As filed with the Securities and Exchange Commission on March 30, 1999
- ----------------------------------------------------------------------------
Registration No. 33-72983
- ----------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[X] Pre-Effective Amendment No. 1 [ ] Post-Effective Amendment No. __
The Gabelli Utility Fund
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (914) 921-5070
One Corporate Center, Rye, New York 10580
(Address of Principal Executive Offices) (Zip code)
Bruce N. Alpert
The Gabelli Utility Fund
One Corporate Center
Rye, New York 10580
(Name and Address of Agent for Service)
-------------
Copies to:
James E. McKee, Esq. Richard T. Prins, Esq.
The Gabelli Utility Fund Skadden, Arps, Slate, Meager & Flom LLP
One Corporate Center 919 Third Avenue
Rye, New York 10580 New York, New York 10022
-------------
<TABLE>
<CAPTION>
Calculation of Registration Fee under the Securities Act of 1933:
Proposed Maximum Proposed Maximum
Title of Securities Amount Being Offering Price per Aggregate Offering Amount of
Being Registered Registered Unit Price Registration Fee
<S> <C> <C> <C> <C>
Common Stock, 8,000,000* $10** $80,000,000** $22,240**+
$.001 par value
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* The amount being registered assumes a dividend of one share of
Registrant's Common Stock for every fourteen shares held of Common
Stock of The Gabelli Equity Trust Inc. If this ratio changes, the
number of shares to be issued will be adjusted accordingly, but
the proposed maximum aggregate offering price will remain
unchanged.
** No separate consideration will be received for shares of Common
Stock to be distributed to the shareholders of The Gabelli Equity
Trust Inc.
+ $20,850 previously paid.
Approximate date of proposed public offering: As soon as possible after the
effective date of this Registration Statement.
Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
THE GABELLI UTILITY FUND
FORM N-14 CROSS REFERENCE SHEET
Pursuant to Rule 481(a) Under the Securities
Act of 1933
<TABLE>
<CAPTION>
Prospectus/Proxy
Part A Item No. and Caption Statement Caption
- --------------------------- ------------------
<S> <C> <C>
Item 1. Beginning of Registration Cover Page; Cross Reference Sheet
Statement and Outside Front Cover
Page of Prospectus
Item 2. Beginning and Outside Back Cover Table of Contents
Page of Prospectus
Item 3. Fee Table, Synopsis Information Proxy Statement/Prospectus Summary; Table of Fees
and Risk Factors and Expenses
Item 4. Information About the Transaction Proxy Statement/Prospectus Summary; The
Transaction; Pro Forma Statement of Assets and
Liabilities
Item 5. Information About the Registrant Cover Page; Proxy Statement/Prospectus Summary;
Investment Objectives and Policies of the Utility
Fund and the Equity Trust; Further Information;
Description of Common Stock of the Utility Fund
and the Equity Trust
Item 6. Information About the Company Proxy Statement/Prospectus Summary; Investment
Being Acquired Objectives and Policies of the Utility Fund and the
Equity Trust; Further Information; Description of the
Common Stock of the Utility Fund and the Equity
Trust
Item 7. Voting Information General Voting Information; Principal Shareholders;
Additional Information -- Broker Non-Votes and
Abstentions; Required Vote for the Transaction
Item 8. Interest of Certain Persons and Experts
Experts
Item 9. Additional Information required Not Applicable
for
Reoffering By Persons Deemed to
be Underwriters
Proxy Statement/
Part B Item No. and Caption* Prospectus Caption
- ---------------------------- -------------------
Item 10. Cover Page Not Applicable
Item 11. Table of Contents Not Applicable
Item 12. Additional Information About the Investment Objectives and Policies of the Utility
Registrant Fund and the Equity Trust; Description of Common
Stock of the Utility Fund and the Equity Trust;
Management of the Utility Fund and the Equity
Trust; Principal Shareholders; Taxation
Item 13. Additional Information About the Not Applicable
Company Being Acquired
Item 14. Financial Statements The Gabelli Utility Fund Statement of Assets and
Liabilities; Annual Report of The Gabelli Equity
Trust Inc. and Semi-Annual Report of The Gabelli
Equity Trust Inc. incorporated by reference; Pro
Forma Statement of Assets and Liabilities
Part C Item No. and Caption Other Information Caption
- --------------------------- -------------------------
Item 15. Indemnification Incorporated by reference to Part A caption
"Description of Common Stock of the Utility Fund
and the Equity Trust -- Limitation of Officers' and
Directors' Liability"
Item 16. Exhibits Exhibits
Item 17. Undertakings Undertakings
- ------------------
* All information required to be set forth in Part B: Statement of
Additional Information has been included in Part A: The Proxy
Statement/Prospectus.
THE GABELLI EQUITY TRUST INC.
One Corporate Center
Rye, New York 10580-1434
April __, 1999
Dear Fellow Shareholder:
I would like to invite you to the Annual Meeting of Shareholders of
The Gabelli Equity Trust Inc. (the "Equity Trust") to be held on May 17,
1999 to consider a proposal to distribute to shareholders, in the form of a
dividend, shares in a newly-organized non-diversified closed-end investment
company, The Gabelli Utility Fund (the "Utility Fund"). The enclosed Proxy
Statement/Prospectus describes the proposal in detail.
Through our ongoing communications with our shareholders we have
learned a great deal about them. We have found that, in general, our
shareholders are conservative, dividend sensitive investors who like
current income. They overwhelmingly favor the Equity Trust's 10%
distribution policy. Knowing this, your Board of Directors believes that
the Equity Trust shareholders want an investment vehicle that provides
monthly dividends.
At the same time, we continue to be attracted to the opportunities for
long-term capital growth and income presented in the utility industry.
Consolidation and deregulation in the utility sector are presenting good
values and sound investment opportunities. To enable the Equity Trust's
shareholders to participate more directly in these opportunities, we are
proposing to contribute approximately $75 million of the Equity Trust's net
assets to the Utility Fund, which would follow a policy of concentration in
utility related businesses. If approved, each Equity Trust shareholder
would receive one share of the Utility Fund for each fourteen shares of the
Equity Trust owned on the dividend record date. No commission or other
sales charge would be imposed. The Utility Fund expects to pay dividends
monthly. In addition, the broker-dealer affiliate of the Equity Trust's
investment adviser intends to allow shareholders of the Equity Trust to
purchase up to 500 additional shares of the Utility Fund (acquired through
open market purchases at market prices) without a commission in order to
round up their positions to even round lots.
Please note that the proposed transaction will not affect the Equity
Trust's 10% distribution policy. The Equity Trust will continue to
distribute $0.27 per share in each of the first three quarters of the year
with an adjusting distribution in the fourth quarter of a sufficient amount
to pay 10% of the average net asset value.
We believe this proposal represents an attractive opportunity for
shareholders, and we urge you to give it your careful consideration.
Very truly yours,
MARIO J. GABELLI
Chairman of the Board and President
Whether or not you plan to attend the Annual Meeting of Shareholders,
please complete, sign and date the enclosed proxy card and return the same
as soon as possible in the enclosed postpaid envelope.
The Gabelli Equity Trust Inc.
One Corporate Center
Rye, New York 10580-1434
(914) 921-5000
-------------------
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS To Be Held on May
17, 1999
-------------------
To the Shareholders of
THE GABELLI EQUITY TRUST INC.
Notice is hereby given that the Annual Meeting of Shareholders of The
Gabelli Equity Trust Inc. (the "Equity Trust") will be held at the
Greenwich Hyatt Regency, 1800 East Putnam Avenue, Greenwich, Connecticut
06870, on Monday, May 17, 1999, at 9:00 a.m. to consider the following
purposes:
1. To consider and vote upon a proposal to distribute to Equity Trust
shareholders approximately $75 million of the Equity Trust's net
assets in the form of shares of The Gabelli Utility Fund, a
newly-organized closed-end, registered investment company
(Proposal 1)
2. To elect three (3) Directors of the Equity Trust (Proposal 2)
3. To ratify the selection of PricewaterhouseCoopers LLP as
independent accountants of the Equity Trust for the year ending
December 31, 1999 (Proposal 3)
4. To consider and vote upon such other matters as may come before
said meeting or any adjournment thereof.
These items are discussed in greater detail in the attached Proxy
Statement/Prospectus.
The close of business on March 17, 1999, has been fixed as the record
date for the determination of shareholders entitled to notice of and to
vote at the meeting and any adjournments thereof.
Your vote is important regardless of the size of your holdings in the
Equity Trust. Whether or not you plan to attend the meeting, we ask that
you please complete and sign the enclosed proxy card and return it promptly
in the enclosed envelope which needs no postage if mailed in the
continental United States. Instructions for the proper execution of proxies
are set forth on the inside cover.
By Order of the Directors
JAMES E. MCKEE
Secretary
April , 1999
This Statement is printed on recycled paper.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense to the Equity Trust
involved in validating your vote if you fail to sign your proxy card
properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the
registration.
3. All Other Accounts: The capacity of the individuals signing the
proxy card should be indicated unless it is reflected in the form
of registration. For example:
Registration Valid Signature
Corporate Accounts
(1) ABC Corp. .................................... ABC Corp.
(2) ABC Corp. .................................... John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer ....................... John Doe
(4) ABC Corp., Profit Sharing Plan .................. John Doe, Trustee
Trust Accounts
(1) ABC Trust .................................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 ................................ Jane Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust John B. Smith.
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith John B. Smith, Jr.,
Executor
THE GABELLI EQUITY TRUST INC.
---------------
ANNUAL MEETING OF SHAREHOLDERS
May 17, 1999
---------------
PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus is furnished in connection with
the solicitation of proxies by the Board of Directors of The Gabelli Equity
Trust Inc. (the "Equity Trust") for use at the Annual Meeting of
Shareholders of the Equity Trust to be held on May 17, 1999, and at any
adjournments thereof (the "Meeting"). A Notice of Meeting of
Shareholders and a proxy card accompany this Proxy Statement/Prospectus.
Among the proposals to be considered at the Meeting is a proposal
(Proposal 1) to distribute to Equity Trust shareholders common shares of
beneficial interest of The Gabelli Utility Fund, a newly-organized
closed-end, registered investment company (the "Utility Fund"). Under this
proposal, the Equity Trust will contribute a segment of its assets (which
is anticipated to consist largely or exclusively of cash and short-term
fixed income instruments) having a value of approximately $75 million to
the Utility Fund, an investment company organized and wholly-owned by the
Equity Trust. All of the common shares of beneficial interest of the
Utility Fund (the "Utility Fund Common Stock") will then be distributed by
the Equity Trust as a dividend to the Equity Trust's shareholders at a rate
of one share of Utility Fund Common Stock for every fourteen shares held of
the Equity Trust. See "The Transaction."
Like the Equity Trust, the Utility Fund is a closed-end
non-diversified management investment company. The primary investment
objective of the Utility Fund is long-term growth of capital and income.
The primary investment objective of the Equity Trust is long-term capital
appreciation, with income as a secondary objective. Unlike the Equity
Trust, which attempts to achieve its objective by investing primarily in a
portfolio of equity securities of companies involved in a wide variety of
industries, the Utility Fund will invest primarily in common stock and
other securities of foreign and domestic companies involved to a
substantial extent in providing products, services or equipment for the
generation or distribution of electricity, gas and water and the provision
of telecommunications services or infrastructure operations, such as
airports, toll roads and municipal services. No assurances can be given
that the Utility Fund's objectives will be achieved.
Application will be made to list the Utility Fund's shares on the
New York Stock Exchange. Although there is no current trading market for
shares of Utility Fund Common Stock, it is expected that "when issued"
trading of such shares will commence on the New York Stock Exchange four
business days prior to the record date set by the Board of Directors of the
Equity Trust for the distribution of the shares of the Utility Fund. If an
Equity Trust shareholder sells the shares in the Utility Fund that it
receives through the dividend, the shareholder may incur brokerage
commissions and the sale may constitute a taxable event for the
shareholder.
Shares of closed-end investment companies frequently trade at a
discount to net asset value. The Equity Trust cannot predict whether the
Utility Fund Common Stock will trade at, below or above net asset value.
Shareholders must bear the risk of loss created by the possibility that its
shares may trade at a discount to net asset value.
The Equity Trust's Common Stock trades on the New York Stock
Exchange under the symbol "GAB." The Equity Trust will furnish, without
charge, a copy of its Annual Report upon request in writing or by
telephone. The address of both the Equity Trust and the Utility Fund is One
Corporate Center, Rye, New York 10580 and the telephone number of both is
(914) 921-5070.
These securities have not been approved or disapproved by the
Securities and Exchange Commission or any state securities commission nor
has the Securities and Exchange Commission or any state securities
commission passed upon the accuracy or adequacy of this Proxy
Statement/Prospectus. Any representation to the contrary is a criminal
offense.
This Proxy Statement/Prospectus sets forth concisely certain
information about the Utility Fund and the Equity Trust that shareholders
should know before giving a proxy and it should be read and retained for
future reference.
April __, 1999
TABLE OF CONTENTS
Page
GENERAL VOTING INFORMATION.................................................
PROXY STATEMENT/PROSPECTUS SUMMARY.........................................
TABLE OF FEES AND EXPENSES.................................................
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES..............................
The Transaction............................................................
Background........................................................
Description of the Transaction....................................
Federal Income Tax Consequences of the Transaction................
Listing .........................................................
Transaction Expenses..............................................
Manner of Effecting the Distribution..............................
Costs Associated with Sales of Utility Fund Common Stock..........
Allocation of Investment Opportunities............................
Investment Objectives and Policies of
the Utility Fund and the Equity Trust.............................
Risk Factors...............................................................
Investment Restrictions....................................................
Management of Utility Fund
and the Equity Trust..............................................
Investment Advisory and Other Services.....................................
Portfolio Transactions and Brokerage.......................................
Determination of Net Asset Value...........................................
Distributions; Automatic Dividend Reinvestment and Voluntary
Cash Purchase Plan................................................
Taxation ..................................................................
Principal Shareholders.....................................................
Custodian, Transfer Agent, Dividend
Disbursing Agent and Registrar....................................
Description of Common Stock of the
Utility Fund and the Equity Trust.................................
Reports to Shareholders....................................................
Experts ..................................................................
Further Information........................................................
Financial Statements.......................................................
Required Vote for the Transaction..........................................
PROPOSAL 2.................................................................
PROPOSAL 3.................................................................
ADDITIONAL INFORMATION.....................................................
SHAREHOLDER PROPOSALS......................................................
OTHER MATTERS TO COME BEFORE THE MEETING...................................
APPENDIX A................................................................A-1
APPENDIX B................................................................B-1
APPENDIX C................................................................C-1
APPENDIX D................................................................D-1
GENERAL VOTING INFORMATION
In addition to the solicitation of Proxies by mail, officers of
the Equity Trust, affiliates of the Equity Trust or other representatives
of the Equity Trust may also solicit proxies by telephone, telegraph or in
person. In addition, the Equity Trust has retained Georgeson and Company
Inc. to assist in the solicitation of Proxies for a fee estimated at $6,000
plus reimbursement of expenses. The costs of solicitation and the expenses
incurred in connection with preparing the Proxy Statement/Prospectus and
its enclosures will be paid by the Equity Trust. The Equity Trust will
reimburse brokerage firms and others for their expenses in forwarding
solicitation materials to the beneficial owners of shares. The Annual
Report of the Equity Trust, including audited financial statements for the
fiscal year ended December 31, 1998, was previously mailed to all
shareholders of the Equity Trust.
If the enclosed Proxy is properly executed and returned in time to
be voted at the Meeting, the shares represented thereby will be voted in
accordance with the instructions marked thereon. Unless instructions to the
contrary are marked thereon, the Proxy will be voted FOR Proposals 1, 2 and
3 and FOR any other matters deemed appropriate. Any shareholder who has
given a Proxy has the right to revoke it at any time prior to its exercise
either by attending the Meeting and voting his or her shares in person or
by submitting a letter of revocation or a later-dated Proxy to the Equity
Trust at the above address prior to the date of the Meeting.
In the event a quorum is present at the Meeting but sufficient
votes to approve any of the proposed items are not received, the persons
named as proxies may propose one or more adjournments of such Meeting to
permit further solicitation of proxies. Any such adjournment will require
the affirmative vote of a majority of those shares present at the Meeting
in person or by proxy. If a quorum is present, the persons named as proxies
will vote those proxies which they are entitled to vote FOR such proposal
in favor of such an adjournment and will vote those proxies required to be
voted for rejection of such proposal against any such adjournment.
The close of business on March 17, 1999 has been fixed as the
record date for the determination of shareholders entitled to notice of and
to vote at the Meeting and all adjournments thereof.
Each shareholder is entitled to one vote for each full share and
an appropriate fraction of a vote for each fractional share held. On the
record date there were 106,116,347 shares of Common Stock and 5,400,000
shares of Cumulative Preferred Stock of the Equity Trust outstanding.
To the knowledge of the management of the Equity Trust, no person
owns of record or beneficially 5% or more of the shares of the Common Stock
or the Cumulative Preferred Stock of the Equity Trust, except that as of
March 17, 1999, 88,725,776 shares of Common Stock and 5,334,450 shares of
Cumulative Preferred Stock were held of record by Cede & Co., a nominee
partnership of The Depository Trust Company. The following table shows the
shares held by The Depository Trust Company as nominee for each 5% record
or beneficial holder:
</TABLE>
<TABLE>
<CAPTION>
Name and Address of Amount of Shares Percent
Beneficial/Record Owner Title of Class and Nature of Ownership of Class
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cede & Co., as nominee for Common Stock 88,725,776 83.6%
The Depository Trust Company
P.O. Box 20 Cumulative 5,334,450 98.8%
Bowling Green Station Preferred Stock
New York, NY 10004
Salomon Smith Barney Inc. Common Stock 19,278,763 18.2%
333 W 34th Street
New York, NY 10001 Cumulative 1,784,960 33.1%
Preferred Stock
A. G. Edwards & Sons, Inc. Common Stock 10,739,322 10.1%
1 North Jefferson
St. Louis, MO 63103
Prudential Securities Inc. Common Stock 5,923,713 5.6%
c/o ADP Proxy Services
51 Mercedes Way Cumulative 555,872 10.3%
Edgewood, NY 11717 Preferred Stock
Paine Webber Inc. Cumulative 982,580 18.2%
1000 Harbor Blvd Preferred Stock
Weehawken, NJ 07087
National Financial Cumulative 614,692 11.4%
Services Corp. Preferred Stock
200 Liberty Street
New York, NY 10281
</TABLE>
As of March 17, 1999, the officers and directors of the Equity
Trust, as a group, owned 1,302,548 shares of Common Stock and 5,000 shares
of Cumulative Preferred Stock of the Equity Trust, representing 1.23% of
the shares of Common Stock and 0.09% of the shares of Cumulative Preferred
Stock.
This Proxy Statement/Prospectus is first being mailed to
shareholders on or about April __, 1999.
PROXY STATEMENT/PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information included elsewhere in this Proxy Statement/Prospectus.
The Transaction ..... The Board of Directors of the Equity Trust
has approved, subject to shareholder
approval, the contribution of a segment
of the Equity Trust's assets (which is
anticipated to consist largely or
exclusively of cash and short-term fixed
income instruments) having a value of
approximately $75 million to the Utility
Fund, a newly formed investment company
organized and wholly-owned by the Equity
Trust. All of the Utility Fund Common
Stock (as hereinafter defined) will then
be distributed by the Equity Trust as a
dividend to its shareholders at a rate of
one share of the Utility Fund for every
fourteen shares held of the Equity Trust.
The contribution of such Equity Trust
assets to the Utility Fund and the
subsequent distribution of the Utility
Fund's shares to Equity Trust
shareholders is referred to herein as the
"Transaction." See "The Transaction."
The Gabelli Utility
Fund ......... A newly formed investment company organized
by the Equity Trust and registered under
the Investment Company Act of 1940, as
amended (the "1940 Act"), as a
non-diversified closed-end investment
company.
Comparison of Investment
Objectives and Policies
of the Equity Trust
and the Utility Fund .... The primary investment objective of the
Utility Fund is long-term growth of
capital and income. Unlike the Equity
Trust, which attempts to achieve its
objective by investing primarily in a
portfolio of equity securities of
companies in a wide variety of
industries, the Utility Fund will
concentrate its investments in common
stock and other securities of foreign and
domestic companies involved to a
substantial extent in providing products,
services or equipment for the generation
or the distribution of electricity, gas
and water and the provision of
telecommunications services or
infrastructure operations, such as
airports, toll roads and municipal
services. As a result of investing in
these businesses, the Utility Fund over
time may be expected to experience
different investment results than the
Equity Trust. The Equity Trust's
secondary investment objective is income.
See "Investment Objectives and Policies
of the Utility Fund and the Equity
Trust."
The investment practices and restrictions
of each of the Utility Fund and the
Equity Trust are substantially similar
except that, generally, (i) the Utility
Fund has no fundamental policy with
respect to purchasing securities of other
investment companies, (ii) the Utility
Fund may borrow money to the extent
permitted by applicable law whereas the
Equity Trust is limited to borrowings not
exceeding 10% of its total assets to
finance repurchases of its shares and 5%
for extraordinary or emergency purposes,
(iii) there is no limitation on the
amount of foreign securities in which the
Utility Fund may invest whereas the
Equity Trust is limited to investing up
to 35% of its total assets in foreign
securities, (iv) the Utility Fund may
invest without limit in illiquid
securities whereas the Equity Trust may
not invest more than 10% of its total
assets in illiquid securities and (v) the
Utility Fund may make short sales of
securities. For a more detailed
description of the differences between
the investment practices and restrictions
of the Utility Fund and the Equity Trust,
see "Appendix A - Investment Practices"
and "Appendix B - Investment
Restrictions."
Investment Adviser
to the Utility
Fund; Advisory
Fees ............. Gabelli Funds, LLC (the "Investment
Adviser"), the investment adviser for the
Equity Trust, will also serve as
investment adviser to the Utility Fund.
The advisory fee structure for the
Utility Fund will be the same as that of
the Equity Trust. The investment advisory
agreement between the Utility Fund and
the Investment Adviser combines
investment advisory and administrative
responsibilities in one agreement. The
Utility Fund will pay the Investment
Adviser a fee computed daily and paid
monthly at an annual rate of 1.00% of the
average weekly net assets of the Utility
Fund. See "Investment Advisory and Other
Services."
Listing ........... Application will be made to list the
Utility Fund's shares on the New York
Stock Exchange upon notice of issuance of
such shares. Although there is no current
trading market for shares of Utility Fund
Common Stock, it is expected that "when
issued" trading of such shares will
commence on the New York Stock Exchange
four business days prior to the record
date set by the Board of Directors of the
Equity Trust for the distribution of the
shares of the Utility Fund.
Federal Income Tax
Consequences of
the Transaction....... The Transaction is not expected to increase
significantly the total amount of taxable
distributions received by the Equity
Trust shareholders for this year and is
not expected to result in the recognition
of significant taxable gain by the Equity
Trust.
The distribution of Utility Fund shares and
cash in lieu of fractional shares to
holders of Equity Trust Common Stock will
constitute a dividend to each such
shareholder up to its portion of the
Equity Trust's current or accumulated
earnings and profits (but not in excess
of the fair market value of Utility Fund
shares and cash received by such
shareholder) and generally will be
taxable to such shareholder as a
distribution of ordinary income and/or
long-term capital gains. To the extent
that the fair market value of the
distributed Utility Fund shares and cash
exceeds the allocated current earnings
and profits and any accumulated earnings
and profits from prior years, the excess
will first be treated as a non-taxable
return of capital, reducing the Equity
Trust Common Stock holder's tax basis in
its Equity Trust shares; thereafter,
distributions in excess of the Equity
Trust Common Stock holder's basis will be
taxable as gain realized from a deemed
sale of its Equity Trust shares. Each
Equity Trust Common Stock holder will
take a fair market value tax basis in the
Utility Fund shares received and will
have a new holding period beginning on
the date following the date of the
distribution. In addition to the other
information necessary to file tax
returns, the Equity Trust will provide
shareholders with information as to the
amount of the distribution to be treated
as a dividend.
The Utility Fund has received an opinion of
counsel to the effect that the foregoing
discussion accurately summarizes the
material federal income tax consequences
of the Transaction.
The foregoing summary is subject to and
qualified in its entirety by the
discussion in "The Transaction-Federal
Income Tax Consequences of the
Transaction" and "Taxation" below.
Comparison of
Distribution
Policies of the
Utility Fund
and the Equity
Trust The Utility Fund intends to file an
exemptive application with the Securities
and Exchange Commission requesting an
order of exemption from Section 19(b) of
the 1940 Act (the "Section 19(b)
Exemptive Order") enabling it to
distribute to shareholders substantially
all of its annual net investment income
monthly and capital gains quarterly or
more frequently. The Equity Trust will
continue to make quarterly dividend
payments pursuant to its 10% distribution
policy. See "Distributions; Automatic
Dividend Reinvestment and Voluntary Cash
Purchase Plan."
Manner of Effecting
the Distribution The Equity Trust's Board of Directors is
expected to declare a distribution (the
"Distribution") of all the outstanding
common shares of beneficial interest, par
value $.001 per share, of the Utility
Fund ("Utility Fund Common Stock"),
payable to the holders of record of the
Equity Trust's Common Stock, par value
$.001 per share ("Equity Trust Common
Stock"), as of the close of business on a
date (the "Distribution Record Date") to
be determined, together with the payable
date for the Distribution (the
"Distribution Date"), by the Equity
Trust's Board of Directors promptly
following shareholder approval of the
Transaction and receipt of an exemptive
order from the Securities and Exchange
Commission.
On or about the Distribution Date, the
Equity Trust will contribute a segment of
its assets (which is anticipated to
consist largely or exclusively of cash
and short-term fixed income instruments)
having a value of approximately $75
million to the Utility Fund.
The Equity Trust will effect the
Distribution on the Distribution Date by
providing for the delivery of the shares
of Utility Fund Common Stock to State
Street Bank and Trust Company (the
"Distribution Agent") for distribution to
holders of record of Equity Trust Common
Stock as of the close of business on the
Distribution Record Date. The
Distribution will be made on the basis of
one share of Utility Fund Common Stock
for every fourteen shares of Equity Trust
Common Stock outstanding on the
Distribution Record Date. All such shares
of Utility Fund Common Stock will be
fully paid and non-assessable. Commencing
on or about the Distribution Date,
certificates representing shares of
Utility Fund Common Stock will be mailed
to persons holding Equity Trust Common
Stock on the Distribution Record Date.
Shareholders who have their Equity Trust
shares registered with the transfer agent
in book-entry form in their names, will
receive shares of the Utility Fund in
book-entry form.
Fractional shares of Utility Fund Common
Stock will only be issued as part of the
Distribution to holders of Equity Trust
Common Stock who are participants in the
Equity Trust's Automatic Dividend
Reinvestment and Voluntary Cash Purchase
Plan (the "Equity Trust Plan"). The
Distribution Agent will aggregate the
fractional shares to which holders who
are not participants in the Equity Trust
Plan would otherwise be entitled and
attempt to sell them in the open market
at the then prevailing prices on behalf
of such holders, and such holders will
receive instead a cash payment in the
amount of their pro rata share of the
total sales proceeds.
