent way to attract, hold and motivate directors and employees. However, each incentive
plan must be evaluated on its own merits, taking into consideration the following:
| ● | Dilution
of voting power or earnings per share by more than 10%. |
| ● | Kind
of stock to be awarded, to whom, when and how much. |
| ● | Amount
of stock already authorized but not yet issued under existing stock plans. |
| ● | The
successful steps taken by management to maximize shareholder value. |
Supermajority
Vote Requirements
Supermajority
vote requirements in a company’s charter or bylaws require a level of voting approval in excess of a simple majority of the outstanding
shares. In general, we oppose supermajority-voting requirements. Supermajority requirements often exceed the average level of shareholder
participation. We support proposals’ approvals by a simple majority of the shares voting.
Reviewed
on a case-by-case basis.
Limit
Shareholders Right to Act by Written Consent
Written
consent allows shareholders to initiate and carry on a shareholder action without having to wait until the next annual meeting or to
call a special meeting. It permits action to be taken by the written consent of the same percentage of the shares that would be required
to effect proposed action at a shareholder meeting.
Reviewed
on a case-by-case basis.
“Say-on-Pay”
/ “Say-When-on-Pay” / “Say-on-Golden-Parachutes”
Required under
the Dodd-Frank Act; these proposals are non-binding advisory votes on executive compensation. We will generally vote with the Board
of Directors’ recommendation(s) on advisory votes on executive compensation (“Say-on-Pay”), advisory votes on the frequency
of voting on executive compensation (“Say-When-on-Pay”) and advisory votes relating to extraordinary transaction executive
compensation (“Say-on-Golden-Parachutes”). In those instances when we believe that it is in our clients’ best
interest, we may abstain or vote against executive compensation and/or the frequency of votes on executive compensation and/or extraordinary
transaction executive compensation advisory votes.
Proxy
Access
Proxy access
is a tool used to attempt to promote board accountability by requiring that a company’s proxy materials contain not only the names
of management nominees, but also any candidates nominated by long-term shareholders holding at least a certain stake in the company.
We will review proposals regarding proxy access on a case-by-case basis taking into account the provisions of the proposal, the company’s
current governance structure, the successful steps taken by management to maximize shareholder value, as well as other applicable factors.
Item 8.
Portfolio Managers of Closed-End Management Investment Companies.
PORTFOLIO
MANAGERS
Mario J. Gabelli,
CFA, is Chairman, Chief Executive Officer, and Chief Investment Officer – Value Portfolios of GAMCO Investors, Inc. that he founded
in 1977, and Chief Investment Officer – Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. He is also Executive
Chairman of the Board of Directors of Associated Capital Group, Inc. Mr. Gabelli is a summa cum laude graduate of Fordham University
and holds an MBA degree from Columbia Business School, and Honorary Doctorates from Fordham University and Roger Williams University.
Timothy
Winter joined Gabelli in 2009 and covers the utility industry. He has over 25 years of experience as an equity research analyst covering
the industry. Currently, he continues to specialize in the utility industry and serves as a portfolio manager of Gabelli Funds, LLC.
Mr. Winter received his BA in Economics in 1991 from Rollins College and MBA in Finance from Notre Dame in 1992.
Justin
Bergner, CFA, is currently a portfolio manager for the Adviser and a Vice President at Gabelli & Company, having rejoined Gabelli
& Company in June 2013 as a research analyst covering Diversified Industrials, Home Improvement, and Transport companies. He began
his investment career at Gabelli & Company in 2005 as a metals and mining analyst, and subsequently spent five years at Axiom International
Investors as a senior analyst focused on industrial and healthcare stocks. Before entering the investment profession, Justin worked in
management consulting at both Bain & Company and Dean & Company. Justin graduated cum laude from Yale University with a B.A.
in Economics & Mathematics and received an M.B.A. in Finance and Accounting from Wharton Business School.
Brett
Kearney is an analyst covering industrials with a focus on the flow control and other niche manufacturing sectors. He joined the firm
in 2017. Previously he was an analyst at Schultze Asset Management, an analyst at Fidus Mezzanine Capital, and an investment analyst
at the Bond & Corporate Finance Group of John Hancock Financial Services. Brett graduated cum laude with a BS in business administration
from Washington and Lee University and holds an MBA from Columbia Business School, where he participated in the school’s Value
Investing Program. He is a CFA charterholder.