In addition, holders of Equity Trust Common
Stock may purchase up to 500 additional
shares of the Utility Fund (acquired
through open market purchases at market
prices) from Gabelli & Company, Inc., the
broker-dealer affiliate of the Investment
Adviser, without a commission in order to
round up their positions to even round
lots.
No holder of Equity Trust Common Stock will
be required to pay any cash or other
consideration for the shares of Utility
Fund Common Stock received in the
Distribution or to surrender or exchange
shares of Equity Trust Common Stock in
order to receive shares of Utility Fund
Common Stock. The Distribution will not
affect the number of, or the rights
attaching to, outstanding shares of
Equity Trust Common Stock. See "The
Transaction - Manner of Effecting the
Distribution."
Shares of Utility Fund Common Stock
distributed in connection with the
Distribution will be freely transferable
except for shares received by persons who
may be deemed to be "affiliates" of the
Utility Fund under the Securities Act of
1933, as amended (the "1933 Act"). See
"The Transaction - Manner of Effecting
the Distribution."
Risk Factors and
Special Considerations Repurchase and Charter Provisions. As
shareholders of a closed-end fund, the
Utility Fund shareholders do not have the
right to redeem their shares. However,
the shares are freely transferable,
except for shares received by persons who
may be deemed to be "affiliates" of the
Utility Fund under the 1933 Act, and
shareholders desiring liquidity may,
subject to applicable securities laws,
trade their shares in the Utility Fund on
the New York Stock Exchange or other
markets on which the shares may trade at
the then current market value. Like the
Equity Trust, the Utility Fund is
authorized to repurchase its shares on
the open market when the shares are
trading at a discount of 10% or more (or
such other percentage as its Board of
Directors (which term includes a Board of
Trustees) may determine from time to
time) from the net asset value. In
addition, certain provisions of the
Utility Fund's Declaration of Trust may
be regarded as "anti-takeover"
provisions. Pursuant to these provisions
only one of the three classes of
directors (which term includes trustees)
is elected each year, and the affirmative
vote of the holders of 75% of the
outstanding voting shares of the Utility
Fund is necessary to authorize amendments
to the Utility Fund's Declaration of
Trust that would be necessary to convert
the Utility Fund from a closed-end to an
open-end investment company. In addition,
the affirmative vote of the holders of
80% of the outstanding voting shares of
each class of the Utility Fund, voting as
a class, is generally required to
authorize certain business transactions
with the beneficial owner of more than 5%
of the outstanding shares of the Utility
Fund. In addition, if the Utility Fund
issues preferred stock, the holders of
the preferred shares would have the
authority to elect two directors at all
times and would have separate class
voting rights on specified matters
including conversion of the Utility Fund
to open-end status and certain
reorganizations of the Utility Fund. The
overall effect of these provisions is to
render more difficult the accomplishment
of a merger with, or the assumption of
control by, a principal shareholder, or
the conversion of the Utility Fund to
open-end status. These provisions may
have the effect of depriving Utility Fund
shareholders of an opportunity to sell
their shares at a premium above the
prevailing market price. See "Description
of Common Stock of the Utility Fund and
the Equity Trust - Certain Provisions of
the Governing Documents of the Utility
Fund and the Equity Trust."
Non-Diversified Status. As a
non-diversified investment company under
the 1940 Act, the Utility Fund, like the
Equity Trust, is not limited in the
proportion of its assets that may be
invested in securities of a single
issuer, and accordingly, an investment in
the Utility Fund may, under certain
circumstances, present greater risk to an
investor than an investment in a
diversified company. See "Investment
Objectives and Policies of the Utility
Fund and the Equity Trust," "Risk
Factors" and "Taxation."
Discount to Net Asset Value. Shares of
closed-end investment companies
frequently trade at a discount from net
asset value. This characteristic of
shares of a closed-end investment company
is a risk separate and distinct from the
risk that the Utility Fund's net asset
value may decrease. The Equity Trust
cannot predict whether the Utility Fund's
shares will trade at, below or above net
asset value. The risk of holding shares
of closed-end investment companies that
might trade at a discount to net asset
value is more pronounced for shareholders
who wish to sell their shares in a
relatively short period of time after
completion of the Distribution. For those
shareholders, realization of a gain or
loss on their investment is likely to be
more dependent upon the existence of a
premium or discount than upon portfolio
performance. See "Investment and
Objectives of the Utility Fund and the
Equity Trust" and "Risk Factors."
Taxable Distribution. Each holder of Equity
Trust Common Stock will recognize taxable
income as a result of the distribution of
the Utility Fund shares and cash in lieu
of fractional shares. The Transaction is
not expected to increase significantly
the total amount of taxable distributions
received by the Equity Trust shareholders
for this year, provided that the Equity
Trust, as it expects, does not contribute
securities with significant net
unrealized appreciation to the Utility
Fund in exchange for Utility Fund shares.
In the event that the Equity Trust does
contribute securities with significant
net unrealized appreciation, the
Transaction could result in the
recognition of significant taxable gain
by the Equity Trust and could increase
the total amount of taxable distributions
received by the Equity Trust shareholders
for this year. See "Proxy
Statement/Prospectus Summary - Federal
Income Tax Consequences of the
Transaction" and "The Transaction -
Federal Income Tax Consequences of the
Transaction."
Costs Associated with Sales of Utility Fund
Common Stock. If an Equity Trust
shareholder sells the shares in the
Utility Fund that he receives, the
shareholder may incur brokerage
commissions and the sale may constitute a
taxable event for the shareholder.
Industry Risks. The Utility Fund will
invest a significant portion of its
assets in companies in the utility
industry and, as a result, the value of
the Utility Fund's shares will be more
susceptible to factors affecting those
particular types of companies, including
governmental regulation, deregulation,
inflationary and other cost increases in
fuel and other operating expenses and
high interest costs or borrowings needed
for capital construction programs,
including compliance with environmental
regulations. As a consequence of its
concentration policy, the Utility Fund's
investments may be subject to greater
risk and market fluctuation than a fund
that has securities representing a
broader range of alternatives. See
"Investment Objectives and Polices of the
Utility Fund and the Equity Trust" and
"Risk Factors."
Foreign Securities. There is no limitation
on the amount of foreign securities in
which the Utility Fund may invest. The
Equity Trust, in contrast, may invest up
to 35% of its total assets in foreign
securities. Investing in securities of
foreign companies and foreign
governments, which generally are
denominated in foreign currencies, may
involve certain risk and opportunity
considerations not typically associated
with investing in domestic companies and
could cause the Utility Fund to be
affected favorably or unfavorably by
changes in currency exchange rates and
revaluations of currencies. See
"Investment Objectives and Policies of
the Utility Fund and the Equity Trust"
and "Risk Factors."
Leveraging. As provided in the 1940 Act and
subject to certain exceptions, the
Utility Fund may issue debt or preferred
stock so long as the Utility Fund's total
assets, less certain ordinary course
liabilities, exceed 300% of the amount of
the debt outstanding and exceed 200% of
the sum of the amount of preferred stock
and debt outstanding and the Equity Trust
may issue debt for certain restricted
purposes up to 10% of its total assets
and preferred stock up to the 200% asset
coverage limitation. Such debt or
preferred stock may be convertible in
accordance with SEC staff guidelines
which may permit each fund to obtain
leverage at attractive rates. Use of
leverage may magnify the impact on the
holders of common stock of changes in net
asset value and the cost of leverage may
exceed the return on the securities
acquired with the proceeds of leverage,
thereby diminishing rather than enhancing
the return to such shareholders and
generally making the fund's total return
to such shareholders more volatile. In
addition, the fund may be required to
sell investments in order to meet
dividend or interest payments on the debt
or preferred stock when it may be
disadvantageous to do so. See "Risk
Factors" and "Appendix A - Investment
Practices."
TABLE OF FEES AND EXPENSES
<TABLE>
<CAPTION>
Equity Utility
Trust Fund
------ -------
Shareholder Transaction Expenses
<S> <C> <C>
Automatic Dividend Reinvestment and Voluntary
Cash Purchase Plan Fees.......................................... (1) (1)
Annual Operating Expenses (as a percentage of net assets
attributable to common shares)
Management Fees.................................................. 1.00% 1.00%
Other Expenses (2)............................................... 0.15% 0.75%
----- -----
Total Annual Operating Expenses............................ 1.15% 1.75%
----- -----
</TABLE>
Example
The following examples illustrate the projected dollar amount of
cumulative expenses that would be incurred over various periods with
respect to a hypothetical investment in each of the Equity Trust and the
Utility Fund. These amounts are based upon payment by each of the Equity
Trust and the Utility Fund of expenses at levels set forth in the above
table.
You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity Trust (3)........................... $12 $37 $63 $140
Utility Fund (3)........................... $18 $55 $95 $206
</TABLE>
The foregoing table is to assist you in understanding the various
costs and expenses that an investor in each of the Equity Trust and the
Utility Fund will bear directly or indirectly. The assumed 5% annual return
is not a prediction of, and does not represent, the projected or actual
performance of the Equity Trust Common Stock or the Utility Fund Common
Stock. Actual expenses and annual rates of return may be more or less than
those assumed for purposes of the Example.
The Utility Fund is a newly-formed entity with no operating
history. As such, expenses are estimated based on the anticipated size of
the Utility Fund as of the date of this Proxy Statement/Prospectus.
- ----------------------
(1) Shareholders participating in the Equity Trust's or the Utility
Fund's Automatic Dividend Reinvestment and Voluntary Cash Purchase
Plan would pay $0.75 per transaction to purchase shares and $2.50
per transaction to sell shares. See "Distributions; Automatic
Dividend Reinvestment and Voluntary Cash Purchase Plan."
(2) "Other expenses" are based on estimated amounts for the first
full fiscal year for the Utility Fund and actual expenses for the
year ended December 31, 1998 for the Equity Trust.
(3) Amounts are exclusive of fees discussed in Note (1) above.
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
The following unaudited pro forma statement of assets and
liabilities of the Equity Trust and the Utility Fund assumes that the
Distribution occurred as of December 31, 1998, that the spin-off was at a
rate of one share of the Utility Fund for every fourteen Equity Trust
shares resulting in 7,579,739 shares of the Utility Fund outstanding and
that the assets contributed to the Utility Fund were valued at cost.
<TABLE>
<CAPTION>
December 31, 1998
Pro Forma
Equity Trust Assets Equity Trust Utility Fund
- ------------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
$1,341,215,869 Investments, at value (1) $1,265,418,478 $75,797,391
41,454,278 Cash and other assets 41,454,278 -
- ------------------------ ------------------- ------------------
$1,382,670,147 Total Assets $1,306,872,756 $75,797,391
- ------------------------ ------------------- ------------------
Liabilities
30,480,425 30,810,425 -
- ------------------------ ------------------- ------------------
$1,352,189,722 Net Assets $1,276,062,331 $75,797,391
======================== =================== ==================
Net Assets consist of:
Cumulative Preferred
Stock (7.25%, $25 liquidation
value, $0.001 par value,
8,000,000 shares authorized with
5,400,000 shares issued and
$135,000,000 outstanding) $135,000,000 -
106,116 Common Stock at par value 106,116 $7,580
720,262,347 Additional paid-in capital 720,262,347 $75,789,811
55,868 Accumulated net investment income - -
Distributions in excess of net
investment income (76,071,523) -
Accumulated net realized gain on
investments, futures contracts and
6,820,887 foreign currency transactions 6,820,887 -
Net unrealized appreciation on
investments, futures contracts and
489,944,504 foreign currency transactions 489,944,504 -
======================== =================== ==================
$1,352,189,722 Total Net Assets $1,276,062,331 $75,797,391
======================== =================== ==================
$11.47 Net Asset Value per common share $10.75 $10.00
======================== =================== ==================
(1) $844,193,648 Cost of investments $768,396,257 $75,797,391
Set forth below is information with respect to the Utility Fund
Common Stock and the Equity Trust Common Stock following the Distribution.
The following table assumes that the Distribution will be based on the
106,116,347 shares of Equity Trust Common Stock outstanding as of December
31, 1998.
Amount Held by Company Amount
Amount Authorized or for Its Own Account Outstanding
Utility Fund Common Stock........... unlimited 0 shares 7,579,739 shares
Equity Trust Common Stock........... 200,000,000 shares 0 shares 106,116,347 shares
</TABLE>
PROPOSAL 1: TO APPROVE THE DISTRIBUTION TO EQUITY TRUST SHAREHOLDERS OF
APPROXIMATELY $75 MILLION OF THE EQUITY TRUST'S NET
ASSETS IN THE FORM OF SHARES OF THE GABELLI UTILITY FUND,
A NEWLY-ORGANIZED CLOSED-END, REGISTERED
INVESTMENT COMPANY.
At the Meeting, a proposal will be presented to approve or
disapprove a distribution to Equity Trust shareholders of approximately $75
million of the Equity Trust's net assets in the form of shares of the
Utility Fund.
The Transaction
Background
The Equity Trust commenced operations in August 1986 as a
non-diversified, closed-end management investment company seeking long-term
growth of capital primarily through investment in a portfolio of equity
securities selected by the Investment Adviser. Income is a secondary
objective of the Equity Trust. At December 31, 1998, the Equity Trust's net
assets approximated $1.35 billion. The Equity Trust stated in its
prospectus that, as a "non-diversified" investment company, the Equity
Trust could concentrate investments in individual issues to a greater
degree than a diversified investment company.
The Board of Directors of the Equity Trust has taken several steps
in order to seek to reduce any discount between the trading price of the
Equity Trust's shares and the Equity Trust's net asset value. The Board of
Directors has authorized the purchase of Equity Trust shares in the open
market whenever a discount of 10% or more exists. Additionally, the Board
has adopted a "10% distribution" policy.(1) While the Board of Directors of
the Equity Trust believes that the adoption of this policy has ameliorated
the discount at which the Equity Trust's shares trade, the Investment
Adviser, in managing the Equity Trust's assets with a view to assuring that
the Equity Trust has sufficient cash and liquidity available to be able on
a consistent basis to meet its 10% distribution policy, has diversified the
Equity Trust's investments to a greater extent than required under the 1940
Act and the Internal Revenue Code of 1986 (the "Code"). Additionally, the
Investment Adviser has found that, in general, the Equity Trust's
shareholders are conservative, dividend sensitive investors who like
current income. They overwhelmingly favor the Equity Trust's 10%
distribution policy.
- -------------
1 Pursuant to this policy, the Equity Trust makes quarterly
distributions of $0.27 per share following the first three
calendar quarters of each year and an adjusting distribution in
December equal to the sum of 2.5% of the net asset value of the
Equity Trust as of the last day of each of the four preceding
calendar quarters less the aggregate distribution of $0.81 per
share for the most recent three calendar quarters.
Description of the Transaction
The Board of Directors of the Equity Trust has approved, subject
to shareholder approval, the contribution of a segment of the Equity
Trust's net assets having a value of approximately $75 million to the
Utility Fund, a newly-formed investment company organized and wholly owned
by the Equity Trust. It is anticipated that the contributed assets will
consist largely or exclusively of cash and short-term fixed income
instruments. All the shares of Utility Fund Common Stock will then be
distributed by the Equity Trust as a dividend to its shareholders at a rate
of one share of Utility Fund Common Stock for every fourteen shares held of
Equity Trust Common Stock.
The primary investment objective of the Utility Fund is long-term
growth of capital and income. Unlike the Equity Trust, which attempts to
achieve its objective by investing primarily in a portfolio of equity
securities of companies involved in a wide variety of industries, the
Utility Fund will invest primarily in common stock and other securities of
foreign and domestic companies involved to a substantial extent in
providing products, services or equipment for the generation or
distribution of electricity, gas, and water and the provision of
telecommunications services or infrastructure operations, such as airports,
toll roads and municipal services. As a result, the Utility Fund over time
may be expected to experience different investment results than the Equity
Trust. The Utility Fund will register under the 1940 Act as a
non-diversified, closed-end investment company, and the Investment Adviser
will serve as investment adviser to the Utility Fund. The advisory fee
structure for the Utility Fund will be the same as that of the Equity Trust
(see "Investment Advisory and Other Services"), and the Utility Fund's
shares will be listed for trading on the New York Stock Exchange. The
Distribution Record Date and the Distribution Date will be determined by
the Board of Directors of the Equity Trust following shareholder approval
of the Transaction. The investment restrictions, policy of concentration in
utility businesses and other matters relating to the Utility Fund's
structure are described below. See "Investment Objectives and Policies of
the Utility Fund and the Equity Trust."
The Board of Directors believes that the Transaction will result
in the following benefits to Equity Trust shareholders:
1. The shareholders will receive shares of an investment
company with a different risk-return profile than the Equity
Trust, thereby providing shareholders with the following
alternatives: (a) retaining their shares in both the Equity Trust
and the Utility Fund; (b) selling their shares in the Utility Fund
and retaining the Equity Trust shares; or (c) selling the Equity
Trust's shares and retaining their shares in the Utility Fund. As
a consequence, the Equity Trust's shareholders may more closely
align their investment portfolio with their desired exposure to
different segments of the market. Of course, if a shareholder
sells his shares in either the Utility Fund or the Equity Trust,
the shareholder may incur brokerage commissions and such sale may
constitute a taxable event for the shareholder.
2. Shares of the Utility Fund will be issued at a much
lower transaction cost to investors than is typically the case for
a newly organized closed-end equity fund since there will be no
underwriting discounts or commissions. Of course, the Transaction
will not result in an increase in the aggregate net assets of the
Equity Trust and the Utility Fund.
3. As a concentrated fund, the Utility Fund will afford
shareholders the opportunity to seek the capital appreciation
opportunities presented by a particular market segment. The
Utility Fund's policy of concentrating in the utility industry is
a fundamental policy that can be changed only with approval of the
holders of a majority of the Utility Fund's outstanding voting
securities. Of course, as a consequence of its concentration
policy, the Utility Fund's investments may be subject to greater
risk and market fluctuation than a fund that has securities
representing a broader range of alternatives.
4. The Utility Fund will distribute to shareholders
substantially all of its net income monthly and capital gains
quarterly or more frequently pursuant to the Section 19(b)
Exemptive Order. The Utility Fund intends to adopt a fixed
dividend policy, at a rate to be determined, that is similar to
the Equity Trust's 10% distribution policy. The dividend policy of
the Utility Fund may be modified from time to time by the Utility
Fund's Board of Directors (which term includes a Board of
Trustees). As a regulated investment company under the Code, the
Utility Fund will not be subject to U.S. federal income tax on its
investment company taxable income that it distributes to
shareholders, provided that at least 90% of its investment company
taxable income for that taxable year is distributed to its
shareholders. See "Taxation."
The Board of Directors believes that the benefits of the
Transaction outlined above outweigh the costs of the Transaction. For a
description of the costs and expenses relating to the Transaction, see
"Transaction Expenses" below.
Federal Income Tax Consequences of the Transaction
The Equity Trust will contribute cash and securities to the
Utility Fund in exchange for shares of the Utility Fund. Such contribution
should not be a taxable event to either the Equity Trust or the Utility
Fund, but the subsequent distribution of Utility Fund shares to holders of
Equity Trust Common Stock may be a taxable event to
the Equity Trust and its shareholders as noted below.
The Equity Trust does not expect that any significant amount of
net unrealized appreciation will exist in the securities transferred to the
Utility Fund. Accordingly, the Transaction is not expected to result in the
recognition of significant taxable gain by the Equity Trust and, except as
noted below, is not expected to increase significantly the total amount of
taxable distributions received by Equity Trust shareholders for this year.
In addition, the Board of Directors of the Equity Trust has considered the
tax consequences of the Transaction to its shareholders and has determined
that the benefits of the Transaction outweigh any adverse tax consequences.
The distribution of Utility Fund shares and cash in lieu of
fractional shares to holders of Equity Trust Common Stock will constitute a
dividend to each such shareholder up to its portion of the Equity Trust's
current or accumulated earnings and profits (but not in excess of the fair
market value of Utility Fund shares and cash received by such shareholder)
and generally will be taxable to such shareholder as a distribution of
ordinary income and/or long-term capital gains. The Equity Trust's current
earnings and profits for 1999 (including earnings and profits, if any, from
the Transaction) will be allocated pro rata among all the Equity Trust's
distributions during this year. The Equity Trust intends to contribute to
the Utility Fund assets that do not reflect in the aggregate net unrealized
appreciation so as to minimize any increase in the Equity Trust's earnings
and profits as a result of the Transaction. To the extent that the fair
market value of the distributed Utility Fund shares and cash exceeds the
allocated current earnings and profits and any accumulated earnings and
profits from prior years, the excess will first be treated as a non-taxable
return of capital, reducing the Equity Trust Common Stock holder's tax
basis in its Equity Trust shares; thereafter, any distributions in excess
of the Equity Trust Common Stock holder's tax basis will be taxable as gain
realized from a deemed sale of its Equity Trust shares. Each shareholder
will take a fair market value tax basis in the Utility Fund shares received
and will have a new holding period beginning on the date following the date
of the distribution. In addition to the other information necessary to file
tax returns, the Equity Trust will provide shareholders with information as
to the amount of the distribution to be treated as a dividend.
The Utility Fund has received an opinion of counsel to the effect
that the foregoing discussion accurately summarizes the material federal
income tax consequences of the Transaction.
The foregoing discussion is subject to and qualified in its
entirety by the discussion in "Taxation" below.
Listing
Application will be made to list the Utility Fund's shares on the
New York Stock Exchange upon notice of issuance thereof. Although there is
no current trading market for shares of Utility Fund Common Stock, it is
expected that "when issued" trading of such shares will commence on the New
York Stock Exchange four business days prior to the Distribution Record
Date.
Transaction Expenses
The costs of organizing the Utility Fund and effecting the
distribution of the Utility Fund's shares to the Equity Trust's
shareholders, including the fees and expenses of counsel and accountants
and printing, listing and registration fees, are estimated to be
approximately $330,000 and will be borne by the Equity Trust. In addition,
the Utility Fund will incur operating expenses on an ongoing basis,
including legal, auditing, transfer agency and custodian expenses that,
when aggregated with the fees payable by the Equity Trust for similar
services after the distribution, will likely exceed the fees currently
payable by the Equity Trust for those services. It is not expected that the
Distribution will have a significant effect on the annual expenses of the
Equity Trust percentage of its net assets.
Manner of Effecting the Distribution
If the Transaction is approved by shareholders of the Equity Trust
and all other conditions thereto are satisfied, the Equity Trust's Board of
Directors is expected to declare the Distribution of all the outstanding
shares of Utility Fund Common Stock, payable on the Distribution Date to
the holders of record of the Equity Trust Common Stock as of the close of
business on the Distribution Record Date. The Distribution Record Date and
the Distribution Date will be determined by the Board of Directors of the
Equity Trust promptly following shareholder approval of the Transaction.
The Equity Trust will effect the Distribution on the Distribution
Date by providing for the delivery of shares of Utility Fund Common Stock
to the Distribution Agent for distribution to holders of record of Equity
Trust Common Stock as of the close of business on the Distribution Record
Date. The Distribution will be made on the basis of one share of Utility
Fund Common Stock for every fourteen shares of Equity Trust Common Stock
outstanding on the Distribution Record Date. All such shares of Utility
Fund Common Stock will be fully paid and nonassessable. The holders of
Utility Fund Common Stock will have no preemptive rights to subscribe for
additional shares of Utility Fund Common Stock or other securities of the
Utility Fund. See "Description of Common Stock of the Utility Fund and the
Equity Trust - Utility Fund Common Stock." Commencing on or about the
Distribution Date, certificates representing shares of Utility Fund Common
Stock will be mailed to persons holding Utility Fund Common Stock on the
Distribution Record Date or credited in book-entry form to accounts
registered directly with the transfer agent, with a confirmation statement
mailed to shareholders.
Fractional shares of Utility Fund Common Stock will only be issued
as part of the Distribution to holders of Equity Trust Common Stock who are
participants in the Equity Trust Plan. The Distribution Agent will
aggregate the fractional shares to which holders who are not participants
in the Equity Trust Plan would otherwise be entitled and attempt to sell
them in the open market at then prevailing prices on behalf of such
holders, and such holders will receive instead a cash payment in the amount
of their pro rata share of the total sales proceeds. Thus, a person who
holds a number of shares of Equity Trust Common Stock that is not an even
multiple of fourteen and who is not a participant in the Equity Trust Plan
will receive the appropriate number of shares of and a check for his or her
pro rata share of the proceeds from sales of fractional share interests. A
holder of fewer than fourteen shares of Equity Trust Common Stock who is
not a participant in the Equity Trust Plan will receive no shares of
Utility Fund Common Stock in the Distribution but will be entitled only to
his or her pro rata share of the proceeds from sales of fractional share
interests. Sales of fractional shares of Utility Fund Common Stock are
expected to be made as soon as practicable after the Distribution Date and
checks representing proceeds of fractional share sales of Utility Fund
Common Stock will be mailed shortly thereafter. The Utility Fund will bear
the cost of commissions incurred in connection with such sales.
In addition, holders of Equity Trust Common Stock may purchase up
to 500 additional shares of the Utility Fund (acquired through open market
purchases at market prices) from Gabelli & Company, Inc., the broker-dealer
affiliate of the Investment Adviser, without a commission in order to round
up their positions to even round lots.
No holder of Equity Trust Common Stock will be required to pay to
the Equity Trust any cash or other consideration for the shares of Common
Stock received in the Distribution or to surrender or exchange shares of
Equity Trust Common Stock in order to receive shares of Utility Fund Common
Stock. The Distribution will not affect the number of, nor the rights
attaching to, outstanding shares of Equity Trust Common Stock.
Shares of Utility Fund Common Stock distributed in connection with
the Distribution will be freely transferable, except for shares received by
persons who may be deemed to be "affiliates" of the Utility Fund under the
1933 Act. Persons who may be deemed to be "affiliates" of the Utility Fund
after the Distribution generally include individuals or entities that
control, are controlled by or are under common control with the Utility
Fund, and may include certain officers and directors (which term includes
trustees) of the Utility Fund as well as principal shareholders of the
Utility Fund. Persons who are affiliates of the Utility Fund will be
permitted to sell their shares of the Utility Fund Common Stock only
pursuant to an effective registration statement under the 1933 Act or an
exemption from the registration requirements of the 1933 Act, such as the
exemptions afforded by Section 4(2) of the 1933 Act and Rule 144
thereunder.
Costs Associated with Sales of Utility Fund Common Stock
If an Equity Trust shareholder sells the shares of Utility Fund
Common Stock that he receives in the Distribution, the shareholder may
incur brokerage commissions and the sale may constitute a taxable event for
the shareholder.
Allocation of Investment Opportunities
After the distribution of shares in the Utility Fund, the Equity
Trust and the Utility Fund and other clients of the Investment Adviser or
its affiliates may purchase or sell the same securities. The Investment
Adviser follows a policy of allocating purchases and sales of the same
security among the Equity Trust and other managed accounts in a manner
deemed fair and equitable to all accounts. See "Portfolio Transactions and
Brokerage."
Investment Objectives and Policies of
the Utility Fund and the Equity Trust
The primary investment objective of the Utility Fund is long-term
growth of capital and income. The primary investment objective of the
Equity Trust is long-term capital appreciation, with income as a secondary
objective. Unlike the Equity Trust, which attempts to achieve its objective
by investing primarily in a portfolio of equity securities of companies in
a wide variety of industries, the Utility Fund will invest primarily in
common stock and other securities of foreign and domestic utility companies
involved to a substantial extent in providing products, services or
equipment for the generation or the distribution of electricity, gas, and
water, the provision of telecommunications services or infrastructure
operations, such as airports, toll roads and municipal services.
The Utility Fund's investment objectives are "fundamental" and
therefore may not be changed without the approval of the holders of a
majority of the Utility Fund's outstanding voting securities, as defined in
the 1940 Act. Except as expressly stated herein, none of the Utility Fund's
policies are fundamental and may be modified by the Board of Directors
without shareholder approval.
The Utility Fund
The Utility Fund will attempt to achieve its objectives by
investing, under normal market conditions, at least 65% of its total assets
in common stock and other securities of foreign and domestic companies in
the utility industry. Such industry is generally associated with electric,
gas, gas pipeline, telephone, telecommunications, water, cable, airport,
seaport, toll road, water disposal and other municipal services companies.
It is anticipated that the Utility Fund will invest primarily in
equity securities of companies in the utility industry. However, the
Utility Fund may also invest in preferred stocks and debt securities of any
quality and any maturity of such companies when it appears that the Utility
Fund will be better able to achieve its investment objective through
investments in such securities or when the Utility Fund is temporarily in a
defensive position. The remaining 35% of its assets may be invested in
other securities, including stocks, debt obligations and money market
instruments, as well as certain derivative instruments in the utility industry
or other industries. Moreover, should extraordinary conditions affecting such
sectors or securities markets as a whole warrant, the Utility Fund may
temporarily be primarily invested in money market instruments.
The companies in which the Utility Fund may invest are those that
are engaged to a substantial extent in providing products, services or
equipment anywhere in the world relating to the generation or distribution
of electricity, gas, water and the provision of telecommunications services
or infrastructure operations, such as airports, toll roads and municipal
services. Although many of these companies traditionally pay above average
dividends, the Utility Fund intends to focus on those companies whose
securities have the potential to increase in value. The Utility 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, the level of demand for services, and the risks associated
with constructing and operating nuclear power facilities. These factors may
change rapidly. The Utility Fund emphasizes quality in selecting utility
investments, and 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 Utility Fund intends to
position itself to take advantage of trends in consolidation.
Under normal circumstances the Utility Fund may invest in
securities of issuers located in countries other than the United States.
Investing in securities of foreign issuers, which generally are denominated
in foreign currencies, may involve certain risk and opportunity
considerations not typically associated with investing in domestic
companies and could cause the Utility Fund to be affected favorably or
unfavorably by changes in currency exchange rates and revaluations of
currencies. For a further discussion of the risks associated with investing
in foreign securities and a description of other risks inherent in the
Utility Fund's investment objectives and policies, see "Investment
Objectives and Policies of the Utility Fund and the Equity Trust" and "Risk
Factors."
The Equity Trust
The Equity Trust attempts to achieve its objectives by investing
primarily in a portfolio of equity securities consisting of common stock,
preferred stock, convertible or exchangeable securities and warrants and
rights to purchase such securities, selected by the Investment Adviser.
Investment Methodology of the Equity Trust and the Utility Fund
In selecting securities for the Equity Trust or the Utility Fund,
the Investment Adviser normally will consider the following factors, among
others: (1) the Investment Adviser's own evaluations of the private market
value, cash flow, earnings per share and other fundamental aspects of the
underlying assets and business of the company; (2) the potential for
capital appreciation of the securities; (3) the interest or dividend income
generated by the securities; (4) the prices of the securities relative to
other comparable securities; (5) whether the securities are entitled to the
benefits of call protection or other protective covenants; (6) the
existence of any anti-dilution protections or guarantees of the security;
and (7) the diversification of the portfolio of the Equity Trust or the
Utility Fund as to issuers. The Investment Adviser's investment philosophy
with respect to debt and equity securities seeks to identify assets that
are selling in the public market at a discount to their private market
value, which the Investment Adviser defines as the value informed
purchasers are willing to pay to acquire assets with similar
characteristics. The Investment Adviser also normally evaluates the
issuers' free cash flow and long-term earnings trends. Finally, the
Investment Adviser looks for a catalyst -- something in the company's
industry or indigenous to the company or country itself that will surface
additional value.
The investment objectives of long-term growth of capital and
income are fundamental policies of both the Equity Trust and the Utility
Fund. The Utility Fund's policy of concentration in companies in the
utility industry is also a fundamental policy of the Utility Fund.
Fundamental policies may not be changed without the authorization of a
Majority Vote (as hereinafter defined) of the fund's shareholders.
Risk Factors
Industry Risks. The Utility Fund will invest a significant portion
of its assets in particular types of companies, and, as a result, the value
of the Utility Fund's shares will be more susceptible to factors affecting
those particular types of companies, including governmental regulation,
inflation, cost increases in fuel and other operating expenses and high
interest costs such as borrowings needed for capital construction programs,
including compliance with environmental regulations. The Equity Trust, on
the other hand, has historically been broadly diversified across industry
groups.
Various regulatory regimes impose limitations on the percentage of
the shares of a public utility held by an investment for its clients. These
limitations may unfavorably restrict the ability of the Utility Fund to
make certain investments.
In addition, deregulation of the utility industry could have a
positive or negative impact on the Utility Fund's shares. The Investment
Adviser believes that certain utility companies' fundamentals should
continue to improve as the industry undergoes deregulation. Companies may
seek to strengthen their competitive positions through mergers and
takeovers. The loosening of the regulation governing 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, 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.
Long-Term Objective. Each of the Equity Trust and the Utility Fund
is intended for investors seeking long-term capital growth and income.
Neither the Equity Trust nor the Utility Fund is meant to provide a vehicle
for those who wish to play short-term swings in the stock market. An
investment in shares of the Equity Trust and/or shares of the Utility Fund
should not be considered a complete investment program. Each shareholder
should take into account the shareholder's investment objectives as well as
the shareholder's other investments when considering the Transaction.
Non-Diversified Status. The Equity Trust and the Utility Fund each
is classified as a "non-diversified" investment company under the 1940 Act,
which means neither the Equity Trust nor the Utility Fund is limited by the
1940 Act in the proportion of its assets that may be invested in the
securities of a single issuer. However, the Equity Trust has in the past
conducted and the Equity Trust and the Utility Fund each intends to conduct
its operations so as to qualify as a "regulated investment company" for
purposes of the Code, which will relieve it of any liability for federal
income tax to the extent its earnings are distributed to shareholders. See
"Taxation." To so qualify, among other requirements, the Equity Trust and
the Utility Fund each will limit its investments so that, at the close of
each quarter of the taxable year, (i) not more than 25% of the market value
of its total assets will be invested in the securities of a single issuer,
and (ii) at least 50% of the market value of its assets is represented by
cash, securities of other regulated investment companies, U.S. government
securities and other securities, with such other securities limited, in
respect of any one issuer, to an amount not greater than 5% of its assets
and not greater than 10% of the outstanding voting securities of such
issuer. The investments of the Equity Trust and the Utility Fund in U.S.
Government Securities are not subject to these limitations. Because the
Equity Trust and the Utility Fund, as non-diversified investment companies,
may invest in the securities of individual issuers to a greater degree than
a diversified investment company, an investment in the Equity Trust or the
Utility Fund may, under certain circumstances, present greater risk to an
investor than an investment in a diversified company.
Market Value and Net Asset Value. The Utility Fund is a newly
organized, non-diversified, closed-end management investment company with
no previous operating history. Shares of closed-end investment companies
frequently trade at a discount from net asset value. The characteristic of
shares of a closed-end fund is a risk separate and distinct from the risk
that the Utility Fund's net asset value will decrease. The Equity Trust
cannot predict whether the Utility Fund's shares will trade at, below or
above net asset value. 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 the
Distribution 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 Utility Fund's
shares are not subject to redemption. Shareholders desiring liquidity may,
subject to applicable securities laws, trade their shares in the Utility
Fund on the New York Stock Exchange or other markets on which such shares
may trade at the then current market value, which may differ from the then
current net asset value. For information concerning the trading history of
the Equity Trust's shares, see "Description of Common Stock of the Utility
Fund and the Equity Trust - Equity Trust Common Stock."
Lower Rated Securities. The Equity Trust and the Utility Fund each
may invest up to 10% of its total assets in fixed-income securities rated
in the lower rating categories of recognized statistical rating agencies,
such as securities rated "CCC" or lower by S&P or "Caa" or lower by
Moody's, Inc., or non-rated securities of comparable quality. These debt
securities are predominantly speculative and involve major risk exposure to
adverse conditions and are often referred to in the financial press as
"junk bonds."
Foreign Securities. The Equity Trust may invest up to 35% of its
total assets in foreign securities. There is no limitation on the amount of
foreign securities in which the Utility Fund may invest. Investing in
securities of foreign companies and foreign governments, which generally
are denominated in foreign currencies, may involve certain risk and
opportunity considerations not typically associated with investing in
domestic companies and could cause the Equity Trust or the Utility Fund to
be affected favorably or unfavorably by changes in currency exchange rates
and revaluations of currencies. In addition, less information may be
available about foreign companies and foreign governments than about
domestic companies and foreign companies and foreign governments generally
are not subject to uniform accounting, auditing and financial reporting
standards or to other regulatory practices and requirements comparable to
those applicable to domestic companies. Foreign securities and their
markets may not be as liquid as U.S. securities and their markets.
Securities of some foreign companies may involve greater market risk than
securities of U.S. companies. Investment in foreign securities may result
in higher expenses than investing in domestic securities because of the
payment of fixed brokerage commissions on foreign exchanges, which
generally are higher than commissions on U.S. exchanges, and the imposition
of transfer taxes or transaction charges associated with foreign exchanges.
Investment in foreign securities also may be subject to local economic or
political risks, including instability of some foreign governments, the
possibility of currency blockage or the imposition of withholding taxes on
dividend or interest payments, and the potential for expropriation,
nationalization or confiscatory taxation and limitations on the use or
removal of funds or other assets.
Among the foreign securities in which the Equity Trust and the
Utility Fund may invest are those issued by companies located in developing
countries, which are countries in the initial stages of their
industrialization cycles. Investing in the equity and debt markets of
developing countries involves exposure to economic structures that are
generally less diverse and less mature, and to political systems that can
be expected to have less stability, than those of developed countries. The
markets of developing countries historically have been more volatile than
the markets of the more mature economies of developed countries, but often
have provided higher rates of return to investors. The Equity Trust and the
Utility Fund each may also invest in debt securities of foreign
governments.
For a further description of lower rated securities and the risks
associated therewith, see Appendix A. For a description of the ratings
categories of certain recognized statistical ratings agencies, see Appendix
D.
Risks to Holders of Common Stock of Issuance of Senior Securities.
A leveraged capital structure creates certain special risks and potential
benefits not associated with unleveraged funds having similar investment
objectives and policies. Any investment income or gains from the capital
represented by preferred shares or debt which is in excess of the dividends
payable thereon will cause the total return of the common shares to be
higher than would otherwise be the case. Conversely, if the investment
performance of the capital represented by preferred shares or debt fails to
cover the dividends payable thereon, the total return of the common shares
would be less or, in the case of negative returns, would result in higher
negative returns to a greater extent than would otherwise be the case. The
requirement to pay dividends on preferred shares or debt in full before any
dividends may be paid on the common shares means that dividends on the
common shares from earnings may be reduced or eliminated.
The mandatory requirements of the 1940 Act could also pose certain
risks for the holders of Common Stock in the same circumstances. If the
asset coverage for any preferred shares or debt securities falls below the
requirements of the 1940 Act, a fund would be unable to pay dividends on
its common shares. Although an inability to pay dividends on the common
shares could conceivably cause a fund to lose its special federal income
tax status, which would be materially adverse to the holders of the common
shares, such inability can be avoided through the use of mandatory
redemption requirements designed to ensure that the fund maintains the
necessary asset coverage.
The class voting rights of preferred shares could make it more
difficult for a fund to take certain actions that may, in the future, be
proposed by the Board and/or the holders of Common Stock, such as a merger,
exchange of securities, liquidation or alteration of the rights of a class
of the Utility Fund's securities if such actions would be adverse to the
preferred shares, or such as changing to an open-end investment company or
acting inconsistently with its fundamental investment restrictions or other
fundamental policies or seeking to operate other than as an investment
company.
The Equity Trust currently has preferred shares outstanding.
Preferred shares (additional preferred shares in the case of the Equity
Trust) will be issued only if the Board of the Utility Fund or the Equity
Trust, as the case may be, determines in light of all relevant
circumstances known to the Board that to do so would be in the best
interests of the fund and its shareholders. The circumstances that the
Board will consider before issuing preferred shares, include not only the
dividend rate on the preferred shares in comparison of the historical
performance of the fund but also such matters as the terms on which the
fund can call the preferred shares, the circumstances in which the
Investment Adviser will earn additional investment advisory fees on the net
assets attributable to the preferred shares and the ability of the fund to
meet the asset coverage tests and other requirements imposed by the rating
agencies for such preferred shares.
The issuance of preferred shares convertible into shares of common
stock might also reduce net income per share of such shares and net asset
value per share of such shares if these securities are converted into
common stock. Such income dilution would occur if the fund could, from the
investments made with the proceeds of the preferred shares, earn an amount
per common share issuable upon conversion greater than the dividend
required to be paid on the amount of preferred stock convertible into one
share of common stock. Such net asset value dilution would occur if
preferred shares were converted at a time when the net asset value per
common share was greater than the conversion price.
Temporary Investments. During temporary defensive periods and
during inopportune periods to be fully invested the Equity Trust and the
Utility Fund each may invest in U.S. Government Securities and in money
market mutual funds not affiliated with the Investment Adviser that invest
in those securities. Obligations of certain agencies and instrumentalities
of the U.S. Government, such as the Government National Mortgage
Association, are supported by the "full faith and credit" of the U.S.
Government; others, such as those of the Export-Import Bank of the U.S.,
are supported by the right of the issuer to borrow from the U.S. Treasury;
others, such as those of the Federal National Mortgage Association, are
supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; and still others, such as those of the Student
Loan Marketing Association, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored instrumentalities if
it is not obligated to do so by law.
Other Investments. The Equity Trust and the Utility Fund each is
permitted to invest in securities subject to reorganization, repurchase
agreements, options and futures contracts, engage in forward currency
transactions and enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis and
the Utility Fund may make short sales of securities. See Appendix A for a
discussion of these investments and techniques and the risks associated
with them.
Investment Restrictions
The Equity Trust and the Utility Fund operate under the investment
restrictions described in Appendix B. The same investment restrictions
apply to both the Equity Trust and the Utility Fund except as described in
Appendix B.
Management of Utility Fund
and the Equity Trust
Directors and Officers
Overall responsibility for management and supervision of each of
the Equity Trust and the Utility Fund rests with its Board of Directors.
The Board of each fund approves all significant agreements between the fund
and the companies that furnish the fund with services, including agreements
with the Investment Adviser, the fund's custodian and the fund's transfer
agent. The day-to-day operations of each of the Equity Trust and the
Utility Fund are delegated to the Investment Adviser.
With the exception of Anthony J. Colavita, Vincent D. Enright and
John D. Gabelli, who will serve as directors of the Utility Fund, the same
persons who currently serve as directors of the Equity Trust are also
directors of the Utility Fund, and the principal officers of the Equity
Trust hold the same or similar offices with the Utility Fund. The names and
business addresses of the directors and principal officers of the Equity
Trust and of the Utility Fund are set forth in the following table,
together with their positions and their principal occupations during the
past five years and, in the case of the directors, their positions with
certain other organizations and companies. Directors who are "interested
persons" of the Equity Trust and the Utility Fund, as defined by the 1940
Act, are indicated by an asterisk. Directors who are solely elected by the
holders of the Equity Trust's Cumulative Preferred Stock are indicated by a
"+".
<TABLE>
<CAPTION>
Position with the Equity Trust Number and Percentage of
and the Utility Fund and Equity Trust Shares Beneficially
Principal Occupation Owned** Directly or
Name and Business Address (Age) During Past Five Years Indirectly on March 17, 1999
------------------------- ---------------------- ----------------------------
Common Preferred
<S> <C> <C> <C>
Dr. Thomas E. Bratter (60) Director of the Equity Trust and the 10,802*** 0
One Corporate Center Utility Fund. Director, President and
Rye, NY 10580-1434 Founder, The John Dewey Academy
(residential college preparatory
therapeutic high school). (10)
Bill Callaghan (54) Director of the Equity Trust and the 959*** 0
One Corporate Center Utility Fund. President of Bill
Rye, NY 10580-1434 Callaghan Associates Ltd., an
executive search company. (3)(10)
+Felix J. Christiana (73) Director of the Equity Trust and the 36,415*** 1000***
Anthony J. Colavita Utility Fund. Retired; formerly
One Corporate Center Senior Vice President of Dollar Dry
Rye, NY 10580-1434 Dock Savings Bank.
(1)(2)(3)(4)(5)(8)(10)(13)
Anthony J. Colavita (62 ) President and Attorney at law in the
One Corporate Center law firm of Anthony J. Colavita, P.C. 0 0
Rye, NY 10580-1434 since 1961. (1)(2)(3)(4)(6)(7)(8)
(9)(11)(12)(13)(14)
+ James P. Conn (61) Director of the Equity Trust and the 23,251*** 4000***
One Corporate Center Utility Fund. Former Managing
Rye, New York 10580-1434 Director and Chief Investment
Officer of Financial Security
Assurance Holdings Ltd., 1992-
1998; Director of Meditrust
Corporation (real estate investment
trust); Director of First Republic
Bank. (1)(2)(10)(14)
Vincent D. Enright (55) Director of the Utility Fund. 0 0
One Corporate Center Former Senior Vice President and
Rye, NY 10580-1434 Chief Financial Officer of KeySpan
Energy Corporation through 1998.
Frank J. Fahrenkopf, Jr. (59) Director of the Equity Trust and the 0 0
One Corporate Center Utility Fund. President and CEO of
Rye, New York 10508-1434 the American Gaming Association
since June 1995; Partner of Hogan &
Hartson; Chairman of International
Trade Practice Group. Co-Chairman
of the Commission on Presidential
Debates; former Chairman of the
Republican National Committee.
* Mario J. Gabelli (56) Chairman of the Board, President 1,188,018 (1.12%) 0
One Corporate Center and Chief Investment Officer of the
Rye, New York 10580-1434 Equity Trust and the Utility Fund.
Chairman of the Board, Chief
Executive Officer of Gabelli Asset
Management Inc. and Chief
Investment Officer of the Investment
Adviser and GAMCO Investors, Inc;
Chairman of the Board and Chief
Executive Officer of Lynch
corporation (diversified
manufacturing and communications
services company); Director of
East/West Communications Inc.
(1)(2)(3)(4)(5)
(6)(7)(8)(9)(10)(11)(12)
* John D. Gabelli (53) Senor Vice President of Gabelli & 0 0
One Corporate Center Company, Inc. and Director of
Rye, New York 10580-1434 Gabelli Advisers, Inc. (1)(2)(5)(8)
* Karl Otto Pohl (69) Director of the Equity Trust and the 0 0
One Corporate Center Utility Fund. Member of the
Rye, New York 10580-1434 Shareholder Committee of Sal.
Oppenheim Jr. & Cie (private
investment bank); Board Member of
TrizecHahn Corporation (real estate
company) and Zurich Versicherungs-
Gesellschaft (Insurance company);
Director of Gabelli Asset
Management Inc. Former President
of the Deutsche Bundesbank and
Chairman of its Central Bank
Council from 1980 through 1991.
(1)(2)(3)(4)(5)(6)(7)(8)
(9)(10)(11)(12)(13)(14)
Anthony R. Pustorino (73) Director of the Equity Trust and the 9,617*** 0
One Corporate Center Utility Fund. Certified Public
Rye, New York 10580-1434 Accountant, Professor of
Accounting, Pace University, since
1965. (1)(2)(3) (4)(5)(10)(11)(13)
* Salvatore J. Zizza (53) Director of the Equity Trust and the 31,102*** 0
One Corporate Center Utility Fund; Adviser to The Gabelli
Rye, New York 10580-1434 Growth Fund; Chairman of The
Bethlehem Corp.; Board Member of
Hollis Eden Pharmaceuticals; Former
Executive Vice President of FMG
Group (a healthcare provider);
Former President and Chief Executive
Officer of the Lehigh Group Inc. (an
electrical supply wholesaler);
Former Chairman of the Executive
Committee and Director of Binnings
Building Products, Inc.; (1)(4)(10)
Directors and Officers as a Group 1,302,548 5,000***
(1.23%)
Bruce N. Alpert (47) Vice President and Treasurer of the
One Corporate Center Equity Trust and the Utility Fund.
Rye, New York 10580-1434 Executive Vice President and Chief
Operating Officer of the Investment
Adviser since June 1988; Director
and President of Gabelli Advisers,
Inc.; Officer of all other
registered investment companies
advised by the Investment Adviser;
Vice President of The Treasurer's
Fund Inc.; Vice President of Gabelli
Westwood Funds.
James E. McKee (36) Secretary of the Equity Trust and the
One Corporate Center Utility Fund. Vice President,
Rye, New York 10580-1434 General Counsel and Secretary of the
Investment Adviser (since 1995) and
Vice President and General Counsel
of GAMCO Investors, Inc. (since
1993); Secretary of the registered
investment companies advised by the
Investment Adviser and its
affiliates; Branch Chief of the
Securities and Exchange Commission
-- Northeast Regional Office,
1992-1993.
Marc S. Diagonale (32) Vice President of the Equity Trust.
One Corporate Center Client services representative of
Rye, New York 10580-1434 Gabelli & Company, Inc. since
March 1993.
- ----------------
* "Interested person" of the Equity Trust and the Utility Fund, as
defined in the 1940 Act. Mr. Mario Gabelli is an "interested person" of
each fund as a result of his employment as an officer of the fund and the
Investment Adviser. Messrs. John and Mario Gabelli are registered
representatives of an affiliated broker-dealer. Mr. Pohl is a director of
the parent company of the Investment Adviser. Mr. Zizza may be an
"interested person" as a result of his previous association within the last
three years with Binnings Building Products, Inc., an entity which was
controlled by GLI, Inc., an affiliate of the Investment Adviser.
** For this purpose "beneficial ownership" is defined under Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"). The
information as to beneficial ownership is based upon information
furnished to the Equity Trust by the Directors.
*** Less than 1%.
</TABLE>
<TABLE>
<S> <C>
(1) Director of The Gabelli Asset Fund. (8) Director of Gabelli Global Series Funds, Inc.
(2) Director of The Gabelli Growth Fund. (9) Director of Gabelli Gold Fund, Inc.
(3) Director of The Gabelli Value Fund Inc. (10) Director of The Gabelli Global Multimedia Trust
(4) Director of The Gabelli Convertible Securities Inc.
Fund, Inc. (11) Director of Gabelli Capital Series Funds
(5) Director of Gabelli Equity Series Funds, Inc. (12) Director of Gabelli International Growth Fund,
(6) Director of The Gabelli Money Market Funds Inc.
(7) Director of Gabelli Investor Funds, Inc. (13) Director of the Treasurer's Fund, Inc.
(14) Director of the Gabelli Westwood Funds
</TABLE>
The Board of Directors of the Equity Trust and the Utility Fund
are each divided into three classes, with a class having a term of three
years except as described below. Each year the term of office of one class
of directors of the Equity Trust and one class of directors of the Utility
Fund will expire. However, to ensure that the term of a class of the
Utility Fund's directors expires each year, one class of the Utility Fund's
directors will serve an initial one-year term and three-year terms
thereafter and another class of its directors will serve an initial
two-year term and three-year terms thereafter. The terms of Messrs.
Callaghan, Fahrenkopf and Zizza as directors of the Equity Trust expire in
1999 (See Proposal 2) and as directors of the Utility Fund in 2002; the
terms of Messrs. Conn, Pohl and Pustorino as directors of the Equity Trust
and of the Utility Fund expire in 2000; the terms of Messrs. Bratter,
Christiana and Mario Gabelli as directors of the Equity Trust and the
Utility Fund expire in 2001. The terms of Messrs. John Gabelli, Enright and
Colavita as directors of the Utility Fund expire in 2000, 2001 and 2002,
respectively. See "Description of Common Stock of the Utility Fund and the
Equity Trust--Certain Provisions of the Governing Documents of the Equity
Trust and the Utility Fund."
Non-Resident Directors
Karl Otto Pohl, a director of the Equity Trust and of the Utility
Fund, resides outside the United States and substantially all of his assets
are located outside the United States. Mr. Pohl has not authorized an agent
in the United States to receive notice of service of process. Consequently,
it may be difficult for shareholders to effect service of process upon him
within the United States or to realize against him upon judgments of courts
in the United States predicated upon civil liability under the United
States federal securities laws. In addition, it is not certain that civil
liabilities predicated upon the U.S. federal securities laws on which a
valid judgment of a court in the United States is obtained would be
enforceable in German courts.
Remuneration of Directors and Officers
The Equity Trust pays each director not affiliated with the
Investment Adviser or its affiliates, a fee of $12,000 per year plus $1,500
per meeting attended, together with the director's actual out-of-pocket
expenses relating to attendance at meetings. The aggregate remuneration
paid by the Equity Trust to such directors during the fiscal year ended
December 31, 1998, amounted to $156,500. For a description of the
remuneration received by each director of the Equity Trust individually and
the total remuneration received by each such director from funds in the
Gabelli complex for the fiscal year ended December 31, 1998, see "Proposal
2 - Compensation Table."
The Utility Fund will pay each director who is not affiliated with
the Investment Adviser or its affiliates a fee of $3,000 per year plus $500
per meeting attended, together with each director's actual out-of-pocket
expenses relating to attendance at such meetings.
Since July 15, 1994, Marc S. Diagonale, Vice President of the
Equity Trust, has performed shareholder services on behalf of the Equity
Trust. Mr. Diagonale will perform similar services on behalf of the Utility
Fund. He currently receives a salary from the Equity Trust at the annual
rate of $115,000.
Investment Advisory and Other Services
Investment Adviser
The Investment Adviser, together with other affiliated investment
advisers, has assets under management totaling $16.2 billion. Gabelli
Funds, LLC, a New York limited liability company, with offices at One
Corporate Center, Rye, New York 10580-1434, is investment adviser (the
"Investment Adviser") to the Equity Trust and to the Utility Fund. The
Investment Adviser was organized in 1999 and is the successor to Gabelli
Funds, Inc. which was organized in 1980. As of December 31, 1998, the
Investment Adviser and its affiliates act as registered investment advisers
to 13 management investment companies with aggregate net assets of $7.2
billion. GAMCO Investors, Inc., an affiliate of the Investment Adviser,
acts as investment adviser for individuals, pension trusts, profit sharing
trusts and endowments, having aggregate assets of $8.0 billion under
management as of December 31, 1998. Gabelli Fixed Income LLC, an affiliate
of the Investment Adviser, acts as investment adviser for the Treasurer's
Funds and separate accounts having aggregate assets under management of
$1.5 billion. The Investment Adviser is a wholly-owned subsidiary of
Gabelli Asset Management Inc., a New York corporation, whose Class A Common
Stock is traded on the New York Stock Exchange under the symbol "GBL ." Mr.