MANAGEMENT
OF OTHER ACCOUNTS
The table
below shows the number of other accounts managed by the portfolio managers and the total assets in each of the following categories:
registered investment companies, other paid investment vehicles and other accounts as of December 31, 2022. For each category, the
table also shows the number of accounts and the total assets in the accounts with respect to which the advisory fee is based on account
performance.
Name
of
Portfolio
Manager |
|
Type of
Accounts |
|
Total
No. of Accounts
Managed |
|
Total
Assets |
|
No.
of
Accounts
where
Advisory
Fee
is
Based on
Performance |
|
Total
Assets in
Accounts
where
Advisory
Fee
is
Based on
Performance |
| Mario J. Gabelli,
CFA |
|
Registered
Investment Companies: |
|
22 |
|
$16.2
billion |
|
4 |
|
$4.8
billion |
| |
|
Other Pooled
Investment Vehicles: |
|
7 |
|
$1.0
billion |
|
7 |
|
$937
million |
| |
|
Other
Accounts: |
|
881 |
|
$6.1
billion |
|
0 |
|
$0 |
| |
|
|
|
|
|
|
|
|
|
|
| Timothy
Winter |
|
Registered
Investment Companies: |
|
3 |
|
$2.1
billion |
|
0 |
|
$0 |
| |
|
Other Pooled
Investment Vehicles: |
|
0 |
|
$0 |
|
0 |
|
$0 |
| |
|
Other
Accounts: |
|
9 |
|
$1.1
million |
|
0 |
|
$0 |
| |
|
|
|
|
|
|
|
|
|
|
| Justin
Berger |
|
Registered
Investment Companies: |
|
3 |
|
$2.0
billion |
|
0 |
|
$0 |
| |
|
Other Pooled
Investment Vehicles: |
|
0 |
|
$0 |
|
0 |
|
$0 |
| |
|
Other
Accounts:
|
|
16 |
|
$3.0
million |
|
0 |
|
$0 |
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Brett
Kearney |
|
Registered
Investment Companies: |
|
3 |
|
$4.5
billion |
|
1 |
|
$2.5
billion |
| |
|
Other Pooled
Investment Vehicles: |
|
0 |
|
$0 |
|
0 |
|
$0 |
| |
|
Other
Accounts:
|
|
3 |
|
$0.6
million |
|
0 |
|
$0 |
POTENTIAL
CONFLICTS OF INTEREST
As reflected
above, Mr. Gabelli manages accounts in addition to the Trust. Actual or apparent conflicts of interest may arise when a Portfolio
Manager also has day-to-day management responsibilities with respect to one or more other accounts. These potential conflicts include:
ALLOCATION
OF LIMITED TIME AND ATTENTION. As indicated above, Mr. Gabelli manages multiple accounts. As a result, he will not be able to
devote all of his time to management of the Trust. Mr. Gabelli, therefore, may not be able to formulate as complete a strategy or
identify equally attractive investment opportunities for each of those accounts as might be the case if he were to devote all of his
attention to the management of only the Trust.
ALLOCATION
OF LIMITED INVESTMENT OPPORTUNITIES. As indicated above, Mr. Gabelli manages managed accounts with investment strategies and/or
policies that are similar to the Trust. In these cases, if the he identifies an investment opportunity that may be suitable for multiple
accounts, a Fund may not be able to take full advantage of that opportunity because the opportunity may be allocated among all or many
of these accounts or other accounts managed primarily by other Portfolio Managers of the Adviser, and their affiliates. In addition,
in the event Mr. Gabelli determines to purchase a security for more than one account in an aggregate amount that may influence the
market price of the security, accounts that purchased or sold the security first may receive a more favorable price than accounts that
made subsequent transactions.
SELECTION
OF BROKER/DEALERS. Because of Mr. Gabelli’s indirect majority ownership interest in G.research LLC., he may have an incentive
to use G.research to execute portfolio transactions for a Fund.
PURSUIT
OF DIFFERING STRATEGIES. At times, Mr. Gabelli may determine that an investment opportunity may be appropriate for only some
of the accounts for which he exercises investment responsibility, or may decide that certain of the funds or accounts should take differing
positions with respect to a particular security. In these cases, he may execute differing or opposite transactions for one or more accounts
which may affect the market price of the security or the execution of the transaction, or both, to the detriment of one or more other
accounts.