Mario J. Gabelli may be deemed a "controlling person" of the Investment
Adviser on the basis of his ownership of a majority of the stock of the
Gabelli Group Capital Partners, Inc., which owns 80% of the capital stock
of Gabelli Asset Management Inc. There is no contract of employment between
the Investment Adviser and Mr. Gabelli, although, Mr. Gabelli has entered
into a three year employment agreement with Gabelli Asset Management Inc.,
the parent company of the Investment Adviser. 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.
Investment Advisory Agreements
The terms of Investment Advisory Agreement between the Utility
Fund and the Investment Adviser, which becomes effective on the
consummation of the Transaction, are identical to those of the Investment
Advisory Agreement between the Equity Trust and the Investment Adviser
(each such agreement, an "Advisory
Agreement").
Under the terms of each Advisory Agreement, the Investment Adviser
manages the portfolio of the fund in accordance with its stated investment
objective and policies, makes investment decisions for the fund, places
orders to purchase and sell securities on behalf of the fund and manages
its other business and affairs, all subject to the supervision and
direction of the fund's Board of Directors. In addition, under each
Advisory Agreement, the Investment Adviser oversees the administration of
all aspects of the fund's business and affairs and provides, or arranges
for others to provide, at the Investment Adviser's expense, certain
enumerated services, including maintaining the fund's books and records,
preparing reports to the fund's shareholders and supervising the
calculation of the net asset value of its shares. All expenses of computing
the net asset value of the Utility Fund or the Equity Trust, including any
equipment or services obtained solely for the purpose of pricing shares or
valuing its investment portfolio, will be an expense of the fund under its
respective Advisory Agreement unless the Adviser voluntarily assumes
responsibility for such expense.
Each Advisory Agreement combines investment advisory and
administrative responsibilities in one agreement. For services rendered by
the Investment Adviser on behalf of each fund under the fund's Advisory
Agreement, the fund pays the Investment Adviser a fee computed daily and
paid monthly at the annual rate of 1.00% of the average weekly net assets
of the fund.
The Advisory Agreements provide that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties thereunder, the Investment Adviser is not liable for
any error or judgment or mistake of law or for any loss suffered by the
Equity Trust or the Utility Fund. As part of the Advisory Agreements, the
Equity Trust and the Utility Fund each has agreed that the name "Gabelli"
is the Investment Adviser's property, and that in the event the Investment
Adviser ceases to act as an investment adviser to the fund, the fund will
change its name to one not including "Gabelli."
Pursuant to its terms, each Advisory Agreement will remain in
effect with respect to the Equity Trust or the Utility Fund, as the case
may be, until the second anniversary of shareholder approval of such
Agreement, and from year to year thereafter if approved annually (i) by the
fund's Board of Directors or by the holders of a majority of its
outstanding voting securities and (ii) by a majority of the Directors who
are not "interested persons" (as defined in the 1940 Act) of any party to
the Advisory Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. Each Advisory Agreement terminates
automatically on its assignment and may be terminated without penalty on 60
days' written notice at the option of either party thereto or by a Majority
Vote.
Portfolio Management
Mario J. Gabelli, Chief Investment Officer of the Equity Trust,
has managed the Equity Trust's assets since its inception and, as Chief
Investment Officer of the Utility Fund, will be the leader of a team which
will manage the Utility Fund's assets. For a list of Mr. Gabelli's other
affiliations, see "Management of the Utility Fund and the Equity
Trust--Directors and Officers."
Administrator
The Investment Adviser has entered into an Administration Contract
with First Data Investor Services Group Inc. (the "Administrator") pursuant
to which the Administrator provides certain administrative services
necessary for the Equity Trust's operations which do not include the
investment advisory and portfolio management services provided by the
Investment Adviser. For these services and the related expenses borne by
the Administrator, the Investment Adviser pays a prorated monthly fee at
the annual rate of .10% of the first $1.0 billion of the aggregate average
net assets of the Equity Trust and all other funds advised by the
Investment Adviser and administered by the Administrator, .08% of the
aggregate average net assets exceeding $1.0 billion, .03% of the aggregate
average net assets in excess of $1.5 billion and .02% of the aggregate net
assets in excess of $3.0 billion (with a minium annual fee of $30,000 per
portfolio), which, together with the services to be rendered, is subject to
negotiation between the parties. The Administrator has its principal office
at 101 Federal Street, Boston MA 02110.
The Investment Adviser will enter into an Administration Agreement
with the Administrator pursuant to which the Administrator will provide
certain administrative services necessary for the Utility Fund's operations
but which do not concern the investment advisory and portfolio management
services provided by the Investment Adviser. These services include the
preparation and distribution of materials for meetings of the Utility
Fund's Board of Directors, compliance testing of the Utility Fund's
activities and assistance in the preparation of proxy statements, reports
to shareholders and other documentation. For such services and the related
expenses borne by the Administrator, the Investment Adviser will pay the
Administrator a monthly fee at the annual rate of .10% of the average daily
net assets of the Utility Fund (with a minimum annual fee of $30,000 and
subject to reduction to (i) .08% of the aggregate assets exceeding $1
billion, (ii) .03% of the aggregate assets managed by the Investment
Adviser and administered by the Administrator in excess of $1.5 billion and
(iii) .02% of such assets in excess of $3.0 billion) which, together with
the services to be rendered, is subject to negotiation between the parties
and both parties retain the right unilaterally to terminate the arrangement
on 60 days' written notice.
Payment of Expenses
For purposes of the calculation of the fees payable to the
Investment Adviser by the Equity Trust and the Utility Fund, respectively,
average weekly net assets of each of the Equity Trust and the Utility Fund
are determined at the end of each month on the basis of its average net
assets for each week during the month. The assets for each weekly period
are determined by averaging the net assets at the end of a week with the
net assets at the end of the prior week.
The Investment Adviser will be obligated to pay expenses
associated with providing the services contemplated by the respective
Advisory Agreements 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 Equity Trust
and the Utility Fund, as well as the fees of all directors of the Equity
Trust and of the Utility Fund who are affiliated with the Investment
Adviser or any of its affiliates. The Equity Trust and the Utility Fund
each pays all other expenses incurred in its operation including, among
other things, expenses for legal and independent accountants' services,
costs of printing proxies, stock certificates and shareholder reports,
charges of the custodian, any subcustodian and transfer and dividend paying
agent, expenses in connection with its respective Automatic Dividend
Reinvestment and Voluntary Cash Purchase Plan, Securities and Exchange
Commission ("SEC") fees, fees and expenses of unaffiliated directors,
accounting and pricing costs, membership fees in trade associations,
fidelity bond coverage for its officers and employees, directors' and
officers' errors and omission insurance coverage, interest, brokerage
costs, taxes, stock exchange listing fees and expenses, expenses of
qualifying its shares for sale in various states, litigation and other
extraordinary or non-recurring expenses, and other expenses properly
payable by the Equity Trust or the Utility Fund, as the case may be.
Portfolio Transactions and Brokerage
The Equity Trust's practices and policies with respect to
portfolio transactions and brokerage are described under "Additional
Information--Portfolio Transactions and Brokerage." The Utility Fund will
follow those same practices and policies in its operations.
Portfolio Turnover
The Equity Trust's portfolio turnover rates for the fiscal years
ended December 31, 1998 and December 31, 1997 were 39.8% and 39.2%,
respectively. It is not expected that the annual portfolio turnover rate
for the Utility Fund will exceed 100%. Portfolio turnover rate is
calculated by dividing the lesser of an investment company's annual sales
or purchases of portfolio securities by the monthly average value of
securities in its portfolio during the year, excluding portfolio securities
the maturities of which at the time of acquisition were one year or less. A
high rate of portfolio turnover involves correspondingly greater brokerage
commission expense than a lower rate, which expense must be borne by the
Equity Trust and its shareholders or by the Utility Fund and its
shareholders, as applicable.
Determination of Net Asset Value
The net asset value of the Equity Trust's shares is computed, and
that of the Utility Fund's shares will be computed, based on the market
value of the securities it holds and determined daily as of the close of
regular trading on the New York Stock Exchange and reported in financial
newspapers of general circulation as of the last day of each week.
Portfolio securities which are traded on a nationally recognized
stock exchange or Nasdaq National Market System are valued at the last sale
price as of the close of regular trading on the day the securities are
being valued, or lacking any sales, at the mean between closing bid and
asked prices. If no asked prices are quoted on such day, then the security
is valued at the closing bid price on such day. Other over-the-counter
securities are valued at the mean of the current bid and asked prices as
reported by Nasdaq, or in the case of securities not quoted by Nasdaq, the
National Quotation Bureau or other comparable source as the Board of
Directors deems appropriate to reflect their fair value. If no asked prices
are quoted on that day, then the security is valued at the closing bid
price on such day. If no bid or asked prices are quoted on that day, then
the security is valued by such method as the Board of Directors shall
determine in good faith to 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. Securities traded primarily on
foreign exchanges are valued at the closing price on such exchanges
immediately prior to the close of the New York Stock Exchange. Securities
and assets for which market quotations are not readily available are valued
at fair value as determined in good faith by or under the direction of the
Board of Directors. Short-term investments that mature in more than 60 days
are valued at the highest bid price obtained from a dealer maintaining an
active market in that security or on the basis of prices obtained from a
pricing service approved as reliable by the Board of Directors. Short-term
investments that mature in 60 days or fewer are valued at amortized cost,
unless the Board of Directors determines that such valuation does not
constitute fair value. Options are valued at the last sale price as of the
close of regular trading, or lacking any sales, at the mean between the
last bid and asked prices.
Net asset value per share is calculated by dividing the value of
the securities held plus any cash or other assets minus all liabilities,
including accrued expenses, by the total number of shares outstanding at
such time.
Distributions; Automatic Dividend Reinvestment and Voluntary Cash
Purchase Plan
The Equity Trust's 10% Distribution Policy
The Equity Trust's policy is to make quarterly distributions of
$0.27 per share at the end of each of the first three calendar quarters of
each year. The Equity Trust's distribution in December for each calendar
year is an adjusting distribution (equal to the sum of 2.5% of the net
asset value of the Equity Trust as of the last day of the four preceding
calendar quarters less the aggregate distributions of $0.81 per share made
for the most recent three calendar quarters) in order to meet the Equity
Trust's 10% distribution policy as well as the Code's distribution
requirements. Prior to May 13, 1998, the quarterly distribution in each of
the first three quarters of each year was $0.25 per share. The Equity Trust
reserves the right, but does not currently intend, to retain for
reinvestment and pay federal income taxes on its net capital gain, if any.
If, for any calendar year, the total distributions exceed net investment
income and net realized capital gains, the excess will generally be treated
as a tax-free return of capital (up to the amount of the shareholder's tax
basis in his shares). The amount treated as a tax-free return of capital
will reduce a shareholder's adjusted basis in his shares, thereby
increasing his potential gain or reducing his potential loss on the sale of
his shares. Such excess, however, will be treated as ordinary dividend
income up to the amount of the Equity Trust's current and accumulated
earnings and profits.
The distribution to shareholders of Utility Trust shares will not
affect the Equity Trust's 10% Distribution Policy.
In the event the Equity Trust distributes amounts in excess of its
net investment income and net realized capital gains, such distributions
will decrease the Equity Trust's total assets and, therefore, have the
likely effect of increasing the Equity Trust's expense ratio. In addition,
in order to make such distributions, the Equity Trust may have to sell a
portion of its investment portfolio at a time when independent investment
judgment might not dictate such action.
The Utility Fund's Distribution Policy
While the Equity Trust distributes dividends quarterly under its
10% distribution policy, the Utility Fund will distribute to shareholders
substantially all of its net investment income monthly and capital gains
quarterly or more frequently pursuant to the Section 19(b) Exemptive Order
and any amendments thereto. The Utility Fund intends to adopt a fixed
dividend policy, at a rate to be determined, that is similar to the Equity
Trust's 10% distribution policy. The dividend policy of the Utility Fund
may be modified from time to time by the Utility Fund's Board of Directors.
As a regulated investment company under the Code, the Utility Fund will not
be subjected to U.S. federal income tax on its investment company taxable
income that it distributes to shareholders, provided that at least 90% of
its investment company taxable income for that taxable year is distributed
to its shareholders.
Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan
Under the Equity Trust Plan and the substantially similar
Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan adopted by
the Utility Fund (each, the "Plan"), a shareholder whose Common Stock is
registered in his own name will have all distributions reinvested
automatically by State Street Bank and Trust Company ("State Street"),
which is agent under the Plan, unless the shareholder elects to receive
cash. Distributions with respect to shares registered in the name of a
broker-dealer or other nominee (that is, in "street name") will be
reinvested by the broker or nominee in additional shares under the Plan,
unless the service is not provided by the broker or nominee or the
shareholder elects to receive distributions in cash. For a further
description of the Plan, see Appendix C.
Taxation
Regulated Investment Company Tax Status
The Equity Trust has elected and qualified to be treated as a
regulated investment company under the Code, and the Utility Fund intends
to elect and qualify to be treated as a regulated investment company under
the Code. Accordingly, if each of the Equity Trust and the Utility Fund
continues to qualify and distributes each year, in a timely manner, at
least 90% of its "investment company taxable income" as defined in the Code
(in general, taxable income excluding long-term capital gains), each such
entity will not be subject to federal income tax on the portion of the
taxable income and gain it distributes to its shareholders. The Equity
Trust and the Utility Fund, however, each will be subject to tax at regular
corporate rates on any undistributed ordinary income or net capital gain.
In addition, if the Equity Trust and the Utility Fund each distributes, in
a timely manner, (or treats as "deemed distributed" as described below) 98%
of its net capital gain income for each one year period ending on October
31 (or December 31, if so elected by the Equity Trust or the Utility Fund),
and distributes 98% of its investment company taxable income for each
calendar year (as well as any income not distributed in prior years), it
will not be subject to the 4% nondeductible federal excise tax on certain
undistributed income. The Equity Trust and the Utility Fund each intends to
make such distributions as are necessary to avoid the application of this
excise tax.
In order to continue to qualify as a regulated investment company
for federal income tax purposes each of the Equity Trust and the Utility
Fund, among other requirements, must (a) derive at least 90% of its gross
income from interest, dividends, payments with respect to securities loans,
and gains from the sale or other disposition of stock or securities or
foreign currencies or other income (including, but not limited to, gain
from options, futures or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies; (b)
diversify its holdings so that at the end of each quarter of its taxable
year (i) at least 50% of the market value of its assets is represented by
cash, securities of other regulated investment companies, U.S. government
securities and other securities provided that such other securities do not
represent more than 5% of its total assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value
of its assets is invested in securities (other than U.S. government
securities or securities of other regulated investment companies ) of any
one issuer or of any two or more issuers that it controls and that are
determined to be engaged in the same or similar trades or businesses or
related trades or businesses.
Dividend and Capital Gain Distributions
For any period in which the Equity Trust or the Utility Fund
qualifies as a regulated investment company, distributions to shareholders
of ordinary income and any distributions of net short-term capital gains
generally will be taxable to shareholders as ordinary income (and not as
short-term capital gains) to the extent such distribution is out of Equity
Trust's or Utility Fund's current and accumulated earning and profits (as
the case may be), whether paid in cash or reinvested in the Equity Trust
shares or the Utility Fund shares. Distributions by either the Equity Trust
or the Utility Fund of net long-term capital gains (designated by the
Equity Trust or the Utility Fund as capital gain dividends) will be taxable
to shareholders as long-term capital gains regardless of the shareholder's
holding period in its shares.
Dividends received by a corporate shareholder from the Equity
Trust or the Utility Fund will generally qualify for the federal
dividends-received deduction for domestic corporate shareholders to the
extent the dividends do not exceed such shareholder's pro rata portion of
the aggregate amount of dividends received by the Equity Trust or the
Utility Fund, as the case may be, from qualified domestic corporations for
the taxable year. Capital gain dividends will not qualify for a
dividend-received deduction. Furthermore, if securities are held by the
Equity Trust or the Utility Fund (i) for less than 46 days (90 days in the
case of certain preferred stock), (ii) are "debt-financed" (generally,
acquired with borrowed funds), or (iii) are subject to certain forms of
hedges, the portion of the dividends, paid by the Equity Trust or the
Utility Fund to their respective shareholders, that corresponds to the
dividends paid with respect to such securities will not be eligible for the
corporate dividends-received deduction.
To the extent that the Equity Trust or the Utility Fund retains
any net long-term capital gains, the Equity Trust or the Utility Fund may
designate such gains as "deemed distributions" and pay a tax thereon for
the benefit of their respective shareholders. In that event, the
shareholders report their share of Equity Trust's or Utility Fund's (as the
case may be) retained realized capital gains on their individual tax
returns as if it had been received, and report a credit for the tax paid
thereon by Equity Trust or Utility Fund. The amount of the deemed
distribution net of such tax is then added to the shareholder's cost basis
for his shares. Qualified pension and profit sharing funds, certain trusts
and other organizations or persons not subject to federal income tax on
capital gains and certain non-resident alien individuals and foreign
corporations would be entitled to a refund of their pro rata share of such
taxes paid by the Equity Trust or by the Utility Fund upon filing
appropriate returns or claims for refund with the proper tax authorities.
Disposition of Shares
As a general rule, selling shareholders will recognize gain or
loss on a sale of Equity Trust shares or Utility Fund shares in an amount
equal to the difference between their adjusted tax basis in the shares and
the amount received. If the shares are held as a capital asset, the gain or
loss will be capital gain or loss. Gain or loss on a sale of Equity Trust
shares or Utility Fund shares held for more than one year will be a
long-term capital gain or loss, and gain or loss on a sale of Equity Trust
shares or Utility Fund shares held for one year or less will be a
short-term capital gain or loss. If, however, a shareholder receives a
distribution taxable as long-term capital gain with respect to shares of
the Equity Trust or shares of the Utility Fund and such shares are sold
within 6 months of their acquisition, any loss on the sale will be treated
as a long-term capital loss to the extent of such prior capital gain
distributions with respect to such shares.
Backup Withholding
If a shareholder fails to furnish a correct taxpayer
identification number, fails to report fully dividend or interest income,
or fails to certify that it has provided a correct taxpayer identification
number and is not subject to backup withholding, then the shareholder may
be subject to a 31% backup withholding tax with respect to all taxable
dividends and distributions. An individual's taxpayer identification number
is his social security number. The 31% backup withholding tax is not an
additional tax and may be credited against a taxpayer's regular federal
income tax liability.
General
The Equity Trust and the Utility Fund will mail to each of their
respective shareholders, as promptly as possible after the end of each
taxable year, a notice detailing, on a per share and per distribution
basis, the amounts includible in such shareholder's taxable income for such
year as net investment income, as net realized capital gains (if
applicable), as a dividend eligible for the corporate dividend received
deduction (if applicable), as "deemed" distributions of capital gains and
as taxes paid by the Equity Trust and the Utility Fund with respect to such
distribution.
Other Tax Consequences
See "The Transaction - Federal Income Tax Consequences of the
Transaction" for a discussion of certain federal income tax consequences of
the Transaction.
The federal income tax discussion set forth above concerning the
federal income tax consequences of an investment in the Equity Trust or the
Utility Fund and the Transaction is for general information only. The
foregoing discussion is based upon the Code, judicial decisions and
administrative regulations, rulings and practices, all of which are subject
to change and which, if changed, may be applied retroactively to the Equity
Trust, the Utility Fund, their respective shareholders and/or their
respective assets. No rulings have been sought from the Internal Revenue
Service with respect to any of the tax matters discussed above.
Furthermore, shareholders should be aware that any tax opinions rendered to
the Equity Trust or the Utility Fund in connection with the Transaction are
not binding on the Internal Revenue Service or any court, are based on
certain assumptions and representations as to relevant factual matters and
are subject to qualifications customary in opinions of similar import.
Dividend and capital gain distributions may be subject to additional state,
local and foreign taxes depending on each shareholder's particular
situation. Shareholders are urged to consult their own tax advisors
regarding the particular tax consequences to them of an investment in the
Equity Trust or the Utility Fund. Non-U.S. shareholders are urged to
consult their own tax advisors concerning the applicability of United
States withholding tax.
Principal Shareholders
The Equity Trust
As of March 17, 1999, the current Directors and officers of the
Equity Trust, as a group, beneficially owned 1,302,548 shares of the Equity
Trust, representing 1.23% of the Equity Trust's outstanding shares,
including 667,828 shares owned individually by Mario J. Gabelli and 520,190
shares owned by the Investment Adviser and its affiliates. For other
information concerning the ownership of the Equity Trust's shares, see
"General Voting Information."
The Utility Fund
As of the date of this Proxy Statement/Prospectus, 10,000 shares
of Utility Fund Common Stock are outstanding, all of which are owned
beneficially and of record by the Equity Trust. These shares were issued in
respect of the Equity Trust's contribution of $100,000 of initial capital
to the Utility Fund. The Equity Trust has represented that these shares
were purchased for investment purposes only and that they will be sold only
pursuant to a registration statement under the 1933 Act or an applicable
exemption therefrom.
Custodian, Transfer Agent, Dividend
Disbursing Agent and Registrar
Boston Safe Deposit and Trust Company ("Boston Safe") located at
One Boston Place, Boston, Massachusetts 02108, serves as the custodian of
the Equity Trust's assets pursuant to a custody agreement. Boston Safe is a
wholly owned subsidiary of The Boston Company, Inc., which in turn is an
indirect wholly owned subsidiary of Mellon Bank Corporation. Under the
custody agreement, Boston Safe holds the Equity Trust's assets in
compliance with the 1940 Act. For its custody services, Boston Safe
receives a monthly fee based upon the average weekly value of the total
assets of the Equity Trust, plus certain charges for securities
transactions.
Boston Safe will serve as the custodian of the Utility Fund's
assets pursuant to a custody agreement. Under the custody agreement, Boston
Safe will hold the Utility Fund's assets in compliance with the 1940 Act.
For its custody services, Boston Safe will receive a monthly fee based upon
the average value of the total assets of the Utility Fund, plus certain
charges for securities transactions.
Rules adopted under the 1940 Act permit the Equity Trust and the
Utility Fund each to maintain its foreign securities in the custody of
certain eligible foreign banks and securities depositories. Pursuant to
those rules, any foreign securities in the portfolio of the Equity Trust or
the Utility Fund may be held by subcustodians approved by the directors of
the Equity Trust or of the Utility Fund, as the case may be, in accordance
with the regulations of the SEC. Selection of any such subcustodians will
be made by the directors of the Equity Trust or of the Utility Fund, as the
case may be, following a consideration of a number of factors, including
but not limited to the reliability and financial stability of the
institution, the ability of the institution to perform capably custodial
services for the Equity Trust or the Utility Fund, as applicable, the
reputation of the institution in its national market, the political and
economic stability of the country or countries in which the subcustodians
are located, and risks of potential nationalization or expropriation of
assets of the Equity Trust or the Utility Fund, as applicable.
State Street serves as the Equity Trust's dividend disbursing
agent, as agent under the Equity Trust Plan and as transfer agent and
registrar for shares of the Equity Trust Common Stock. State Street also
will serve as the Utility Fund's dividend disbursing agent, as agent of the
Utility Fund Plan and as transfer agent and registrar for shares of Utility
Fund Common Stock.
Description of Common Stock of the
Utility Fund and the Equity Trust
Utility Fund Common Stock
The Utility Fund was formed as a business trust under the laws of
the State of Delaware on February 25, 1999 and is authorized to issue an
unlimited number of shares of beneficial interest, par value $.001 per
share, in multiple classes and series thereof as determined from time to
time by the Board of Directors. The Board of Directors of the Utility Fund
has authorized issuance of an unlimited number of shares of two classes,
common stock and preferred stock. Each share within a particular class or
series thereof has equal voting, dividend, distribution and liquidation
rights. When issued, the shares of Utility Fund Common Stock distributed in
the Transaction will be fully paid and non-assessable. Shares of the
Utility Fund Common Stock are not redeemable and have no preemptive,
conversion or cumulative voting rights.
See "Pro Forma Statement of Assets and Liabilities" for certain
information with respect to the Utility Fund Common Stock following the
Distribution.
Equity Trust Common Stock
The Equity Trust, which was incorporated under the laws of the
State of Maryland on May 20, 1986, is authorized to issue 200,000,000
shares of Common Stock, par value $.001 per share and 8,000,000 shares of
Cumulative Preferred Stock, par value $0.001. Each share has equal voting,
dividend, distribution and liquidation rights. The shares outstanding are
fully paid and non-assessable. Shares of Equity Trust Common Stock are not
redeemable and have no preemptive, conversion or cumulative voting rights.
Set forth below is information with respect to the Common Stock
and Cumulative Preferred Stock as of December 31, 1998.
<TABLE>
<CAPTION>
Amount Held by Equity Trust Amount
Amount Authorized or for Its Own Account Outstanding
- ------------------------------ ------------------------------ ------------------------
<S> <C> <C>
200,000,000 common shares 0 shares 106,116,347
8,000,000 preferred shares 0 shares 5,400,000
</TABLE>
The Equity Trust Common Stock and the Cumulative Preferred Stock
are listed and traded on the New York Stock Exchange under the symbols
"GAB" and "GABPr", respectively.
The net asset value per share of a share of Equity Trust Common
Stock at the close of business on March 29, 1999 was $11.74 and the last
reported sales price of a share of Equity Trust Common Stock on the New
York Stock Exchange on such date was $11.875.
Repurchase of Shares
The Equity Trust and the Utility Fund are closed-end, management
investment companies and as such their respective shareholders do not, and
will not, have the right to redeem their shares. The Equity Trust and the
Utility Fund each, however, may repurchase its shares from time to time as
and when it deems such a repurchase advisable. Such repurchases will be
made when the Equity Trust's shares or the Utility Fund's shares, as the
case may be, are trading at a discount of 10% or more (or such other
percentage as the Board of Directors of the Equity Trust or the Utility
Fund may determine from time to time) from the net asset value of the
shares. Pursuant to the 1940 Act, the Equity Trust and the Utility Fund
each may repurchase its shares on a securities exchange (provided that the
Equity Trust or the Utility Fund, as the case may be, has informed its
shareholders within the preceding six months of its intention to repurchase
such shares) or as otherwise permitted in accordance with Rule 23c-1 under
the 1940 Act. Under that Rule, certain conditions must be met regarding,
among other things, distribution of net income for the preceding fiscal
year, identity of the seller, price paid, brokerage commissions, prior
notice to shareholders of an intention to purchase shares and purchasing in
a manner and on a basis which does not discriminate unfairly against the
other shareholders through their interest in the Equity Trust or the
Utility Fund, as the case may be.
Shares repurchased by the Equity Trust will constitute authorized
and unissued shares of the Equity Trust available for reissuance. The
Equity Trust and the Utility Fund each may incur debt, in an amount not
exceeding 10% of its total assets, to finance share repurchase
transactions. See "Investment Restrictions." Any gain in the value of the
investments of the Equity Trust or the Utility Fund, as the case may be,
during the term of the borrowing that exceeds the interest paid on the
amount borrowed would cause the net asset value of its shares to increase
more rapidly than in the absence of borrowing. Conversely, any decline in
the value of the investments of the Equity Trust or the Utility Fund, as
the case may be, would cause the net asset value of its shares to decrease
more rapidly than in the absence of borrowing. Borrowing money thus creates
an opportunity for greater capital gain but at the same time increases
exposure to capital risk.
When the Equity Trust or the Utility Fund repurchases its shares
for a price below their net asset value, the net asset value of those
shares that remain outstanding will be enhanced, but this does not
necessarily mean that the market price of those outstanding shares will be
affected, either positively or negatively. Further, interest on borrowings
to finance share repurchase transactions will reduce the net income of the
Equity Trust or the Utility Fund, as applicable.
Neither the Equity Trust nor the Utility Fund currently has an
established tender offer program or established schedule for considering
tender offers. No assurance can be given that the Board of Directors of
either the Equity Trust or the Utility Fund will decide to undertake any
such tender offers in the future, or, if undertaken,
that they will reduce any market discount.
Rights Offerings of the Equity Trust
In October 1991, September 1992, July 1993 and October 1995, the
Equity Trust issued transferable rights to shareholders entitling the
holders thereof to subscribe for an aggregate of 7,882,562 shares,
9,563,615 shares, 11,654,962 shares and 14,931,381 shares respectively, of
the Equity Trust Common Stock at the rate of one share of common stock for
each six rights held and entitling shareholders to subscribe for any shares
not acquired by exercise of primary subscription rights. The subscription
price in each of the offerings was $8.00 per share, representing a discount
to the prevailing net asset value of the Equity Trust Common Stock at the
time of the offer of approximately 27.5% in the 1991 offering, 22.5% in the
1992 offering, 29.9% in the 1993 offering and 24.4% in the 1995 offering
and a discount from market value of approximately 22.9% on average for each
offering. Each of the rights offerings was substantially oversubscribed,
resulting in the issuance of the maximum number of shares being offered.
The Equity Trust raised $63,060,496 in the 1991 offering, $76,508,920 in
the 1992 offering, $93,239,696 in the 1993 offering and $119,451,048 in the
1995 offering while subscriptions remitted to the Equity Trust totaled more
than $136,000,000, $164,000,000, $176,000,000 and $199,000,000
respectively. As a percentage of the shares outstanding on the record dates
for the offering, holders of more than 91% of the outstanding shares
participated in the 1991 offering, more than 92% participated in the 1992
offering, more than 93% participated in the 1993 offering and more than 88%
participated in the 1995 offering.
The Equity Trust and the Utility Fund each may, in the future and
at its discretion, choose to make rights offerings from time to time for a
number of shares and on terms which may or may not be similar to any of the
Equity Trust's previous offers. Any such future rights offering will be
made in accordance with the 1940 Act. Under the laws of Maryland, the state
in which the Equity Trust was incorporated, and Delaware, the state in
which the Utility Fund was organized, respectively, the Board of Directors
of each fund is authorized to approve rights offerings without obtaining
shareholder approval. The staff of the SEC has interpreted the 1940 Act as
not requiring shareholder approval of a transferable rights offering at a
price below the then current net asset value so long as certain conditions
are met, including (i) a good faith determination by a fund's Board of
Directors that such offering would result in a net benefit to existing
shareholders; (ii) the offering fully protects shareholders' preemptive
rights and does not discriminate among shareholders (except for the
possible effect of not offering fractional rights); (iii) management uses
its best efforts to ensure an adequate trading market in the rights for use
by shareholders who do not exercise such rights; and (iv) the ratio of a
transferable rights offering does not exceed one new share for each three
rights held. The Equity Trust's shareholders approved rights offerings
generally at the 1993 Annual Meeting of Shareholders.
The Multimedia Trust
On November 15, 1994, the Equity Trust effected a transaction
substantially similar to the Transaction by contributing $64,382,764 of its
assets in exchange for 8,587,702 shares of The Gabelli Global Multimedia
Trust Inc. (the "Multimedia Trust"), a newly formed non-diversified
closed-end registered investment company (the "Prior Transaction"). The
Multimedia Trust's investment objective is long-term growth of capital and,
under normal market conditions, the Multimedia Trust seeks to achieve its
investment objective by investing at least 65% of its total assets in
common stock and other securities of foreign and domestic companies in the
telecommunications, media, publishing and entertainment industries. The
Prior Transaction has proven successful. From its inception on November 15,
1994 through December 31, 1998, the Multimedia Trust has had an annualized
rate of return of 21.6% and an average annualized expense ratio of 1.89%
based on total assets.
Certain Provisions of the Governing Documents of the Equity Trust
and the Utility Fund
The Equity Trust and the Utility Fund each presently has
provisions in its Articles of Incorporation or Declaration of Trust,
respectively, and By-Laws (together, in each case, its "Governing
Documents") which could have the effect of limiting, in each case, (i) the
ability of other entities or persons to acquire control of the fund, (ii)
the fund's freedom to engage in certain transactions, or (iii) the ability
of the fund's directors or shareholders to amend the Governing Documents or
effectuate changes in the fund's management. These provisions of the
Governing Documents of the Equity Trust and the Utility Fund may be
regarded as "anti-takeover" provisions. The Board of Directors of the
Equity Trust and the Utility Fund are each divided into three classes, each
having a term of no more than three years (except, to ensure that the term
of a class of the Utility Fund's directors expires each year, one class of
the Utility Fund's directors will serve an initial one-year term and
three-year terms thereafter and another class of its directors will serve
an initial two-year term and three-year terms thereafter). Each year the
term of one class of directors will expire. Accordingly, only those
directors in one class may be changed in any one year, and it would require
a minimum of two years to change a majority of the Board of Directors.
Further, one director in each of two of the classes of the Equity Trust is
elected solely by the holders of preferred stock issued by the Equity Trust
and cannot be removed or replaced by the holders of the Common Stock. The
same feature will apply to the Utility Fund if it issues preferred stock.
Such system of electing directors may have the effect of maintaining the
continuity of management and, thus, make it more difficult for the
shareholders of that fund to change the majority of directors. See
"Management of the Equity Trust and the Utility Fund -- Directors and
Officers." A director of either the Equity Trust or the Utility Fund may be
removed with or without cause by a vote of, in the case of the Equity
Trust, a majority, and, in the case of the Utility Fund, 662/3% of the
votes entitled to be cast for the election of directors of such fund. In
addition, the affirmative vote of the holders of 662/3% of the outstanding
voting shares of the Equity Trust and the separate vote of a majority (as
used in the 1940 Act) of its outstanding preferred stock are required to
authorize its conversion from a closed-end to an open-end investment
company. With respect to the Utility Fund, this voting requirement also
applies to mergers into or a sale of all or substantially all of its assets
to an open-end fund (or other closed-end fund that does not have minority
shareholder protections against conversion to open-end status) and is 75%
of its outstanding voting shares and, if the Utility Fund issues preferred
stock, the same separate class vote of the preferred stock. In addition,
the 662/3% vote (80% in the case of the Utility Fund) of the holders of the
outstanding voting securities of each class of the fund, voting as a class
is generally required in order to authorize any of the following
transactions:
(i) merger or consolidation of the fund with or into any
other corporation;
(ii) issuance of any securities of the fund to any person
or entity for cash;
(iii) sale, lease or exchange of all or any substantial
part of the assets of the fund to any entity or person (except
assets having an aggregate fair market value of less than
$1,000,000); or
(iv) sale, lease or exchange to the fund, in exchange for
securities of the fund, of any assets of any entity or person
(except assets having an aggregate fair market value of less than
$1,000,000);
(v) in the case of the Utility Fund, the purchase of the
fund's Common Stock by the fund from any other person or entity;
if such corporation, person or entity is directly, or indirectly through
affiliates, the beneficial owner of more than 5% of the outstanding shares
of the Equity Trust or the Utility Fund, as the case may be. However, such
vote would not be required when, under certain conditions, the Board of
Directors approves the transaction. Reference is made to the Governing
Documents of the Equity Trust and the Utility Fund, on file with the SEC,
for the full text of these provisions. See "Further Information."
The provisions of the Governing Documents described above could
have the effect of depriving the owners of shares in either fund of
opportunities to sell their shares at a premium over prevailing market
prices, by discouraging a third party from seeking to obtain control of
either the Equity Trust or the Utility Fund in a tender offer or similar
transaction. The overall effect of these provisions is to render more
difficult the accomplishment of a merger or the assumption of control by a
principal shareholder.
Limitation of Officers' and Directors' Liability
The Governing Documents of each of the Equity Trust and the
Utility Fund provide that the fund will indemnify its directors and
officers and may indemnify its employees or agents against liabilities and
expenses incurred in connection with litigation in which they may be
involved because of their positions with the fund, to the fullest extent
permitted by law. However, nothing in the Governing Documents of either the
Equity Trust or the Utility Fund protects or indemnifies a director,
officer, employee or agent of such fund against any liability to which such
person would otherwise be subject in the event of such person's willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her position.
Restrictions on Issuance of Senior Securities
Overview
The 1940 Act permits registered closed-end investment companies
such as the Equity Trust and the Utility Fund to issue senior securities
under certain circumstances as summarized below.
In the first instance, such issuance must be consistent with the
fundamental investment restrictions and any other fundamental restrictions
of the investment company. Moreover, if such class of senior securities
represents an indebtedness ("debt securities"), then the following
requirements must be met:
a. such debt securities must have an asset coverage (meaning
the ratio which the value of the total assets of the
investment company, less all liabilities and indebtedness
not represented by senior securities, bears to the
aggregate amount of debt securities) of at least 300%
immediately after issuance or sale of such debt
securities:
b. provision must be made to prohibit the declaration of any
dividend (other than a stock dividend) or the declaration
of any other distribution upon any class of the capital
stock of the investment company, or the purchase of any
such capital stock by the company, unless, after giving
effect to such action, such debt securities have an asset
coverage of at least 300% (200% in the case of dividends
on any preferred stock); and
c. provision must be made either that:
i. if on the last business day of each of twelve
consecutive calendar months such debt securities
have an asset coverage of less than 100%, the
holders of such securities voting as a class
will be entitled to elect at least a majority of
the members of the board of directors of the
investment company, until such debt securities
have an asset coverage of at least 100% on the
last business day of three consecutive calendar
months, or
ii. if on the last business day of each of
twenty-four consecutive calendar months such
debt securities have an asset coverage of less
than 100%, an event of default shall be deemed
to have occurred.
If the senior securities are preferred stock ("preferred shares"),
then the following requirements must be met:
(a) such shares must have an asset coverage (meaning the
ratio which the value of the total assets of the
investment company, less all liabilities and indebtedness
not represented by senior securities, bears to the
aggregate amount of debt securities of such company plus
the involuntary liquidation preference of the preferred
shares of such company) of at least 200% immediately
after such issuance or sale;
(b) provision must be made to prohibit the declaration of any
dividend (other than a dividend payable in common shares)
or the declaration of any other distribution upon the
common shares of the company, or the purchase of any such
common shares, unless, after giving effect to such
action, such preferred shares has an asset coverage of at
least 200%;
(c) provision must be made to entitle the holders of such
preferred shares, voting as a class, to elect at least
two directors at all times, and, subject to the prior
rights, if any, of the holders of any debt securities
outstanding, to elect a majority of the directors if at
any time dividends on such preferred shares are unpaid in
an amount equal to two full years' dividends on such
securities, and to continue to be so represented until
all dividends in arrears are paid or otherwise provided
for;
(d) provision must be made requiring approval by the vote of
a majority (i.e., the lesser of a majority of the
outstanding shares or two-thirds of a quorum of such
shares) of such preferred shares, voting as a class, of
any plan of reorganization adversely affecting such
preferred shares; of any action to change the
classification of the investment company from a
non-diversified to a diversified company; or of any
action to change its classification from a closed-end
investment company to an open-end investment company; of
any action to borrow money, issue senior securities,
underwrite securities of other persons, purchase or sell
real estate or commodities or make loans to other persons
that is not authorized in such company's registration
statement under the 1940 Act, of any deviation from
fundamental investment restrictions or other fundamental
policies of such company or of any change in the nature
of the business of such company so as to cease to be an
investment company; and
(e) such class of shares must have complete priority over any
other class as to distribution of assets and payment of
dividends, which dividends must be cumulative.
The 1940 Act limits a registered closed-end investment companies
such as the Equity Trust and the Utility Fund to one class of debt
securities and to one class of preferred shares, except that (i) any such
class may be issued in one or more series so long as no such series has a
preference or priority over any other series upon the distribution of the
assets of such company or in respect of the payment of interest or
dividends and (ii) promissory notes or other evidences of indebtedness
issued in consideration of any loan, extension, or renewal thereof, made by
a bank or other person and privately arranged, and not intended to be
publicly distributed, are not deemed to be a separate class of debt
securities. In addition, debt securities do not include any promissory note
or other evidence of indebtedness of temporary purposed only and in an
amount not exceeding 5% of the value of the total assets of the investment
company at the time.
Reports to Shareholders
The Equity Trust sends, and the Utility Fund will send, unaudited
semi-annual and audited annual reports to their respective shareholders,
including a list of investments held.
Experts
PricewaterhouseCoopers LLP, independent accountants, 1177 Avenue
of the Americas, New York, New York 10036, serve as auditors of the Equity
Trust and the Utility Fund and annually renders an opinion on the
financial statements of each fund.
The statement of assets and liabilities of the Utility Fund, as of
March 29, 1999, contained in this Proxy Statement/Prospectus has been
included herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, and upon the authority of such firm as experts in
auditing and accounting. The statement of assets and liabilities of the
Equity Trust, as of December 31, 1998, and the related statement of
operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended and the selected per
share date and ratios for each of the five years in the period then ended
included in the Annual Report have been audited by PricewaterhouseCoopers
LLP, independent accountants, as indicated in their report with respect
thereto, and are incorporated by reference in reliance upon such report and
upon the authority of such firm as experts in accounting and auditing.
Further Information
The disclosure concerning the Transaction in this Proxy
Statement/Prospectus does not contain all of the information included in
the Registration Statement filed with the SEC under the 1933 Act, with
respect to the shares of Utility Fund Common Stock to be distributed in the
Transaction, certain portions of which have been omitted pursuant to the
rules and regulations of the SEC. The Registration Statement, including
exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C.
Statements contained in this Proxy Statement/Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such
contract or other document filed as an exhibit to the Registration
Statement, of which this Proxy Statement/Prospectus forms a part, each such
statement being qualified in all respects by such reference.
Financial Statements
The Annual Report of the Equity Trust either accompanies this
Proxy Statement/Prospectus or was previously sent to the person to whom
this Proxy Statement/Prospectus is being sent, is incorporated herein by
reference with respect to all information other than the information set
forth in the respective Letters to Shareholders included therein. The
Equity Trust will furnish, without charge, a copy of the Annual Report,
upon request to the Equity Trust at One Corporate Center, Rye, New York
10580-1434, telephone (914) 921-5070.
Required Vote for the Transaction
Approval of the Transaction by the shareholders is to be
determined by the vote of a majority of the outstanding shares of the
Equity Trust (holders of Common Stock and holders of Cumulative Preferred
Stock voting together as a single class). Under the 1940 Act, this means
that to be approved, the Transaction must receive the affirmative vote of
the lesser of (1) a majority of the outstanding shares of the Equity Trust,
or (2) 662/3% or more of the shares of the Equity Trust represented at the
Meeting if more than 50% of the outstanding shares of the Equity Trust are
present or represented by proxy at the Meeting ("Majority Vote"). While the
Equity Trust has no present intention of making any additional
distributions in the form of registered investment companies other than the
distribution of the Utility Fund as described above, the Board of Directors
of the Equity Trust in the future could authorize such additional
distributions. The Board of Directors of the Equity Trust may elect to
delay or not to proceed with the Transaction notwithstanding its approval
by shareholders if for any reason the Board of Directors determines that
such action would be in the best interests of shareholders.
The Board of Directors, including the "non-interested" directors,
recommends that the shareholders vote "for" approval of the Transaction.
PROPOSAL 2: TO ELECT THREE DIRECTORS OF THE TRUST
At the meeting, three of the nine directors of the Equity Trust
are to be elected to hold office for a period of three years and until
their successors are elected and qualified (Messrs. Callaghan, Fahrenkopf
and Zizza). The Board of Directors is divided into three classes. Each year
the term of office of one class will expire. Unless authority is withheld,
it is the intention of the persons named in the proxy to vote the proxy FOR
the election of the nominees named below. Each nominee has indicated that
he will serve if elected, but if any nominee should be unable to serve, the
proxy will be voted for any other person determined by the persons named in
the proxy in accordance with their judgment. Each of the directors of the
Equity Trust has served in that capacity since the July 14, 1986
organizational meeting of the Trust with the exception of (i) Mr. Conn who
became a director of the Equity Trust on May 15, 1989, (ii) Mr. Pohl, who
became a director of the Equity Trust on February 19, 1992 and (iii) Mr.
Fahrenkopf, who became a director of the Equity Trust on May 11, 1998.
Under the Equity Trust's Articles of Incorporation and the 1940
Act, holders of the Equity Trust's Cumulative Preferred Stock, voting as a
separate class, are entitled to elect two directors, and holders of the
Equity Trust's Common Stock and Cumulative Preferred Stock, voting as a
single class, are entitled to elect the remaining directors, subject to the
provisions of the 1940 Act and the Equity Trust's Articles of Incorporation
and By-Laws. The holders of the Equity Trust's Cumulative Preferred Stock
would elect the minimum number of additional directors that would represent
a majority of the directors in the event that dividends on the Equity
Trust's Cumulative Preferred Stock are in arrears for two full years. Felix
J. Christiana and James P. Conn represent the holders of the Equity Trust's
Cumulative Preferred Stock.
The Equity Trust pays each director not affiliated with the
Investment Adviser or its affiliates, a fee of $12,000 per year plus $1,500
per meeting attended in person and by telephone, together with the
director's actual out-of-pocket expenses relating to attendance at
meetings. The aggregate remuneration paid by the Equity Trust to such
directors during the fiscal year ended December 31, 1998, amounted to
$156,500.
During the year ended December 31, 1998, the directors of the
Equity Trust met six times, two of which were special meetings of
directors. Each director then serving in such capacity, except Messrs.
Fahrenkopf and Pohl, attended at least 75% of the meetings of directors and
of any Committee of which he is a member. Mr. Fahrenkopf attended 80% of
the meetings during the period from May 11, 1998 (when he became a
director) through December 31, 1998. Messrs. Christiana and Pustorino, who
are not "interested persons" of the Equity Trust as defined in the 1940
Act, serve on the Equity Trust's Audit Committee. The Audit Committee is
responsible for recommending the selection of the Equity Trust's
independent accountants and reviewing all audit as well as non-audit
services performed for the Equity Trust. During the fiscal year ended
December 31, 1998, the Audit Committee met twice.
The directors serving on the Equity Trust's Nominating Committee
are Messrs. Christiana (Chairman) and Zizza. The Nominating Committee is
responsible for recommending qualified candidates to the Board in the event
that a position is vacated or created. The Nominating Committee will
consider recommendations by shareholders if a vacancy were to exist. Such
recommendations should be forwarded to the Secretary of the Equity Trust.
The Nominating Committee did not meet during the fiscal year ended December
31, 1998. The Equity Trust does not have a standing compensation committee.
The following table sets forth certain information regarding the
compensation of the Equity Trust's directors and officers. Mr. Diagonale is
employed by the Equity Trust and is not employed by the Investment Adviser.
Officers of the Equity Trust who are employed by the Investment Adviser
receive no compensation or expense reimbursement from the Equity Trust.
Compensation Table
for the Fiscal Year Ended December 31, 1998
<TABLE>
<CAPTION>
Aggregate Total Compensation from
Compensation the Equity Trust and
from the Equity Fund Complex
Name of Person and Position Trust Paid to Directors*
-------------------- ----------------------------
<S> <C> <C>
Mario J. Gabelli $ 0 $ 0
Chairman of the Board
Dr. Thomas E. Bratter $ 22,000 $ 27,500(2)
Director
Bill Callaghan $ 22,000 $ 41,500(3)
Director
Felix J. Christiana $ 21,500 $ 88,500(9)
Director
James P. Conn $ 20,500 $ 46,000(5)
Director
Frank J. Fahrenkopf, Jr. $ 8,000 $ 8,000(1)
Director
Karl Otto Pohl $ 19,000 $ 102,466(15)
Director
Anthony R. Pustorino $ 22,000 $ 100,500(9)
Director
Salvatore J. Zizza $ 21,500 $ 51,000(4)
Director
Marc S. Diagonale $ 115,000 $ 115,000(1)
Vice President
</TABLE>
* Represents the total compensation paid to such persons during the
calendar year ended December 31, 1998 by investment companies (including
the Equity Trust) or portfolios thereof from which such person receives
compensation that are considered part of the same fund complex as the
Equity Trust because they have common or affiliated investment advisers.
The number in parenthesis represents the number of such investment
companies and portfolios.
For additional information regarding the nominees for election to
the Board of Directors of the Equity Trust, directors whose terms of office
continue beyond the 1999 Annual Meeting and the officers and directors of
the Equity Trust as a group, see "Management of the Utility Fund and the
Equity Trust."
Required Vote
Election of each director of the Equity Trust requires the
affirmative vote of the holders of a plurality of the applicable classes of
shares of the Equity Trust represented at the Meeting if a quorum is
present (holders of Common Stock and holders of Cumulative Preferred Stock
voting together as a single class for each of the three directors).
The Board of Directors, including the "non-interested" directors,
recommends that the shareholders vote "For" the proposal to elect the
respective directors of the Equity Trust.
PROPOSAL 3: TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE
INDEPENDENT ACCOUNTANTS OF THE EQUITY TRUST FOR THE YEAR ENDING
DECEMBER 31, 1999
Upon recommendation by the Audit Committee, PricewaterhouseCoopers
LLP, 1177 Avenue of the Americas, New York, New York 10036, has been
selected by the vote of a majority of those directors who are not
"interested persons" of the Equity Trust to serve as independent
accountants for the Equity Trust's fiscal year ending December 31, 1999.
PricewaterhouseCoopers LLP has advised the Equity Trust that it is
independent with respect to the Equity Trust in accordance with the
applicable requirements of the American Institute of Certified Public
Accountants and the SEC.
Representatives of PricewaterhouseCoopers LLP are expected to be
present at the Meeting to answer appropriate questions and will be given
the opportunity to make a statement if they so desire.
Required Vote
Ratification of the selection of PricewaterhouseCoopers LLP as
independent accountants requires the affirmative vote of a majority of the
votes cast by holders of shares of the Equity Trust (holders of Common
Stock and holders of Cumulative Preferred Stock voting together as a single
class) represented at the Meeting if a quorum is present.
The Board of Directors, including the "non-interested" directors,
recommends that the shareholders vote "for" the proposal to ratify the
selection of PricewaterhouseCoopers LLP as the independent accountants of
the equity trust for the year ending December 31, 1999.
ADDITIONAL INFORMATION
Portfolio Transactions and Brokerage
Subject to policies established by the Board of Directors of the
Equity Trust, the Investment Adviser is responsible for placing purchase
and sales orders and the allocation of brokerage on behalf of the Equity
Trust. Transactions in equity securities are in most cases effected on U.S.
stock exchanges and involve the payment of negotiated brokerage
commissions. In general, there may be no stated commission in the case of
securities traded in over-the-counter markets, but the prices of those
securities may include undisclosed commissions or mark-ups. Principal
transactions are not entered into with affiliates of the Equity Trust.
However, Gabelli & Company, Inc. ("Gabelli & Company") may execute
transactions in the over-the-counter markets on an agency basis and receive
a stated commission therefrom. To the extent consistent with applicable
provisions of the 1940 Act and the rules and exemptions adopted by the SEC
thereunder, as well as other regulatory requirements, the Equity Trust's
Board of Directors have determined that portfolio transactions may be
executed through Gabelli & Company and its broker-dealer affiliates if, in
the judgment of the Investment Adviser, the use of those broker-dealers is
likely to result in price and execution at least as favorable as those of
other qualified broker-dealers, and if, in particular transactions, those
broker-dealers charge the Equity Trust a rate consistent with that charged
to comparable unaffiliated customers in similar transactions. The Equity
Trust has no obligations to deal with any broker or group of brokers in
executing transactions in portfolio securities. In executing transactions,
the Investment Adviser seeks to obtain the best price and execution for the
Equity Trust, taking into account such factors as price, size of order,
difficulty of execution and operational facilities of the firm involved and
the firm's risk in positioning a block of securities. While the Investment
Adviser generally seeks reasonably competitive commission rates, the Equity
Trust does not necessarily pay the lowest commission available.
For the fiscal years ended December 31, 1996, December 31, 1997
and December 31, 1998, the Equity Trust paid a total of $439,741, $846,195
and $829,777, respectively, in brokerage commissions of which Gabelli &
Company received $119,897, $170,831 and $362,787, respectively, and of
which Keeley Investment Corp. received $2,100, $8,005 and $2,215,
respectively. The amount received by Gabelli & Company, Inc. and Keeley
Investment Corp. from the Equity Trust in respect of brokerage commissions
for the fiscal year ended December 31, 1998 represented 43.7% and 0.3%,
respectively, of the total of all brokerage commissions paid during such
fiscal year. Such commissions were paid with respect to 48.4% and 0.3%,
respectively, of the total dollar value of all transactions involving the
payment of brokerage commissions effected during the fiscal year.
Subject to obtaining the best price and execution, brokers who
provided supplemental research, market and statistical information to the
Investment Adviser or its affiliates may receive orders for transactions by
the Equity Trust. The term "research, market and statistical information"
includes advice as to the value of securities, and advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities, and furnishing analyses
and reports concerning issues, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts. Information so
received will be in addition to and not in lieu of the services required to
be performed by the Investment Adviser under its Advisory Agreement and the
expenses of the Investment Adviser will not necessarily be reduced as a
result of the receipt of such supplemental information. Such information
may be useful to the Investment Adviser and its affiliates in providing
services to clients other than the Equity Trust, and not all such
information is used by the Investment Adviser in connection with the Equity
Trust. Conversely, such information provided to the Investment Adviser and
its affiliates by brokers and dealers through whom other clients of the
Investment Adviser and its affiliates effect securities transactions may be
useful to the Investment Adviser in providing services to the Equity Trust.
Although investment decisions for the Equity Trust are made
independently from those of the other accounts managed by the Investment
Adviser and its affiliates, investments of the kind made by the Equity
Trust may also be made by those other accounts. When the same securities
are purchased for or sold by the Equity Trust and any of such other
accounts, it is the policy of the Investment Adviser and its affiliates to
allocate such purchases and sales in the manner deemed fair and equitable
to all of the accounts, including the Equity Trust.
Broker Non-Votes and Abstentions
If a proxy which is properly executed and returned accompanied by
instructions to withhold authority to vote represents a broker "non-vote"
(that is, a proxy from a broker or nominee indicating that such person has
not received instructions from the beneficial owner or other person
entitled to vote shares on a particular matter with respect to which the
broker or nominee does not have discretionary power), is unmarked or marked
with an abstention (collectively, "abstentions"), the shares represented
thereby will be considered to be present at the meeting for purposes of
determining the existence of a quorum for the transaction of business.
Under applicable law, abstentions do not constitute a vote "for" or
"against" a matter and will be disregarded in determining the "votes cast"
on an issue.