VARIATION
IN COMPENSATION. A conflict of interest may arise where the financial or other benefits available to Mr. Gabelli differ among
the accounts that he manages. If the structure of the Adviser’s management fee or the Portfolio Manager’s compensation differs
among accounts (such as where certain accounts pay higher management fees or performance-based management fees), the Portfolio Manager
may be motivated to favor certain accounts over others. The Portfolio Manager also may be motivated to favor accounts in which he has
an investment interest, or in which the Adviser, or their affiliates have investment interests. Similarly, the desire to maintain assets
under management or to enhance a Portfolio Manager’s performance record or to derive other rewards, financial or otherwise, could
influence the Portfolio Manager in affording preferential treatment to those accounts that could most significantly benefit the Portfolio
Manager. For example, as reflected above, if Mr. Gabelli manages accounts which have performance fee arrangements, certain portions
of his compensation will depend on the achievement of performance milestones on those accounts. Mr. Gabelli could be incented to
afford preferential treatment to those accounts and thereby by subject to a potential conflict of interest.
The Adviser,
and the Funds have adopted compliance policies and procedures that are designed to address the various conflicts of interest that may
arise for the Adviser and their staff members. However, there is no guarantee that such policies and procedures will be able to detect
and prevent every situation in which an actual or potential conflict may arise.
COMPENSATION
STRUCTURE FOR MARIO J. GABELLI
Mr. Gabelli
receives incentive-based variable compensation based on a percentage of net revenues received by the Adviser for managing the Trust.
Net revenues are determined by deducting from gross investment management fees the firm’s expenses (other than Mr. Gabelli’s
compensation) allocable to this Trust. Four closed-end registered investment companies (including this Trust) managed by Mr. Gabelli
have arrangements whereby the Adviser will only receive its investment advisory fee attributable to the liquidation value of outstanding
preferred stock (and Mr. Gabelli would only receive his percentage of such advisory fee) if certain performance levels are met.
Additionally, he receives similar incentive based variable compensation for managing other accounts within the firm and its affiliates.
This method of compensation is based on the premise that superior long-term performance in managing a portfolio should be rewarded with
higher compensation as a result of growth of assets through appreciation and net investment activity. The level of compensation is not
determined with specific reference to the performance of any account against any specific benchmark. One of the other closed-end registered
investment companies managed by Mr. Gabelli has a performance (fulcrum) fee arrangement for which his compensation is adjusted up
or down based on the performance of the investment company relative to an index. Mr. Gabelli manages other accounts with performance
fees. Compensation for managing these accounts has two components. One component is based on a percentage of net revenues to the investment
adviser for managing the account. The second component is based on absolute performance of the account, with respect to which a percentage
of such performance fee is paid to Mr. Gabelli. As an executive officer of the Adviser’s parent company, GBL, Mr. Gabelli
also receives ten percent of the net operating profits of the parent company. He receives no base salary, no annual bonus, and no stock
options.
OWNERSHIP
OF SHARES IN THE FUND
Mario J. Gabelli,
Timothy Winter, Justin Berger, and Brett Kearney owned over $1 million, $0, $0, and $0, respectively, of shares of the Trust as of December 31,
2022.