Shareholders of the Equity Trust will be informed of the voting
results of the Meeting in the Equity Trust's Semi-Annual Report dated June
30, 1999.
SHAREHOLDER PROPOSALS
All proposals by shareholders of the Equity Trust, which are
intended to be presented at the Equity Trust's next Annual Meeting of
Shareholders to be held in 2000, must be received by the Trust for
consideration for inclusion in the Equity Trust's proxy statement and proxy
relating to that meeting no later than November
22, 1999.
OTHER MATTERS TO COME BEFORE THE MEETING
The directors of the Equity Trust do not intend to present any
other business at the Meeting, nor are they aware that any shareholder
intends to do so. If, however, any other matters are properly brought
before the Meeting, the persons named in the accompanying form of proxy
will vote thereon in accordance with their judgment.
It is important that proxies be returned promptly. Shareholders
who do not expect to attend the Meeting are therefore urged to complete,
sign, date and return the proxy card as soon as possible in the enclosed
postage-paid envelope.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Trustees of
The Gabelli Utility Fund
In our opinion, the accompanying statement of assets and
liabilities presents fairly, in all material respects, the financial
position of The Gabelli Utility Fund (the "Fund") at March 29, 1999 in
conformity with generally accepted accounting principles. This financial
statement is the responsibility of the Fund's management; our
responsibility is to express an opinion on this financial statement based
on our audit. We conducted our audit of this financial statement in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
March 30, 1999
THE GABELLI UTILITY FUND
STATEMENT OF ASSETS AND LIABILITIES
As of March 29, 1999
ASSETS
Cash ........................................................ $100,000
Total Assets........................................... 100,000
LIABILITIES
Total Liabilities...................................... 0
----------
Net Assets, applicable to 10,000 shares of Common
Stock, $.001 par value, issued and outstanding
(authorized unlimited shares).......................... $100,000
Net Asset Value per share ($100,000 divided
by 10,000 shares of Common Stock outstanding).......... $10.00
The accompanying notes are an integral part of this
statement.
- ---------------------
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
(1) The Gabelli Utility Fund (the "Utility Fund") was organized on
February 25, 1999 under the laws of the State of Delaware and will
be registered under the Investment Company Act of 1940, as
amended, as a non-diversified, closed-end management investment
company. The Utility Fund has had no operations other than
organizational matters and the issuance and sale and offering of
10,000 shares of Common Stock on March 29, 1999 to The Gabelli
Equity Trust Inc. (the "Equity Trust"). Organizational expenses
estimated at $330,000 will be borne by the Equity Trust.
(2) The Gabelli Utility Fund intends to enter into an Investment
Advisory Agreement with Gabelli Funds, LLC (the "Investment
Adviser") pursuant to which the Investment Adviser will be
responsible for providing investment management and advisory
services to the Utility Fund. For its services, the Investment
Adviser will receive a fee computed weekly and payable monthly at
an annual rate of 1.00% of the Utility Fund's average weekly net
assets.
APPENDIX A
INVESTMENT PRACTICES
Securities Subject to Reorganization. The Equity Trust and the
Utility Fund each may invest without limit in securities for which a tender
or exchange offer has been made or announced and in securities of companies
for which a merger, consolidation, liquidation or reorganization proposal
has been announced if, in the judgment of the Investment Adviser, there is
a reasonable prospect of high total return significantly greater than the
brokerage and other transaction expenses involved.
In general, securities which are the subject of such an offer or
proposal sell at a premium to their historic market price immediately prior
to the announcement of the offer or may also discount what the stated or
appraised value of the security would be if the contemplated transaction
were approved or consummated. Such investments may be advantageous when the
discount significantly overstates the risk of the contingencies involved;
significantly undervalues the securities, assets or cash to be received by
shareholders of the prospective portfolio company as a result of the
contemplated transaction; or fails adequately to recognize the possibility
that the offer or proposal may be replaced or superseded by an offer or
proposal of greater value. The evaluation of such contingencies requires
unusually broad knowledge and experience on the part of the Investment
Adviser which must appraise not only the value of the issuer and its
component businesses as well as the assets or securities to be received as
a result of the contemplated transaction but also the financial resources
and business motivation of the offeror and the dynamics and business
climate when the offer or proposal is in process. Since such investments
are ordinarily short-term in nature, they will tend to increase the
turnover ratio of the Equity Trust or the Utility Fund, as applicable,
thereby increasing its brokerage and other transaction expenses. The
Investment Adviser intends to select investments of the type described
which, in its view, have a reasonable prospect of capital appreciation
which is significant in relation to both risk involved and the potential of
available alternative investments.
Temporary Investments. Although under normal market conditions at
least 65% of the Equity Trust's total assets will consist of a portfolio of
equity securities of companies in a wide variety of industries and at least
65% of the Utility Fund's assets will consist of common stock and other
securities of foreign and domestic companies involved in the utility
industry, when a temporary defensive posture is believed by the Investment
Adviser to be warranted ("temporary defensive periods"), the Equity Trust
or the Utility Fund may without limitation hold cash or invest its assets
in money market instruments and repurchase agreements in respect of those
instruments. The money market instruments in which the Equity Trust or the
Utility Fund may invest are obligations of the United States Government,
its agencies or instrumentalities ("U.S. Government Securities");
commercial paper rated A-1 or higher by Standard & Poor's Corporation
("S&P") or Prime-1 by Moody's Investors Service, Inc. ("Moody's"); and
certificates of deposit and bankers' acceptances issued by domestic
branches of U.S. banks that are members of the Federal Deposit Insurance
Corporation. For a description of such ratings, see Appendix D. During
temporary defensive periods, the Utility Fund may also invest to the extent
permitted by applicable law, and the Equity Trust may invest up to 10% of
the market value of its total assets, in shares of money market mutual
funds. Money market mutual funds are investment companies and the
investments in those companies by the Equity Trust (and in some cases by
the Utility Fund) are subject to certain other limitations under the Equity
Trust's fundamental investment restrictions and applicable law. See
Appendix B - Investment Restrictions. As a shareholder in a mutual fund,
the Equity Trust or the Utility Fund will bear its ratable share of the
funds's expenses, including management fees, and will remain subject to
payment of the fees to the Investment Adviser, with respect to assets so
invested. See "Investment Advisory and Other Services" in the Proxy
Statement/Prospectus.
Lower Rated Securities. The Equity Trust may invest up to 10%, and
the Utility 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 S&P or "Caa" or
lower by Moody's, or non-rated securities of comparable quality. These debt
securities are predominantly speculative and involve major risk exposure to
adverse conditions and are often referred to in the financial press as
"junk bonds."
Generally, such lower rated securities and unrated securities of
comparable quality offer a higher current yield than is offered by higher
rated securities, but also (i) will likely have some quality and protective
characteristics that, in the judgment of the rating organizations, are
outweighed by large uncertainties or major risk exposures to adverse
conditions and (ii) are predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with
the terms of the obligation. The market values of certain of these
securities also tend to be more sensitive to individual corporate
developments and changes in economics conditions than higher quality bonds.
In addition, such lower rated securities and comparable unrated securities
generally present a higher degree of credit risk. The risk of loss due to
default by these issuers is significantly greater because such lower rated
securities and unrated securities of comparable quality generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness. In light of these risks, the 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 financial resources, its sensitivity to economic conditions
and trends, the operating history of and the community support for the
facility financed by the issue, the ability of the issuer's management and
regulatory matters.
In addition, the market value of securities in lower rated
categories is more volatile than that of higher quality securities, and the
markets in which such lower rated or unrated securities are traded are more
limited than those in which higher rated securities are traded. The
existence of limited markets may make it more difficult for each of the
Equity Trust and the Utility Fund to obtain accurate market quotations for
purposes of valuing its portfolio and calculating its net asset value.
Moreover, the lack of a liquid trading market may restrict the availability
of securities for Equity Trust and the Utility Fund to purchase and may
also have the effect of limiting the ability of the Equity Trust and the
Utility Fund to sell securities at their fair value to respond to changes
in the economy or the financial markets.
Lower rated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Equity
Trust or the Utility Fund may have to replace the security with a lower
yielding security, resulting in a decreased return for investors. Also, as
the principal value of bonds moves inversely with movements in interest
rates, in the event of rising interest rates the value of the securities
held by the Equity Trust and the Utility Fund may decline proportionately
more than a portfolio consisting of higher rated securities. Investments in
zero coupon bonds may be more speculative and subject to greater
fluctuations in value due to changes in interest rates than bonds that pay
interest currently.
The Equity Trust and the Utility Fund each may invest in
securities of issuers in default within their limitations on the purchase
of fixed-income securities. The Equity Trust and the Utility Fund each 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 and the value of these securities will
appreciate. By investing in securities of issuers in default, the Equity
Trust or the Utility Fund bears the risk that these issuers will not
continue to honor their obligations or emerge from bankruptcy protection or
that the value of the securities will not appreciate.
In addition to using recognized rating agencies and other sources,
the 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 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 Equity Trust and the Utility 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 Equity Trust or the Utility
Fund, an issue of securities may cease to be rated or its rating may be
reduced. In addition, it is possible that statistical rating agencies might
change their ratings of a particular issue or reflect subsequent events on
a timely basis. None of these events will require the sale of the
securities by the Equity Trust or the Utility Fund, although the Investment
Adviser will consider these events in determining whether the Equity Trust
or the Utility Fund should continue to hold the securities.
Fixed-income securities, including lower rated securities and
comparable unrated securities, frequently have call or buy-back features
that permit their issuers to call or repurchase the securities from their
holders, such as the Equity Trust and the Utility Fund. If an issuer
exercises these rights during periods of declining interest rates, the
Equity Trust or the Utility Fund may have to replace the security with a
lower yielding security, thus resulting in a decreased return for the
Equity Trust or the Utility Fund.
The market for certain lower rated and comparable unrated
securities several years ago experienced a major economic recession. The
recession adversely affected the value of such securities as well as the
ability of certain issuers of such securities to repay principal and pay
interest thereon. The market for those securities could react in a similar
fashion in the event of any future economic recession.
Options. A call option is a contract that, in return for a
premium, gives the holder of the option the right to buy from the writer of
the call option the security underlying the option at a specified exercise
price at any time during the term of the option. The writer of the call
option has the obligation, upon exercise of the option, to deliver the
underlying security upon payment of the exercise price during the option
period. A put option is the reverse of a call option, giving the holder the
right to sell the security to the writer and obligating the writer to
purchase the underlying security from the holder.
A written call option is "covered" if the writer owns the
underlying security covered by the call or has an absolute and immediate
right to acquire that security without additional cash consideration (or
for additional cash consideration held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also covered if the Equity Trust or the Utility
Fund holds a call on the same security as the call written where the
exercise price of the call held is (1) equal to or less than the exercise
price of the call written or (2) greater than the exercise price of the
call written if the difference is maintained by the Equity Trust or the
Utility Fund in cash, U.S. Government Securities or other high grade
short-term obligations in a segregated account held with its custodian. A
written put option is "covered" if the Equity Trust or the Utility Fund
maintains cash or other high grade short-term obligations with a value
equal to the exercise price in a segregated account held with its
custodian, or else holds a put on the same security as the put written
where the exercise price of the put held is equal to or greater than the
exercise price of the put written.
If the Equity Trust or the Utility Fund has written an option, it
may terminate its obligation by effecting a closing purchase transaction.
This is accomplished by purchasing an option of the same series as the
option previously written. However, once it has been assigned an exercise
notice, the Equity Trust or the Utility Fund will be unable to effect a
closing purchase transaction. Similarly, if the Equity Trust or the Utility
Fund is the holder of an option it may liquidate its position by effecting
a closing sale transaction. This is accomplished by selling an option of
the same series as the option previously purchased. There can be no
assurance that either a closing purchase or sale transaction can be
effected when the Equity Trust or the Utility Fund so desires.
The Equity Trust or the Utility Fund will realize a profit from a
closing transaction if the price of the transaction is less than the
premium received from writing the option or is more than the premium paid
to purchase the option; the Equity Trust or the Utility Fund will realize a
loss from a closing transaction if the price of the transaction is more
than the premium received from writing the option or is less than the
premium paid to purchase the option. Since call option prices generally
reflect increases in the price of the underlying security, any loss
resulting from the repurchase of a call option may also be wholly or
partially offset by unrealized appreciation of the underlying security.
Other principal factors affecting the market value of a put or a call
option include supply and demand, interest rates, the current market price
and price volatility of the underlying security and the time remaining
until the expiration date. Gains and losses on investments in options
depend, in part, on the ability of the 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 which
provides a secondary market for an option of the same series. Although the
Equity Trust and the Utility Fund each 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
Equity Trust or the Utility 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 Equity Trust or the
Utility Fund, as a covered call option writer, is unable to effect a
closing purchase transaction in a secondary market, it will not be able to
sell the underlying security until the option expires or it delivers the
underlying security upon exercise or otherwise covers the position.
In addition to options on individual securities, the Equity Trust
and the Utility Fund each may also purchase and sell call and put options
on securities indexes. 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 Equity Trust or the Utility Fund is
obligated, in return for the premium received, to make delivery of this
amount. The Equity Trust or the Utility Fund may offset its position in
stock index options prior to expiration by entering into an closing
transaction on an exchange or it may let the option expire unexercised.
The Equity Trust and the Utility Fund each also may buy or sell
put and call options on foreign currencies. A put option on a foreign
currency gives the purchaser of the option the right to sell a foreign
currency at the exercise price until the option expires. A call option on a
foreign currency gives the purchaser of the option the right to purchase
the currency at the exercise price until the option expires. Currency
options traded on U.S. or other exchanges may be subject to position limits
which may limit the ability of the Equity Trust or the Utility Fund to
reduce foreign currency risk using such options. Over-the-counter options
differ from exchange-traded options in that they are two-party contracts
with price and other terms negotiated between buyer and seller and
generally do not have as much market liquidity as exchange-traded options.
Over-the-counter options are illiquid securities.
Use of options on securities indexes entails the risk that trading
in the options may be interrupted if trading in certain securities included
in the index is interrupted. Neither the Equity Trust nor the Utility Fund
will 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.
Price movements in the portfolio of the Equity Trust or the
Utility Fund are unlikely to correlate precisely with movements in the
level of an index and, therefore, the use of options on indexes 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 indexes require settlement in cash, the Investment Adviser may
be forced to liquidate portfolio securities to meet settlement obligations.
The SEC considers over-the-counter options such as options on indexes
illiquid securities.
Although the Investment Adviser will attempt to take appropriate
measures to minimize the risks relating to the Equity Trust's and the
Utility Fund's writing of put and call options, there can be no assurance
that the Equity Trust or the Utility Fund will succeed in any
option-writing program it undertakes.
Futures Contracts and Options on Futures. Neither the Equity Trust
nor the Utility Fund will enter into futures contracts or options on
futures contracts unless (i) the aggregate initial margins and premiums do
not exceed 5% of the fair market value of its assets and (ii) the aggregate
market value of its outstanding futures contracts and the market value of
the currencies and futures contracts subject to outstanding options written
by the Equity Trust or the Utility Fund, as the case may be, do not exceed
50% of the market value of its total assets. It is anticipated that these
investments, if any, will be made by the Equity Trust or the Utility Fund
solely for the purpose of hedging against changes in the value of its
portfolio securities and in the value of securities it intends to purchase.
Such investments will only be made if they are economically appropriate to
the reduction of risks involved in the management of the Equity Trust or
the Utility Fund. In this regard, the Equity Trust and the Utility Fund
each may enter into futures contracts or options on futures for the
purchase or sale of securities indices or other financial instruments
including but not limited U.S. Government securities.
A "sale" of a futures contract (or a "short" futures position)
means the assumption of a contractual obligation to deliver the securities
underlying the contract at a specified price at a specified future time. A
"purchaser" of a futures contract (or a "long" futures position) means the
assumption of a contractual obligation to acquire the securities underlying
the contract at a specified future time. Certain futures contracts,
including stock and bond index futures, are settled on a net cash payment
basis rather than by the sale and delivery of the securities underlying the
futures contracts.
No consideration will be paid or received by the Equity Trust or
the Utility Fund upon the purchase or sale of a futures contract.
Initially, the Equity Trust or the Utility Fund will be required to deposit
with the broker an amount of cash or cash equivalents equal to
approximately 1% to 10% of the contract amount (this amount is subject to
change by the exchange or board of trade on which the contract is traded
and brokers or members of such board of trade may charge a higher amount).
This amount is known as "initial margin" and is in the nature of a
performance bond or good faith deposit on the contract. Subsequent
payments, known as "variation margin," to and from the broker will be made
daily as the price of the index or security underlying the futures contract
fluctuates. At any time prior to the expiration of the futures contract,
the Equity Trust or the Utility Fund may elect to close the position by
taking an opposite position, which will operate to terminate its existing
position in the contract.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract at
a specified exercise price at any time to the expiration of the option.
Upon exercise of an option, the delivery of the futures position by the
writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account
attributable to that contract, which represents the amount by which the
market price of the futures contract exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option
on futures on contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option purchased is fixed at
the point of sale, there are no daily cash payments by the purchaser to
reflect changes in the value of the underlying contract; however, the value
of the option does change daily and that change would be reflected in the
net assets of the Equity Trust or the Utility Fund.
Futures and options on futures entail certain risks, including but
not limited to the following: no assurance that futures contracts or
options on futures can be offset at favorable prices, possible reduction of
the yield of the Equity Trust or the Utility 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, losses from investing in futures transactions that
are potentially unlimited and the segregation requirements described below.
In the event the Equity Trust or the Utility Fund sells a put
option or enters into long futures contracts, under current interpretations
of the 1940 Act, an amount of cash, obligations of the U.S. Government and
its agencies and instrumentalities or other high grade debt securities
equal to the market value of the contract must be deposited and maintained
in a segregated account with the custodian of the Equity Trust or the
Utility Fund, as the case may be, to collateralize the positions, in order
for the fund to avoid being treated as having issued a senior security in
the amount of its obligations. For short positions in futures contracts and
sales of call options, the Equity Trust or the Utility Fund may establish a
segregated account (not with a futures commission merchant or broker) with
cash obligations of the U.S. Government and its agencies and
instrumentalities or other high grade debt securities that, when added to
amounts deposited with a futures commission merchant or a broker as margin,
equal the market value of the instruments or currency underlying the
futures contracts or call options, respectively (but are no less than the
stock price of the call option or the market price at which the short
positions were established).
Forward Currency Transactions. The Equity Trust and the Utility
Fund each may hold currencies to meet settlement requirements for foreign
securities and may engage in currency exchange transactions to protect
against uncertainty in the level of future exchange rates between a
particular foreign currency and the U.S. dollar or between foreign
currencies in which its securities are or may be denominated. Forward
currency contracts are agreements to exchange one currency for another at a
future date. The date (which may be any agreed-upon fixed number of days in
the future), the amount of currency to be exchanged and the price at which
the exchange takes place will be negotiated and fixed for the term of the
contract at the time that the Equity Trust or the Utility Fund enters into
the contract. Forward currency contracts (1) are traded in a market
conducted directly between currency traders (typically, commercial banks or
other financial institutions) and their customers, (2) generally have no
deposit requirements and (3) are typically consummated without payment of
any commissions. The Equity Trust or the Utility Fund, however, may enter
into forward currency contracts requiring deposits or involving the payment
of commissions. To assure that its forward currency contracts are not used
to achieve investment leverage, the Equity Trust or the Utility Fund will
segregate liquid assets consisting of cash, U.S. Government Securities or
other liquid high grade debt obligations with its custodian, or a
designated sub-custodian, in an amount at all times equal to or exceeding
its commitment with respect to the contracts.
The dealings of the Equity Trust and the Utility Fund in forward
foreign exchange is limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or
sale of one forward foreign currency for another currency with respect to
specific receivables or payable of the Equity Trust or the Utility Fund
accruing in connection with the purchase and sale of its portfolio
securities or its payment of dividends and distributions. Position hedging
is the purchase or sale of one forward foreign currency for another
currency with respect to portfolio security positions denominated or quoted
in the foreign currency to offset the effect of an anticipated substantial
appreciation or depreciation, respectively, in the value of the currency
relative to the U.S. dollar. In this situation, the Equity Trust or the
Utility Fund also may, for example, enter into a forward contract to sell
or purchase a different foreign currency for a fixed U.S. dollar amount
where it is believed that the U.S. dollar value of the currency to be sold
or bought pursuant to the forward contract will fall or rise, as the case
may be, whenever there is a decline or increase, respectively, in the U.S.
dollar value of the currency in which its portfolio securities are
denominated (this practice being referred to as a "cross-hedge").
In hedging a specific transaction, the Equity Trust or the Utility
Fund may enter into a forward contract with respect to either the currency
in which the transaction is denominated or another currency deemed
appropriated by the Investment Adviser. The amount the Equity Trust or the
Utility Fund may invest in forward currency contracts is limited to the
amount of its aggregate investments in foreign currencies.
The use of forward currency contracts may involve certain risks,
including the failure of the counterparty to perform its obligations under
the contract, and such use may not serve as a complete hedge because of an
imperfect correlation between movements in the prices of the contracts and
the prices of the currencies hedged or used for cover. The Equity Trust and
the Utility Fund each will only enter into forward currency contracts with
parties which it believes to be creditworthy institutions.
When Issued, Delayed Delivery Securities and Forward Commitments.
The Equity Trust and the Utility Fund each 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 Equity Trust or the Utility 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 Equity
Trust or the Utility Fund prior to the settlement date. Each of the Equity
Trust and the Utility Fund will segregate with its custodian cash or liquid
high-grade debt securities in an aggregate amount at least equal to the
amount of its outstanding forward commitments.
Short Sales. The Utility Fund may make short sales of securities.
A short sale is a transaction in which the Utility Fund sells a security it
does not own in anticipation that the market price of that security will
decline. The market value of the securities sold short of any one insurer
will not exceed either 5% of the Utility Fund's total assets or 5% of such
issuer's voting securities. The Utility Fund will not make a short sale,
if, after giving effect to such sale, the market value of all securities
sold short exceeds 25% of the value of its assets or the Utility Fund's
aggregate short sales of a particular class of securities exceeds 25% of
the outstanding securities of that class. The Utility Fund may also make
short sales "against the box" without respect to such limitations. In this
type of short sale, at the time of the sale, the Utility Fund owns, or has
the immediate and unconditional right to acquire at no additional cost, the
identical security.
The Utility Fund expects to make short sales both to obtain
capital gains from anticipated declines in securities and as a form of
hedging to offset potential declines in long positions in the same or
similar securities. The short sale of a security is considered a
speculative investment technique.
When the Utility Fund makes a short sale, it must borrow the
security sold short and deliver it to the broker-dealer through which it
made the short sale in order to satisfy its obligation to deliver the
security upon conclusion of the sale. The Utility Fund may have to pay a
fee to borrow particular securities and is often
obligated to pay over any payments received on such borrowed securities.
The Utility Fund's obligation to replace the borrowed security
will be secured by collateral deposited with the broker-dealer, usually
cash, U.S. government securities or other highly liquid debt securities.
The Utility Fund will also be required to deposit similar collateral with
its custodian, Boston Safe Deposit and Trust Company ("Boston Safe"), and ,
to the extent, if any, necessary so that the value of both collateral
deposits in the aggregate is at all times equal to the greater of the price
at which the security is sold short of 100% of the current market value of
the security sold short. Depending on arrangements made with the
broker-dealer from which it borrowed the security regarding payment over of
any payments received by the Utility Fund on such security, the Utility
Fund may not receive any payments (including interest) on its collateral
deposited with such broker-dealer. If the price of the security sold short
increases between the time of the short sale and the time the Utility Fund
replaces the borrowed security, the Utility Fund will incur a loss;
conversely, if the price declines, the Utility Fund will realize a capital
gain. Any gain will be decreased, any loss increased, by the transaction
costs described above. Although the Utility Fund's gain is limited to the
price at which it sold the security short, its potential loss is
theoretically unlimited.
To secure its obligations to deliver the securities sold short,
the Utility Fund will deposit in escrow in a separate account with the
custodian, an amount at least equal to the securities sold short or
securities convertible into, or exchangeable for, the securities. The
Utility Fund may close out a short position by purchasing and delivering an
equal amount of securities sold short, rather than by delivering securities
already held by the Utility Fund, because the Utility Fund may want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short.
Repurchase Agreements. The Equity Trust and the Utility Fund each
may engage in repurchase agreement transactions involving money market
instruments with banks, registered broker-dealers and government securities
dealers approved by the Board of Directors. Neither the Equity Trust nor
the Utility Fund will enter into repurchase agreements with the Investment
Adviser or any of its affiliates. Under the terms of a typical repurchase
agreement, the Equity Trust or the Utility Fund, as the case may be, would
acquire an underlying debt obligation for a relatively short period
(usually not more than one week) subject to an obligation of the seller to
repurchase, and the Equity Trust or the Utility Fund, as the case may be,
to resell, the obligation at an agreed price and time, thereby determining
the yield during its holding period. Thus, repurchase agreements may be
seen to be loans by the Equity Trust or the Utility Fund collateralized by
the underlying debt obligation. This arrangement results in a fixed rate of
return that is not subject to market fluctuations during the holding
period. The value of the underlying securities will be at least equal to
all times to the total amount of the repurchase obligation, including
interest. The Equity Trust or the Utility Fund bears a risk of loss in the
event that the other party to a repurchase agreement defaults on its
obligations and the Equity Trust or the Utility Fund is delayed in or
prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period in which it seeks to assert these
rights. The Investment Adviser, acting under the supervision of the Board
of Directors of the Equity Trust or the Utility Fund, reviews the
creditworthiness of those banks and dealers with which the Equity Trust or
the Utility Fund, as the case may be, enters into repurchase agreements to
evaluate these risks and monitors on an ongoing basis the value of the
securities subject to repurchase agreements to ensure that the value is
maintained at the required level.
Leveraging. As provided in the 1940 Act and subject to certain
exceptions, the Utility Fund may issue debt or preferred stock so long as
the Utility Fund's total assets, less certain ordinary course liabilities,
exceed 300% of the amount of the debt outstanding and exceed 200% of the
sum of the amount of preferred stock and debt outstanding and the Equity
Trust may issue debt for certain restricted purposes up to 10% of its total
assets and preferred stock up to the 200% asset coverage limitation. Such
debt or preferred stock may be convertible in accordance with SEC staff
guidelines which may permit each fund to obtain leverage at attractive
rates. Leverage entails two primary risks. The first risk is that the use
of leverage magnifies the impact on the holders of common stock of changes
in net asset value. For example, a fund that uses 33% leverage will show a
1.5% increase or decline in net asset value for each 1% increase or decline
in the value of its total assets. The second risk is that the cost of
leverage will exceed the return on the securities acquired with the
proceeds of leverage, thereby diminishing rather than enhancing the return
to holders of common stock. These two risks would generally make the fund's
total return to holders of common stock more volatile. in addition, the
fund may be required to sell investments in order to meet dividend or
interest payments on the debt or preferred stock when it may be
disadvantageous to do so.
A decline in net asset value could affect the ability of the
Equity Trust or the Utility Fund to make common stock dividend payments and
such a failure to pay dividends or make distributions could result in the
Equity Trust or the Utility Fund ceasing to qualify as a regulated
investment company under the Code. See "Taxation". Finally, if the asset
coverage for preferred stock or debt securities declines to less than 200%
or 300%, respectively (as a result of market fluctuations or otherwise),
the Equity Trust or the Utility Fund may be required to sell a portion of
its investments to redeem the preferred stock or repay the debt when it may
be disadvantageous to do so.
APPENDIX B
INVESTMENT RESTRICTIONS
The Equity Trust and the Utility Fund operate under the following
restrictions that constitute fundamental policies that, except as otherwise
noted, cannot be changed without the affirmative vote of the holders of a
majority of the outstanding voting securities of the Equity Trust or the
Utility Fund, as the case may be. Except as otherwise noted, these
investment restrictions apply to both the Equity Trust and the Utility
Fund, and all percentage limitations set forth below apply immediately
after a purchase or initial investment and any subsequent change in any
applicable percentage resulting from market fluctuations does not require
elimination of any security from the portfolio.
1. Neither the Equity Trust nor the Utility Fund may
invest 25% or more of its total assets, taken at market value at
the time of each investment, in the securities of issuers in any
particular industry other than, in the case of the Utility Fund,
the utility industry. This restriction does not apply to
investments in U.S. Government Securities.
2. The Equity Trust may not purchase securities of other
investment companies, except in connection with a merger,
consolidation, acquisition or reorganization, if more than 10% of
the market value of the total assets of the Equity Trust would be
invested in securities of other investment companies, more than 5%
of the market value of the total assets of the Equity Trust would
be invested in the securities of any one investment company or the
Equity Trust would own more than 3% of any other investment
company's securities; provided, however, this restriction shall
not apply to securities of any investment company organized by the
Equity Trust that are to be distributed pro rata as a dividend to
its shareholders. The Utility Fund has no fundamental policy in
this area.
3. Neither the Equity Trust nor the Utility Fund may
purchase or sell commodities or commodity contracts except that
the Equity Trust and the Utility Fund each may purchase or sell
futures contracts and related options thereon if immediately
thereafter (i) no more than 5% of its total assets are invested in
margins and premiums and (ii) the aggregate market value of its
outstanding futures contracts and market value of the currencies
and futures contracts subject to outstanding options written by
the Equity Trust or the Utility Fund, as the case may be, do not
exceed 50% of the market value of its total assets. Neither the
Equity Trust nor the Utility Fund may purchase or sell real
estate, provided that each may invest in securities secured by
real estate or interests therein or issued by companies which
invest in real estate or interests therein.
4. Neither the Equity Trust nor the Utility Fund may
purchase any securities on margin or, in the case of the Equity
Trust, make short sales of securities, except that the Equity
Trust and the Utility Fund each may obtain such short-term credit
as may be necessary for the clearance of purchases
and sales of portfolio securities.
5. Neither the Equity Trust nor the Utility Fund may make
loans of money, except by the purchase of a portion of publicly
distributed debt obligations (in the case of the Equity Trust) or
private or publicly distributed debt obligations (in the case of
the Utility Fund), entering into repurchase agreements (which in
the case of the Equity Trust are limited to publicly traded debt
obligations in which it may invest). The Equity Trust and the
Utility Fund each reserves the authority to make loans of its
portfolio securities to financial intermediaries in an aggregate
amount not exceeding 20% of its total assets. Any such loans will
only be made upon approval of, and subject to any conditions
imposed by, the Board of Directors of the Equity Trust or of the
Utility Fund, as the case may be. Because these loans are required
to be fully collateralized at all times, the risk of loss in the
event of default of the borrower should be slight.
6. The Utility Fund may borrow money to the extent
permitted by applicable law. The 1940 Act currently requires that
the Utility Fund have 300% asset coverage with respect to all
borrowings other than temporary borrowings of up to 5% of the
value of its total assets. The Equity Trust may not borrow money,
except that it may borrow from banks and other financial
institutions on an unsecured basis, in an amount not exceeding 10%
of its total assets, to finance the repurchase of its shares as
described above. See "Description of Common Stock of the Utility
Fund and the Equity Trust Repurchase of Shares." The Equity Trust
may borrow money on a secured basis from banks as a temporary
measure for extraordinary or emergency purposes. Temporary
borrowings may not exceed 5% of the value of the total assets of
the Equity Trust at the time the loan is made. The Equity Trust
may pledge up to 10% of the lesser of the cost or value of its
total assets to secure temporary borrowings. The Equity Trust will
not borrow for investment purposes. Immediately after any
borrowing, the Equity Trust will maintain asset coverage of not
less than 300% with respect to all borrowings. While the borrowing
of the Equity Trust exceeds 5% of its total assets, the Equity
Trust will make no further purchases of securities, although this
limitation will not apply to repurchase transactions as described
above.
7. Issue senior securities, except to the extent
permitted by applicable law.
8. Underwrite securities of other issuers except insofar
as the Equity Trust or the Utility Fund may be deemed an
underwriter under the 1933 Act in selling portfolio securities;
provided, however, this restriction shall not apply to securities
of any investment company organized by the Equity Trust or the
Utility Fund that are to be distributed pro rata as a dividend to
its shareholders.
9. The Utility Fund may invest without limit in illiquid
securities. The Equity Trust may not invest more than 10% of its
total assets in illiquid securities, such as certain repurchase
agreements with maturities in excess of seven days, or securities
that have legal or contractual restrictions on resale.
APPENDIX C
AUTOMATIC DIVIDEND REINVESTMENT AND VOLUNTARY CASH PURCHASE PLAN
Under the Equity Trust Plan and the substantially similar
Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan adopted by
the Utility Fund (each, the "Plan"), a shareholder whose Common Stock is
registered in his own name will have all distributions reinvested
automatically by State Street Bank and Trust Company ("State Street"),
which is agent under the Plan, unless the shareholder elects to receive
cash. Distributions with respect to shares registered in the name of a
broker-dealer or other nominee (that is, in "street name") will be
reinvested by the broker or nominee in additional shares under the Plan,
unless the service is not provided by the broker or nominee or the
shareholder elects to receive distributions in cash. Investors who own
Common Stock registered in street name should consult their broker-dealers
for details regarding reinvestment. All distributions to investors who do
not participate in the Plan will be paid by check mailed directly to the
record holder by State Street as dividend disbursing agent.
Under the Plan, whenever the market price of the Common Stock is
equal to or exceeds net asset value at the time shares are valued for
purposes of determining the number of shares equivalent to the cash
dividend or capital gains distribution, participants in such plan are
issued shares of Common Stock, valued at the greater of (i) the net asset
value as most recently determined or (ii) 95% of the then current market
price of the Common Stock. The valuation date is the dividend or
distribution payment date or, if that date is not a New York Stock Exchange
trading day, the next preceding trading day. If the net asset value of the
Common Stock at the time of valuation exceeds the market price of the
Common Stock, participants will receive shares from the Equity Trust or the
Utility Fund, as applicable, or acquired by the Plan agent in the market,
valued at market price. As required by the 1940 Act, the shareholders of
the Equity Trust and the Equity Trust as the sole shareholder of the
Utility Fund has approved issuance of new shares by the relevant fund if
the market price of such shares at the time is less than their net asset
value per share. If the Equity Trust or the Utility Fund should declare a
dividend or capital gains distribution payable only in cash, State Street
will buy such investment company's Common Stock for such Plan in the open
market, on the New York Stock Exchange or elsewhere, for the participants'
accounts, except that State Street will endeavor to terminate purchases in
the open market and cause the Equity Trust or the Utility Fund, as the case
may be, to issue shares at net asset value if, following the commencement
of such purchases, the market value of its Common Stock exceeds net asset
value.
Participants in the Plan have the option of making additional cash
payments to State Street, monthly for the Equity Trust and twice per month
for the Utility Fund, for investment in the shares as applicable. Such
payments may be made in any amount from $250 to $10,000. State Street will
use all funds received from participants to purchase Equity Trust shares or
Utility Fund shares, as applicable, in the open market on the 15th of each
month for the Equity Trust and on the 1st and 15th of each month for the
Utility Fund. It is suggested that participants send voluntary cash
payments to State Street in a manner that ensures that State Street will
receive these payments approximately 10 days before the investment date. A
participant may without charge withdraw a voluntary cash payment by written
notice, if the notice is received by State Street at least 48 hours before
such payment is to be invested.
State Street maintains all shareholder accounts in the Plan and
furnishes written confirmations of all transactions in the account,
including information needed by shareholders for personal and tax records.
Shares in the account of each Plan participant will be held by State Street
in noncertificated form in the name of the participant, and each
shareholder's proxy will include those shares purchased pursuant to the
Plan. A Plan participant may send his share certificates to State Street so
that the shares represented by such certificates will be held by State
Street in the participant's shareholder account under the Plan.
In the case of shareholders such as banks, brokers or nominees,
which hold shares for others who are the beneficial owners, State Street
will administer the Plan on the basis of the number of shares certified
from time to time by the shareholder as representing the total amount
registered in the shareholder's name and held for the account of beneficial
owners who participate in the Plan.
There is no charge to participants for reinvesting dividends or
capital gains distributions payable in either stock or cash. State Street's
fees for handling the reinvestment of such dividends and capital gains
distributions are paid by the Equity Trust or Utility Fund, as the case may
be. There are no brokerage charges with respect to shares issued directly
by the Equity Trust or Utility Fund, as the case may be, as a result of
dividends or capital gains distributions payable in stock or in cash.
However, each participant bears a pro rata share of brokerage commissions
incurred with respect to State Street's open market purchases in connection
with the reinvestment of dividends or capital gains distributions.
With respect to purchases from voluntary cash payments, State
Street will charge $0.75 for each such purchase for a participant, plus a
pro rata share of the brokerage commissions. Brokerage charges for
purchasing small amounts of stock for individual accounts through the Plan
are expected to be less than the usual brokerage charges for such
transactions, as State Street will be purchasing shares for all
participants in blocks and prorating the lower commission thus attainable.
The automatic reinvestment of dividends and distributions will not
relieve participants of any income tax which may be payable on such
dividends or distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Equity Trust and the Utility Fund each reserves the right
to amend or terminate its respective Plan as applied to any voluntary cash
payments made and any dividend or distribution paid subsequent to written
notice of the change sent to the members of such Plan at least 90 days
before the record date for such dividend or distribution. Each Plan also
may be amended or terminated by State Street on at least 90 days' written
notice to the respective participants in such Plan. All correspondence
concerning the Plan should be directed to State Street at P.O. Box 8200,
Boston, Massachusetts 02266-8200.
APPENDIX D
DESCRIPTION OF RATINGS
Description of Moody's Investors Service, Inc.'s ("Moody's") Corporate
Bond Ratings
Aaa: Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which made the long term risks appear somewhat
larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in
this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect
to principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's may apply numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end
of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end
of its generic rating category.
Description of Standard & Poor's Corporation's ("S&P") Corporate Debt
Ratings
AAA: Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small
degree.
A: Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB: Debt rated BBB is regarded as having adequate capacity to pay
interest and repay principal. Whereas it normally exhibits protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher rated categories.
BB, B, CCC, CC, C: Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculative and C the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no
interest is being paid.
D: Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The D
Rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
r: In July 1994, S&P added an "r" symbol to its ratings. The "r" symbol is
attached to derivatives, hybrids and certain other obligations that S&P
believes may experience high variability in expected returns due to
non-credit risks created by the terms of the obligations.
Description of Moody's Preferred Stock Ratings
aaa: An issue which is rated aaa is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least
risk of dividend impairment within the universe of preferred stocks.
aa: An issue which is rated aa is considered a high-grade
preferred stock. This rating indicates that there is reasonable assurance
that earnings and asset protection will remain relatively well maintained
in the foreseeable future.
a: An issue which is rated a is considered to be an upper medium
grade preferred stock. While risks are judged to be somewhat greater than
in the aaa and aa classifications, earnings and asset protection are
nevertheless expected to be maintained at adequate levels.
baa: An issue which is rated baa is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.
ba: An issue which is rated ba is considered to have speculative
elements and its future cannot be considered well assured. Earnings and
asset protection may be very moderate and not well safeguarded during
adverse periods. Uncertainty of position characterizes preferred stocks in
this class.
b: An issue which is rated b generally lacks the characteristics
of a desirable investment. Assurance of dividend payments and maintenance
of other terms of the issue over any long period of time may be small.
caa: An issue which is rated caa is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate the
future status of payment.
ca: An issue which is rated ca is speculative in a high degree and
is likely to be in arrears on dividends with little likelihood of eventual
payment.
c: This is the lowest rated class of preferred or preference
stock. Issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Note: Moody's may apply numerical modifiers 1, 2 and 3 in each rating
classification from "aa" through "b" in its preferred stock rating system.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
Description of S&P's Preferred Stock Ratings
AAA: This is the highest rating that may be assigned by S&P to a
preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA: A preferred stock issue rated AA also qualifies as a
high-quality fixed income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues
rated AAA.
A: An issue rated A is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible to
the adverse effect of changes in circumstances and economic conditions.
BBB: An issue rated BBB is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to
make payments for a preferred stock in this category than for issues in the
A category.
BB, B, CCC: Preferred stock rated BB, B, and CCC are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity
to pay preferred stock obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation. While such issues
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
CC: The rating CC is reserved for a preferred stock in arrears on
dividends or sinking fund payments but that is currently paying.
C: A preferred stock rated C is a non-paying issue.
D: A preferred stock rated D is a non-paying issue with the issuer
in default on debt instruments.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
THE GABELLI UTILITY FUND
PART C
OTHER INFORMATION
Item 15. Indemnification
The response to this item is incorporated by
reference to the caption "Description of Common
Stock of the Utility Fund and the Equity Trust -
- Limitation of Officers' and Directors'
Liability" in Part A of this Registration
Statement.
Insofar as indemnification for liability arising
under the Securities Act of 1933 may be
permitted to directors, officers and controlling
persons of Registrant pursuant to the forgoing
provisions, or otherwise, Registrant has been
advised that, in the opinion of the SEC, such
indemnification is against public policy as
expressed in the Securities Act of 1933, and is,
therefore, unenforceable. In the event that a
claim for indemnification against such
liabilities (other than the payment by
Registrant of expenses incurred or paid by a
director, officer or controlling person of
Registrant in the successful defense of any
action, suit or proceeding) is asserted by such
director, officer or controlling person in
connection with the securities being registered,
Registrant will, unless in the opinion of its
counsel the matter has been settled by
controlling precedent, submit to a court of
appropriate jurisdiction the question whether
such indemnification by it is against public
policy as expressed in the Securities Act of
1933 and will be governed by the final
adjudication of such issue.
Item 16. Exhibits
(1) Agreement and Declaration of Trust of Registrant.*
(2) By-Laws of Registrant.*
(3) Not Applicable.
(4) Not Applicable.
(5) Form of Registrant's Common Stock Certificate.*
(6) Form of Investment Advisory Agreement between
Registrant and Gabelli Funds, LLC*
(7) Not Applicable.
(8) Not Applicable.
(9) (a) Form of Custodian Contract between Registrant
and Boston Safe Deposit and Trust Company.*
(9) (b) Form of Custodian Fee Schedule between
Registrant and Boston Safe Deposit and Trust
Company.*
(9) (c) Form of Registrar, Transfer Agency and Service
Agreement between Registrant and State Street
Bank and Trust Company.*
(9) (d) Form of Transfer Agent and Registrar Services
Fee Agreement between Registrant and State
Street Bank and Trust Company.*
(10) Not Applicable.
(11) Opinion and Consent of Skadden, Arps, Slate,
Meagher & Flom LLP with respect to legality.*
(12) Opinion and Consent of Skadden, Arps, Slate,
Meagher & Flom LLP with respect to tax matters.*
(13) Not Applicable.
(14) Consents of PricewaterhouseCoopers LLP.*
(15) Not Applicable.
(16) Power of Attorney.*
(17) (a)(i) Form of Proxy Card (holders of Common Stock).*
(17) (a)(ii) Form of Proxy Card (holders of Cumulative
Preferred Stock).*
(17) (b) Purchase Agreement dated March 29, 1999 between
Registrant and The Gabelli Equity Trust Inc.*
(17) (c) Annual Report of The Gabelli Equity Trust Inc.
to Shareholders for the fiscal year ended
December 31, 1998.**
(17) (d) Automatic Dividend Reinvestment and Voluntary
Cash Purchase Plan of Registrant.*
- ---------------
* Filed herewith.
** Incorporated by reference from The Gabelli Equity Trust Inc.'s
Form N-30D as filed with the Securities and Exchange Commission
on March 11, 1999.
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to
any public reoffering of the securities
registered through the use of a prospectus which
is a part of this Registration Statement by any
person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of
the Securities Act of 1933, the reoffering
prospectus will contain the information called
for by the applicable registration form for
reofferings by persons who may be deemed
underwriters, in addition to the information
called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every
prospectus that is filed under paragraph (1)
above will be filed as a part of an amendment to
the Registration Statement and will not be used
until the amendment is effective, and that, in
determining any liability under the Securities
Act of 1933, each post-effective amendment shall
be deemed to be a new registration statement for
the securities offered therein, and the offering
of the securities at that time shall be deemed
to be the initial bona fide offering of them.
SIGNATURES
As required by the Securities Act of 1933, this Registrant's
Registration Statement has been signed on behalf of the Registrant, in the
City of Rye, State of New York, on the 30th day of March, 1999.
THE GABELLI UTILITY FUND
By: /s/ Bruce N. Alpert
----------------------------
Bruce N. Alpert
Treasurer
POWER OF ATTORNEY
Each person whose signature appears below on this
Registration Statement hereby constitutes and appoints Mario J. Gabelli,
Bruce N. Alpert and James E. McKee, and each of them, with full power to
act without the other, his rue and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities (until revoked in writing) to
sign any and all amendments to this Registration Statement (including
post-effective amendments thereto), and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every
act and thing ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof. This Power of Attorney
may be executed in multiple counterparts, each of which shall be deemed an
original but which taken together shall constitute one instrument.
As required by the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
/s/ Mario J. Gabelli Chairman of the Board, March 30, 1999
- -------------------- President, Chief Investment
Mario J. Gabelli Officer and Trustee
/s/ Bruce N. Alpert Chief Financial Officer March 30, 1999
- -------------------
Bruce N. Alpert
- -------------------- Trustee March 30, 1999
Thomas E. Bratter
/s/ Bill Callaghan Trustee March 30, 1999
- --------------------
Bill Callaghan
- ---------------------- Trustee March 30, 1999
Felix J. Christiana
/s/ Anthony J. Colavita Trustee March 30, 1999
- -----------------------
Anthony J. Colavita
/s/ James P. Conn Trustee March 30, 1999
- -----------------
James P. Conn
/s/ Vincent D. Enright Trustee March 30, 1999
- ----------------------
Vincent D. Enright
/s/ Frank J. Fahrenkopf, Jr. Trustee March 30, 1999
- --------------------------
Frank J. Fahrenkopf, Jr.
- -------------------------- Trustee March 30, 1999
John D. Gabelli
- ------------------------- Trustee March 30, 1999
Karl Otto Pohl
/s/ Anthony R. Pustorino Trustee March 30, 1999
- ------------------------
Anthony R. Pustorino
- ------------------------- Trustee March 30, 1999
Salvatore J. Zizza
EXHIBIT INDEX
Exhibit Number Description
(1) Agreement and Declaration of Trust of Registrant*
(2) By-Laws of Registrant*
(5) Form of Registrant's Common Stock Certificate.*
(9) (a) Form of Custodian Contract between Registrant*
and State Street Bank and Trust Company.
(9) (b) Form of Custodian Fee Schedule between
Registrant and State Street Bank and Trust
Company.*
(9) (c) Form of Registrar, Transfer Agency and Service
Agreement between Registrant and State Street Bank
and Trust Company.*
(9) (d) Form of Transfer Agent and Registrar Services
Fee Agreement.*
(10) Form of Investment Advisory Agreement between
Registrant and Gabelli Funds, LLC.*
(11) Opinion and Consent of Skadden, Arps, Slate,
Meagher & Flom LLP with respect to legality .*
(12) Opinion and Consent of Skadden, Arps, Slate,
Meagher & Flom LLP with respect to tax matters.*
(14) Consents of PricewaterhouseCoopers LLP.**
(16) Power of Attorney.*
(17) (a)(i) Form of Proxy Card (holders of Common Stock).*
(17) (a)(ii) Form of Proxy Card (holders of Cumulative
Preferred Stock).*
(17) (b) Purchase Agreement dated March 29, 1999 between
Registrant and The Gabelli Equity Trust Inc.*
(17) (c) Annual Report of The Gabelli Equity Trust Inc.
to Shareholders for the fiscal year ended
December 31, 1998.**
(17) (d) Automatic Dividend Reinvestment and Voluntary Cash
Purchase Plan of Registrant.*
- ---------------
* Filed herewith.
** Incorporated by reference from The Gabelli Equity Trust Inc.'s
Form N-30D as filed with the Securities and Exchange Commission
on March 11, 1999.
EXHIBIT (1)
THE GABELLI UTILITY FUND
____________________________________________
AGREEMENT AND DECLARATION OF TRUST
____________________________________________
MARCH 29, 1999
TABLE OF CONTENTS
ARTICLE I
The Trust
1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Purpose and Powers of Trust . . . . . . . . . . . . . . . 5
ARTICLE II
Trustees
2.1 Number and Qualification . . . . . . . . . . . . . . . . . 5
2.2 Term and Election . . . . . . . . . . . . . . . . . . . . 5
2.3 Resignation and Removal . . . . . . . . . . . . . . . . . 6
2.4 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 Officers . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
Powers and Duties of Trustees
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Investments . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Legal Title . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Issuance and Repurchase of Shares . . . . . . . . . . . . 9
3.5 Borrow Money or Utilize Leverage . . . . . . . . . . . . 10
3.6 Collection and Payment . . . . . . . . . . . . . . . . . 10
3.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . 11
3.9 Miscellaneous Powers . . . . . . . . . . . . . . . . . . 11
3.10 Delegation; Committees . . . . . . . . . . . . . . . . 11
3.11 Further Powers . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
Limitations of Liability
and Indemnification
4.1 No Personal Liability of Shareholders, Trustees, etc. . 12
4.2 Mandatory Indemnification . . . . . . . . . . . . . . . 13
4.3 No Duty of Investigation; Notice in Trust Instruments,
etc. . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.4 Reliance on Experts, etc . . . . . . . . . . . . . . . . 15
ARTICLE V
Shares of Beneficial Interest
5.1 Beneficial Interest . . . . . . . . . . . . . . . . . . 15
5.2 Classes and Series . . . . . . . . . . . . . . . . . . . 15
5.3 Issuance of Shares . . . . . . . . . . . . . . . . . . . 16
5.4 Rights of Shareholders . . . . . . . . . . . . . . . . . 16
5.5 Trust Only . . . . . . . . . . . . . . . . . . . . . . . 16
5.6 Register of Shares . . . . . . . . . . . . . . . . . . . 17
5.7 Transfer Agent and Registrar . . . . . . . . . . . . . . 17
5.8 Transfer of Shares . . . . . . . . . . . . . . . . . . . 17
5.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . 18
5.10 Net Asset Value . . . . . . . . . . . . . . . . . . . . 18
5.11 Distributions to Shareholders. . . . . . . . . . . . . 18
ARTICLE VI
Shareholders
6.1 Meetings of Shareholders . . . . . . . . . . . . . . . . 19
6.2 Voting . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.3 Notice of Meeting, Shareholder Proposals and Record Date 20
6.4 Quorum and Required Vote . . . . . . . . . . . . . . . . 20
6.5 Proxies, etc. . . . . . . . . . . . . . . . . . . . . . 21
6.6 Reports . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Inspection of Records . . . . . . . . . . . . . . . . . 22
6.8 Shareholder Action by Written Consent . . . . . . . . . 22
ARTICLE VII
Duration: Termination of Trust;
Amendment; Mergers, Etc.
7.1 Duration . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Termination. . . . . . . . . . . . . . . . . . . . . . . 22
7.3 Amendment Procedure. . . . . . . . . . . . . . . . . . . 23
7.4 Merger, Consolidation and Sale of Assets . . . . . . . . 24
7.5 Redemption; Conversion . . . . . . . . . . . . . . . . . 25
7.6 Certain Transactions . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII
Miscellaneous
8.1 Filing . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.2 Resident Agent . . . . . . . . . . . . . . . . . . . . . 28
8.3 Governing Law . . . . . . . . . . . . . . . . . . . . . 28
8.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . 28
8.5 Reliance by Third Parties . . . . . . . . . . . . . . . 28
8.6 Provisions in Conflict with Law or Regulation . . . . . 29
THE GABELLI UTILITY FUND
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made as of the 29th day of
March, 1999, by the Trustees hereunder, and by the holders of shares of
beneficial interest issued hereunder as hereinafter provided.
WHEREAS, this Trust has been formed to carry on business as set
forth more particularly hereinafter;
WHEREAS, this Trust is authorized to issue an unlimited number of
its shares of beneficial interest all in accordance with the provisions
hereinafter set forth;
WHEREAS, the Trustees have agreed to manage all property coming
into their hands as Trustees of a Delaware business trust in accordance
with the provisions hereinafter set forth; and
WHEREAS, the parties hereto intend that the Trust created by this
Declaration and the Certificate of Trust filed with the Secretary of State
of the State of Delaware on February 25th, 1999 shall constitute a business
trust under the Delaware Business Trust Statute and that this Declaration
shall constitute the governing instrument of such business trust.
NOW, THEREFORE, the Trustees hereby declare that they will hold
all cash, securities, and other assets which they may from time to time
acquire in any manner as Trustees hereunder IN TRUST to manage and dispose
of the same upon the following terms and conditions for the benefit of the
holders from time to time of shares of beneficial interest in this Trust as
hereinafter set forth.
ARTICLE I
The Trust
1.1 Name. This Trust shall be known as the "The Gabelli Utility
Fund" and the Trustees shall conduct the business of the Trust under that
name or any other name or names as they may from time to time determine.
1.2 Definitions. As used in this Declaration, the following
terms shall have the following meanings:
The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person" and "Principal Underwriter" shall have the meanings
given them in the 1940 Act.
"By-Laws" shall mean the By-Laws of the Trust as amended from
time to time by the Trustees.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"Commission" shall mean the Securities and Exchange Commission.
"Declaration" shall mean this Agreement and Declaration of Trust,
as amended or amended and restated from time to time, including by way of
any supplement authorizing or creating any class of Shares or any series of
any such class.
"Delaware Business Trust Statute" shall mean the provisions of
the Delaware Business Trust Act, 12 Del. C. section3801, et. seq., as such
Act may be amended from time to time.
"Fundamental Policies" shall mean the investment policies and
restrictions as set forth from time to time in any Prospectus or contained
in any current Registration Statement of the Trust filed with the
Securities and Exchange Commission or as otherwise adopted by the Trustees
and the Shareholders in accordance with the requirements of the 1940 Act
and designated as fundamental policies therein as they may be amended from
time to time in accordance with the requirements of the 1940 Act.
"Majority Shareholder Vote" shall mean a vote of a majority of
the outstanding voting securities (as such term is defined in the 1940 Act)
of the Trust or the applicable class or classes of such voting securities.