Item
9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
REGISTRANT
PURCHASES OF EQUITY SECURITIES
Period |
|
(a) Total Number of
Shares (or Units)
Purchased |
|
(b) Average Price Paid
per
Share
(or Unit) |
|
(c) Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs |
|
(d) Maximum Number
(or Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs |
Month
#1
07/01/2022
through
07/31/2022 |
|
Common
– N/A
Preferred Series C – N/A |
|
Common
– N/A
Preferred Series C – N/A |
|
Common
– N/A
Preferred Series C – N/A |
|
Common
– 73,483,006
Preferred Series C – 1,996,500 |
Month
#2
08/01/2022
through
08/31/2022 |
|
Common
– N/A
Preferred Series C – N/A |
|
Common
– N/A
Preferred Series C – N/A |
|
Common
– N/A
Preferred Series C – N/A |
|
Common
– 73,565,505
Preferred Series C – 1,996,500 |
Month
#3
09/01/2022
through
09/30/2022 |
|
Common
– N/A
Preferred Series C – N/A |
|
Common
– N/A
Preferred Series C – N/A |
|
Common
– N/A
Preferred Series C – N/A |
|
Common
– 73,662,226
Preferred Series C – 1,996,500 |
Month
#4
10/01/2022
through
10/31/2022 |
|
Common
– N/A
Preferred Series C – 174 |
|
Common
– N/A
Preferred Series C – $22.40 |
|
Common
– N/A
Preferred Series C – 174 |
|
Common
– 73,755,282
Preferred Series C – 1,996,500 - 174 = 1,996,326 |
Month
#5
11/01/2022
through
11/30/2022 |
|
Common
– N/A
Preferred Series C – N/A |
|
Common
– N/A
Preferred Series C – N/A |
|
Common
– N/A
Preferred Series C – N/A |
|
Common
– 73,851,084
Preferred Series C – 1,996,326 |
Month
#6
12/01/2022
through
12/31/2022 |
|
Common
– N/A
Preferred Series C – 9,100 |
|
Common
– N/A
Preferred Series C – $23.49 |
|
Common
– N/A
Preferred Series C – 9,100 |
|
Common
– 73,943,148
Preferred Series C – 1,996,326- 9,100 = 1,987,226 |
| Total |
|
Common
– N/A
Preferred Series C – 9,274 |
|
Common
– N/A
Preferred Series C – $22.94 |
|
Common
– N/A
Preferred Series C – 9,274 |
|
N/A |
Footnote columns
(c) and (d) of the table, by disclosing the following information in the aggregate for all plans or programs publicly announced:
| a. | The
date each plan or program was announced – The notice of the potential repurchase of
common and preferred shares occurs semiannually in the Fund’s reports to shareholders
in accordance with Section 23(c) of the Investment Company Act of 1940, as amended. |
| b. | The dollar amount
(or share or unit amount) approved – Any or all common shares outstanding may be repurchased
when the Fund’s common shares are trading at a discount of 10% or more from the net
asset value of the shares. Any or all preferred shares outstanding may be repurchased when
the Fund’s preferred shares are trading at a discount to their respective liquidation
values. |
| c. | The
expiration date (if any) of each plan or program – The Fund’s repurchase plans
are ongoing. |
| d. | Each
plan or program that has expired during the period covered by the table – The Fund’s
repurchase plans are ongoing. |
| e. | Each
plan or program the registrant has determined to terminate prior to expiration, or under
which the registrant does not intend to make further purchases. – The Fund’s
repurchase plans are ongoing. |
Item 10.
Submission of Matters to a Vote of Security Holders.
There have
been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s Board of Trustees,
where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv)
of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11.
Controls and Procedures.
| (a) | The
registrant’s principal executive and principal financial officers, or persons performing
similar functions, have concluded that the registrant’s disclosure controls and procedures
(as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940
Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this paragraph, based on their
evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act
(17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act
of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| (b) | There
were no changes in the registrant’s internal control over financial reporting (as defined
in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the period
covered by this report that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting. |
Item
12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
| (a) | If the registrant
is a closed-end management investment company, provide the following dollar amounts of income
and fees/compensation related to the securities lending activities of the registrant during
its most recent fiscal year: |
(1)
Gross income from securities lending activities; $0
(2)
All fees and/or compensation for each of the following securities lending activities and related services: any share of revenue generated
by the securities lending program paid to the securities lending agent(s) (“revenue split”); fees paid for cash collateral
management services (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in the revenue
split; administrative fees that are not included in the revenue split; fees for indemnification that are not included in the revenue
split; rebates paid to borrowers; and any other fees relating to the securities lending program that are not included in the revenue
split, including a description of those other fees;
(3)
The aggregate fees/compensation disclosed pursuant to paragraph (2); $0 and
(4)
Net income from securities lending activities (i.e., the dollar amount in paragraph (1) minus the dollar amount in paragraph (3)).
$0
| (b) | If the registrant
is a closed-end management investment company, describe the services provided to the registrant
by the securities lending agent in the registrant’s most recent fiscal year. N/A |
Item 13.
Exhibits.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) |
|
The
Gabelli Utility Trust |
|
| By (Signature and Title)* |
|
/s/ John C. Ball |
|
| |
|
John C. Ball, Principal Executive Officer |
|
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* |
|
/s/ John C. Ball |
|
| |
|
John C. Ball, Principal Executive Officer |
|
| By (Signature and Title)* |
|
/s/ John C. Ball |
|
| |
|
John C. Ball, Principal Financial Officer and Treasurer |
|
*
Print the name and title of each signing officer under his or her signature.
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