"Person" shall mean and include natural persons, corporations,
partnerships, trusts, limited liability companies, associations, joint
ventures and other entities, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Prospectus" shall mean the currently effective Prospectus of the
Trust, if any, under the Securities Act of 1933, as amended.
"Shareholders" shall mean as of any particular time the holders
of record of outstanding Shares of the Trust, at such time.
"Shares" shall mean the transferable units of beneficial interest
into which the beneficial interest in the Trust shall be divided from time
to time and includes fractions of Shares as well as whole Shares. All
references to Shares shall be deemed to be Shares of any or all Series or
classes or series thereof as the context may require.
"Trust" shall mean the trust established by this Declaration, as
amended from time to time, inclusive of each such amendment.
"Trustees" shall mean the signatory to this Declaration, so long
as he shall continue in office in accordance with the terms hereof, and all
other persons who at the time in question have been duly elected or
appointed and have qualified as trustees in accordance with the provisions
hereof and are then in office.
"Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust or the Trustees in such
capacity.
The "1933 Act" refers to the Securities Act of 1933 and the rules
and regulations promulgated thereunder and exemptions therefrom covering
the Trust and its affiliated persons, as amended from time to time.
The "1940 Act" refers to the Investment Company Act of 1940 and
the rules and regulations promulgated thereunder and exemptions granted
therefrom, as amended from time to time.
1.3 Purpose and Powers of Trust. The Trust is established for
the purpose of engaging in any activity not prohibited by Delaware law and
shall have the power to engage in any such activity and in any activity
incidental or related to any such activity.
ARTICLE II
Trustees
2.1 Number and Qualification. Prior to a public offering of
Shares, there may be a sole Trustee and thereafter the number of Trustees
shall be such number, not less than three or more than fifteen, as shall be
set forth in a written instrument signed or adopted by a majority of the
Trustees then in office. No reduction in the number of Trustees shall have
the effect of removing any Trustee from office prior to the expiration of
his term. An individual nominated as a Trustee shall be at least 21 years
of age and not older than such age as shall be set forth in a written
instrument signed or adopted by a majority of the Trustees then in office
and shall not be under legal disability. Trustees need not own Shares and
may succeed themselves in office.
2.2 Term and Election. The Board of Trustees shall be divided
into three classes. Within the limits specified in Section 2.1, the number
of the Trustees in each class shall be determined by resolution of the
Board of Trustees. The initial term of office of the first class shall
expire on the date of the first annual meeting of Shareholders or special
meeting in lieu thereof. The initial term of office of the second class
shall expire on the date of the second annual meeting of Shareholders or
special meeting in lieu thereof. The initial term of office of the third
class shall expire on the date of the third annual meeting of Shareholders
or special meeting in lieu thereof. Upon expiration of the initial term of
office of each class as set forth above and the expiration of each
subsequent term of office of such class, the number of Trustees in such
class, as determined by the Board of Trustees, shall be elected for a term
expiring on the date of the third annual meeting of Shareholders or special
meeting in lieu thereof following such expiration to succeed the Trustees
whose terms of office expire. The Trustees shall be elected at an annual
meeting of the Shareholders or special meeting in lieu thereof called for
that purpose, except as provided in Section 2.4 of this Article, and each
Trustee elected shall hold office until his or her successor shall have
been elected and shall have qualified, except as provided in Section 2.3.
2.3 Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in
writing signed by him and delivered or mailed to the Chairman, if any, the
President or the Secretary and such resignation shall be effective upon
such delivery, or at a later date according to the terms of the instrument.
Any Trustee may be removed (provided the aggregate number of Trustees after
such removal shall not be less than the number required by Section 2.1
hereof) for cause at any time by written instrument, signed by two-thirds
of the remaining Trustees, specifying the date when such removal shall
become effective. Any Trustee may be removed (provided the aggregate
number of Trustees after such removal shall not be less than the minimum
number required by Section 2.1 hereof) without cause at any time by a
written instrument, signed or adopted by two-thirds of the remaining
Trustees or by vote of Shares having not less than two-thirds of the
aggregate number of Shares entitled to vote in the election of such
Trustee, specifying the date when such removal shall become effective.
Upon the resignation or removal of a Trustee, or such persons otherwise
ceasing to be a Trustee, such persons shall execute and deliver such
documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held in
the name of the resigning or removed Trustee. Upon the incapacity or death
of any Trustee, such Trustee's legal representative shall execute and
deliver on such Trustee's behalf such documents as the remaining Trustees
shall require as provided in the preceding sentence.
2.4 Vacancies. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation,
bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office, or removal, of a Trustee. Whenever a vacancy in the
Board of Trustees shall occur, the remaining Trustees may fill such vacancy
by appointing an individual having the qualifications described in this
Article by a written instrument signed or adopted by a majority of the
Trustees then in office or by election by the Shareholders, or may leave
such vacancy unfilled or may reduce the number of Trustees (provided the
aggregate number of Trustees after such reduction shall not be less than
the minimum number required by Section 2.1 hereof). Any vacancy created by
an increase in Trustees may be filled by the appointment of an individual
having the qualifications described in this Article made by a written
instrument signed by a majority of the Trustees then in office or by
election by the Shareholders. No vacancy shall operate to annul this
Declaration or to revoke any existing agency created pursuant to the terms
of this Declaration. Whenever a vacancy in the number of Trustees shall
occur, until such vacancy is filled as provided herein, the Trustees in
office, regardless of their number, shall have all the powers granted to
the Trustees and shall discharge all the duties imposed upon the Trustees
by this Declaration.
2.5 Meetings. Meetings of the Trustees shall be held from time
to time upon the call of the Chairman, if any, the President, the Secretary
or any two Trustees. Regular meetings of the Trustees may be held without
call or notice at a time and place fixed by the By-Laws or by resolution of
the Trustees. Notice of any other meeting shall be mailed not less than 48
hours before the meeting or otherwise actually delivered orally or in
writing not less than 24 hours before the meeting, but may be waived in
writing by any Trustee either before or after such meeting. The attendance
of a Trustee at a meeting shall constitute a waiver of notice of such
meeting except where a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting
has not been lawfully called or convened. The Trustees may act with or
without a meeting. A quorum for all meetings of the Trustees shall be one-
third of the Trustees. Unless provided otherwise in this Declaration of
Trust, any action of the Trustees may be taken at a meeting by vote of a
majority of the Trustees present (a quorum being present) or without a
meeting by written consent of a majority of the Trustees or such other
proportion as shall be specified herein for action at a meeting at which
all Trustees then in office are present.
Any committee of the Trustees, including an executive committee,
if any, may act with or without a meeting. A quorum for all meetings of
any such committee shall be a majority of the members thereof. Unless
provided otherwise in this Declaration, any action of any such committee
may be taken at a meeting by vote of a majority of the members present (a
quorum being present) or without a meeting by written consent of a majority
of the members or such other proportion as shall be specified herein for
action at a meeting at which all committee members are present.
With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons in any action to be taken may
be counted for quorum purposes under this Section and shall be entitled to
vote to the extent not prohibited by the 1940 Act.
All or any one or more Trustees may participate in a meeting of
the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other; participation in a
meeting pursuant to any such communications system shall constitute
presence in person at such meeting except as otherwise provided by the 1940
Act.
2.6 Officers. The Trustees shall elect a President, a Secretary
and a Treasurer and may elect a Chairman who shall serve at the pleasure of
the Trustees or until their successors are elected. The Trustees may elect
or appoint or may authorize the Chairman, if any, or President to appoint
such other officers or agents with such other titles and powers as the
Trustees may deem to be advisable. A Chairman shall, and the President,
Secretary and Treasurer may, but need not, be a Trustee.
ARTICLE III
Powers and Duties of Trustees
3.1 General. The Trustees shall owe to the Trust and its
Shareholders the same fiduciary duties as owed by directors of corporations
to such corporations and their stockholders under the general corporation
law of the State of Delaware. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust
Property and business in their own right, but with such powers of
delegation as may be permitted by this Declaration. The Trustees shall
have power to engage in any activity not prohibited by Delaware law. The
enumeration of any specific power herein shall not be construed as limiting
the aforesaid power. The Trustees may perform such acts as in their sole
discretion are proper for conducting the business of the Trust. The powers
of the Trustees may be exercised without order of or resort to any court.
No Trustee shall, be obligated to give any bond or other security for the
performance of any of his duties or powers hereunder.
3.2 Investments. The Trustees shall have power to:
(a) manage, conduct, operate and carry on the business of
an investment company;
(b) subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange,
distribute or otherwise deal in or dispose of any and all sorts of
property, tangible or intangible, including but not limited to securities
of any type whatsoever, whether equity or non-equity, of any issuer,
evidences of indebtedness of any person and any other rights, interests,
instruments or property of any sort and to exercise any and all rights,
powers and privileges of ownership or interest in respect of any and all
such investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto,
with power to designate one or more Persons to exercise any of said rights,
powers and privileges in respect of any of said investments. The Trustees
shall not be limited by any law limiting the investments which may be made
by fiduciaries.
3.3 Legal Title. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the
name of one or more of the Trustees, or in the name of the Trust, or in the
name of any other Person as nominee, custodian or pledgee, on such terms as
the Trustees may determine, provided that the interest of the Trust therein
is appropriately protected.
The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter become a
Trustee upon his due election and qualification. Upon the ceasing of any
person to be a Trustee for any reason, such person shall automatically
cease to have any right, title or interest in any of the Trust Property,
and the right, title and interest of such Trustee in the Trust Property
shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents
have been executed and delivered.
3.4 Issuance and Repurchase of Shares. Subject to the
provisions of this Declaration and applicable law, the Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in, Shares,
including Shares in fractional denominations, and to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares
any funds or property whether capital or surplus or otherwise, to the full
extent now or hereafter permitted by the laws of the State of Delaware
governing business corporations.
3.5 Borrow Money or Utilize Leverage. The Trustees shall have
the power to borrow money or otherwise obtain credit or utilize leverage in
connection with the activities of the Trust to the maximum extent permitted
by law regulation or order and to secure the same by mortgaging, pledging
or otherwise subjecting as security the assets of the Trust, including the
lending of portfolio securities, and to endorse, guarantee, or undertake
the performance of any obligation, contract or engagement of any other
person, firm, association or corporation.
3.6 Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property or the Trust, the Trustees or any officer,
employee or agent of the Trust; to prosecute, defend, compromise or abandon
any claims relating to the Trust Property or the Trust, or the Trustees or
any officer, employee or agent of the Trust; to foreclose any security
interest securing any obligations, by virtue of which any property is owed
to the Trust; and to enter into releases, agreements and other instruments.
Except to the extent required for a Delaware business corporation, the
Shareholders shall have no power to vote as to whether or not a court
action, legal proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders.
3.7 Expenses. The Trustees shall have power to incur and pay
out of the assets or income of the Trust any expenses which in the opinion
of the Trustees are necessary or appropriate to carry out any of the
purposes of this Declaration, and the business of the Trust, and to pay
reasonable compensation from the funds of the Trust to themselves as
Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees. The Trustees may pay themselves such compensation
for special services, including legal, underwriting, syndicating and
brokerage services, as they in good faith may deem reasonable and
reimbursement for expenses reasonably incurred by themselves on behalf of
the Trust. The Trustees shall have the power, as frequently as they may
determine, to cause each Shareholder to pay directly, in advance or
arrears, for charges of distribution, of the custodian or transfer,
shareholder servicing or similar agent, a pro rata amount as defined from
time to time by the Trustees, by setting off such charges due from such
Shareholder from declared but unpaid dividends or distributions owed such
Shareholder and/or by reducing the number of shares in the account of such
Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such charges due from such
Shareholder.
3.8 By-Laws. The Trustees may adopt and from time to time amend
or repeal By-Laws for the conduct of the business of the Trust. Such By-
Laws shall be binding on the Trust and the Shareholders unless inconsistent
with the provisions of this Declaration.
3.9 Miscellaneous Powers. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust, including investment
advisors, administrators, custodians, transfer agents, shareholder services
providers, accountants, counsel, brokers, dealers and others; (b) enter
into joint ventures, partnerships and any other combinations or
associations; (c) purchase, and pay for out of Trust Property, insurance
policies insuring the Shareholders, Trustees, officers, employees, agents,
investment advisors, distributors, selected dealers or independent
contractors of the Trust against all claims arising by reason of holding
any such position or by reason of any action taken or omitted by any such
Person in such capacity, whether or not constituting negligence, or whether
or not the Trust would have the power to indemnify such Person against such
liability; (d) establish pension, profit-sharing, share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers,
employees and agents of the Trust; (e) make donations, irrespective of
benefit to the Trust, for charitable, religious, educational, scientific,
civic or similar purposes; (f) to the extent permitted by applicable law,
indemnify any Person with whom the Trust has dealings, including without
limitation any investment adviser, administrator, manager, transfer agent,
custodian, distributor or selected dealer, or any other person as the
Trustees may see fit to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine
and change the fiscal year of the Trust and the method in which its
accounts shall be kept; and (i) adopt a seal for the Trust but the absence
of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
3.10 Delegation; Committees. The Trustees shall have the power,
consistent with their continuing exclusive authority over the management of
the Trust and the Trust Property, to delegate from time to time to such of
their number or to officers, employees or agents of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Trustees or otherwise as the Trustees may deem
expedient, to at least the same extent as such delegation is permitted to
directors of a Delaware business corporation and is permitted by the 1940
Act, as well as any further delegations the Trustees may determine to be
desirable, expedient or necessary in order to effect the purpose hereof.
The Trustees may designate one or more committees each of which shall have
all or such lesser portion of the power and authority of the entire Board
of Trustees as the Trustees shall determine from time to time, except to
the extent action by the entire Board of Trustees or particular Trustees is
required by the 1940 Act.
3.11 Further Powers. The Trustees shall have the power to
conduct the business of the Trust and carry on its operations in any and
all of its branches and maintain offices both within and without the State
of Delaware, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities of the
United States of America and of foreign governments, and to do all such
other things and execute all such instruments as they deem necessary,
proper or desirable in order to promote the interests of the Trust although
such things are not herein specifically mentioned. Any determination as to
what is in the interests of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the Trustees.
ARTICLE IV
Limitations of Liability
and Indemnification
4.1 No Personal Liability of Shareholders, Trustees, etc. No
Shareholder of the Trust shall be subject in such capacity to any personal
liability whatsoever to any Person in connection with Trust Property or the
acts, obligations or affairs of the Trust. Shareholders shall have the
same limitation of personal liability as is extended to stockholders of a
private corporation for profit incorporated under the general corporation
law of the State of Delaware. No Trustee or officer of the Trust shall be
subject in such capacity to any personal liability whatsoever to any
Person, other than the Trust or its Shareholders, in connection with Trust
Property or the affairs of the Trust, save only liability to the Trust or
its Shareholders arising from bad faith, willful misfeasance, gross
negligence or reckless disregard for his duty to such Person; and, subject
to the foregoing exception, all such Persons shall look solely to the Trust
Property for satisfaction of claims of any nature arising in connection
with the affairs of the Trust. If any Shareholder, Trustee or officer, as
such, of the Trust, is made a party to any suit or proceeding to enforce
any such liability, subject to the foregoing exception, he shall not, on
account thereof, be held to any personal liability.
4.2 Mandatory Indemnification. (a) The Trust shall indemnify
the Trustees and officers of the Trust (each such person being an
"indemnitee") against any liabilities and expenses, including amounts paid
in satisfaction of judgments, in compromise or as fines and penalties, and
reasonable counsel fees reasonably incurred by such indemnitee in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative
or investigative body in which he may be or may have been involved as a
party or otherwise (other than, except as authorized by the Trustees, as
the plaintiff or complainant) or with which he may be or may have been
threatened, while acting in any capacity set forth above in this Section
4.2 by reason of his having acted in any such capacity, except with respect
to any matter as to which he shall not have acted in good faith in the
reasonable belief that his action was in the best interest of the Trust or,
in the case of any criminal proceeding, as to which he shall have had
reasonable cause to believe that the conduct was unlawful, provided,
however, that no indemnitee shall be indemnified hereunder against any
liability to any person or any expense of such indemnitee arising by reason
of (i) willful misfeasance, (ii) bad faith, (iii) gross negligence
(negligence in the case of Affiliated Indemnitees), or (iv) reckless
disregard of the duties involved in the conduct of his position (the
conduct referred to in such clauses (i) through (iv) being sometimes
referred to herein as "disabling conduct"). Notwithstanding the foregoing,
with respect to any action, suit or other proceeding voluntarily prosecuted
by any indemnitee as plaintiff, indemnification shall be mandatory only if
the prosecution of such action, suit or other proceeding by such indemnitee
was authorized by a majority of the Trustees.
(b) Notwithstanding the foregoing, no indemnification shall
be made hereunder unless there has been a determination (1) by a final
decision on the merits by a court or other body of competent jurisdiction
before whom the issue of entitlement to indemnification hereunder was
brought that such indemnitee is entitled to indemnification hereunder or,
(2) in the absence of such a decision, by (i) a majority vote of a quorum
of those Trustees who are neither Interested Persons of the Trust nor
parties to the proceeding ("Disinterested Non-Party Trustees"), that the
indemnitee is entitled to indemnification hereunder, or (ii) if such quorum
is not obtainable or even if obtainable, if such majority so directs,
independent legal counsel in a written opinion conclude that the indemnitee
should be entitled to indemnification hereunder. All determinations to
make advance payments in connection with the expense of defending any
proceeding shall be authorized and made in accordance with the immediately
succeeding paragraph (c) below.
(c) The Trust shall make advance payments in connection
with the expenses of defending any action with respect to which
indemnification might be sought hereunder if the Trust receives a written
affirmation by the indemnitee of the indemnitee's good faith belief that
the standards of conduct necessary for indemnification have been met and a
written undertaking to reimburse the Trust unless it is subsequently
determined that he is entitled to such indemnification and if a majority of
the Trustees determine that the applicable standards of conduct necessary
for indemnification appear to have been met. In addition, at least one of
the following conditions must be met: (1) the indemnitee shall provide
adequate security for his undertaking, (2) the Trust shall be insured
against losses arising by reason of any lawful advances, or (3) a majority
of a quorum of the Disinterested Non-Party Trustees, or if a majority vote
of such quorum so direct, independent legal counsel in a written opinion,
shall conclude, based on a review of readily available facts (as opposed to
a full trial-type inquiry), that there is substantial reason to believe
that the indemnitee ultimately will be found entitled to indemnification.
(d) The rights accruing to any indemnitee under these
provisions shall not exclude any other right to which he may be lawfully
entitled.
(e) Notwithstanding the foregoing, subject to any
limitations provided by the 1940 Act and this Declaration, the Trust shall
have the power and authority to indemnify Persons providing services to the
Trust to the full extent provided by law as if the Trust were a corporation
organized under the Delaware General Corporation Law provided that such
indemnification has been approved by a majority of the Trustees.
4.3 No Duty of Investigation; Notice in Trust Instruments, etc.
No purchaser, lender, transfer agent or other person dealing with the
Trustees or with any officer, employee or agent of the Trust shall be bound
to make any inquiry concerning the validity of any transaction purporting
to be made by the Trustees or by said officer, employee or agent or be
liable for the application of money or property paid, loaned, or delivered
to or on the order of the Trustees or of said officer, employee or agent.
Every obligation, contract, undertaking, instrument, certificate, Share,
other security of the Trust, and every other act or thing whatsoever
executed in connection with the Trust shall be conclusively taken to have
been executed or done by the executors thereof only in their capacity as
Trustees under this Declaration or in their capacity as officers, employees
or agents of the Trust. The Trustees may maintain insurance for the
protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to
cover possible liability, and such other insurance as the Trustees in their
sole judgment shall deem advisable or is required by the 1940 Act.
4.4 Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of its duties, be fully and
completely justified and protected with regard to any act or any failure to
act resulting from reliance in good faith upon the books of account or
other records of the Trust, upon an opinion of counsel, or upon reports
made to the Trust by any of the Trust's officers or employees or by any
advisor, administrator, manager, distributor, selected dealer, accountant,
appraiser or other expert or consultant selected with reasonable care by
the Trustees, officers or employees of the Trust, regardless of whether
such counsel or other person may also be a Trustee.
ARTICLE V
Shares of Beneficial Interest
5.1 Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into an unlimited number of shares of beneficial
interest, par value $.001 per share. All Shares issued in accordance with
the terms hereof, including, without limitation, Shares issued in
connection with a dividend in Shares or a split of Shares, shall be fully
paid and nonassessable when the consideration determined by the Trustees
(if any) therefor shall have been received by the Trust.
5.2 Classes and Series . The Trustees shall have the authority,
without the approval of the holders of any Shares of the Trust, to classify
and reclassify issued and unissued Shares into one or more classes and one
or more series of any or all of such classes, each of which classes and
series thereof shall have such designations, powers, preferences, voting,
conversion and other rights, limitations, qualifications and terms and
conditions as the Trustees shall determine from time to time with respect
to each such class or series; provided, however, that no reclassification
of any issued and outstanding Shares and no modifications of any of the
designations, powers, preferences, voting, conversion or other rights,
limitations, qualifications and terms and conditions of any issued and
outstanding Shares may be made by the Trustees without the affirmative vote
of the holders of Shares specified in Section 7.3(a). The initial class of
Shares of the Trust shall be designated as "Common Shares", subject to
redesignation as aforesaid. To the extent expressly determined by the
Trustees as aforesaid, all consideration received by the Trust for the
issue or sale of Shares of a class, together with all income, earnings,
profits and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to such class subject only to the rights of the
creditors, and all liabilities allocable to such class shall be charged
thereto.
5.3 Issuance of Shares. The Trustees, in their discretion, may
from time to time without vote of the Shareholders issue Shares of any
class or any series of any such class to such party or parties and for such
amount and type of consideration, including cash or property, at such time
or times, and on such terms as the Trustees may determine, and may in such
manner acquire other assets (including the acquisition of assets subject
to, and in connection with the assumption of, liabilities) and businesses.
The Trustees may from time to time divide or combine the Shares of any
class or any series of any such class into a greater or lesser number
without thereby changing the proportionate beneficial interest in such
Shares. Issuances and repurchases of Shares may be made in whole Shares
and/or l/l,000ths of a Share or multiples thereof as the Trustees may
determine.
5.4 Rights of Shareholders. The Shares shall be personal
property giving only the rights in this Declaration specifically set forth.
The ownership of the Trust Property of every description and the right to
conduct any business herein before described are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein other than
the beneficial interest conferred by their Shares, and they shall have no
right to call for any partition or division of any property, profits,
rights or interests of the Trust nor can they be called upon to share or
assume any losses of the Trust or, subject to the right of the Trustees to
charge certain expenses directly to Shareholders, as provided in the last
sentence of Section 3.7, suffer an assessment of any kind by virtue of
their ownership of Shares. The Shares shall not entitle the holder to
preference, preemptive, appraisal, conversion or exchange rights (except as
specified in this Section 5.4, in Section 7.4 or as specified by the
Trustees in the designation or redesignation of any class or series thereof
of the Shares).
5.5 Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and
each Shareholder from time to time. It is not the intention of the
Trustees to create a general partnership, limited partnership, joint stock
association, corporation, bailment or any form of legal relationship other
than a trust. Nothing in this Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or
members of a joint stock association.
5.6 Register of Shares. A register shall be kept at the Trust
or any transfer agent duly appointed by the Trustees under the direction of
the Trustees which shall contain the names and addresses of the
Shareholders and the number of Shares held by them respectively and a
record of all transfers thereof. Separate registers shall be established
and maintained for each class and each series of each class. Each such
register shall be conclusive as to who are the holders of the Shares of the
applicable class and series and who shall be entitled to receive dividends
or distributions or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him as herein
provided, until he has given his address to a transfer agent or such other
officer or agent of the Trustees as shall keep the register for entry
thereon. It is not contemplated that certificates will be issued for the
Shares; however, the Trustees, in their discretion, may authorize the
issuance of share certificates and promulgate appropriate fees therefore
and rules and regulations as to their use.
5.7 Transfer Agent and Registrar. The Trustees shall have power
to employ a transfer agent or transfer agents, and a registrar or
registrars, with respect to the Shares. The transfer agent or transfer
agents may keep the applicable register and record therein, the original
issues and transfers, if any, of the said Shares. Any such transfer agent
and registrars shall perform the duties usually performed by transfer
agents and registrars of stock in a corporation, as modified by the
Trustees.
5.8 Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by its agent
thereto duly authorized in writing, upon delivery to the Trustees or a
transfer agent of the Trust of a duly executed instrument of transfer,
together with such evidence of the genuineness of each such execution and
authorization and of other matters as may reasonably be required. Upon
such delivery the transfer shall be recorded on the applicable register of
the Trust. Until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereof and neither
the Trustees nor any transfer agent or registrar nor any officer, employee
or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, shall be recorded on the applicable register of Shares as
the holder of such Shares upon production of the proper evidence thereof to
the Trustees or a transfer agent of the Trust, but until such record is
made, the Shareholder of record shall be deemed to be the holder of such
for all purposes hereof, and neither the Trustees nor any transfer agent or
registrar nor any officer or agent of the Trust shall be affected by any
notice of such death, bankruptcy or incompetence, or other operation of
law.
5.9 Notices. Any and all notices to which any Shareholder
hereunder may be entitled and any and all communications to any Shareholder
shall be deemed duly served or given if mailed, postage prepaid, addressed
to any Shareholder of record at his last known address as recorded on the
applicable register of the Trust and may be sent together with any such
notice or other communication to another Shareholder at the same address.
5.10 Net Asset Value. The value of the assets of the Trust, the
amount of liabilities of the Trust and the net asset value of each
outstanding Share of Common Shares of the Trust shall be determined at such
time or times on such days as the Trustees may determine, in accordance
with the 1940 Act. The method of determination of net asset value shall be
determined by the Trustees. The power and duty to make net asset value
determinations and calculations may be delegated by the Trustees.
5.11 Distributions to Shareholders.
(a) The Trustees shall from time to time distribute among
the Shares such proportion of the net profits, surplus (including paid-in
surplus), capital, or assets held by the Trustees as they may deem proper
or as may otherwise be determined in the instrument setting forth the terms
of such Shares such class or series of Shares, which need not be ratable
with respect to distributions in respect of Shares of any other class or
series thereof of the Trust. Such distributions may be made in cash or
property (including without limitation any type of obligations of the Trust
or any assets thereof) or any combination thereof.
(b) Distributions may be made to the Shareholders entitled
to such distribution of record at the time such distribution is declared or
at such later date as shall be determined by the Trust prior to the date of
payment.
(c) The Trustees may always retain from any source such
amount as they may deem necessary to pay the debts or expenses of the Trust
or to meet obligations of the Trust, or as they otherwise may deem
desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business of the Trust.
ARTICLE VI
Shareholders
6.1 Meetings of Shareholders. The Trust may, but shall not be
required to, hold annual meetings of the holders of any class or series of
Shares. An annual or special meeting of Shareholders may be called at any
time only by the Trustees; provided, however, that if May 31 of any year
shall have passed and the Trustees shall not have called an annual meeting
of Shareholders for such year, the Trustees shall call a meeting for the
purpose of voting on the removal of one or more Trustees or the termination
of any investment advisory agreement, upon written request of holders of
Shares of the Trust having in the aggregate not less than a majority of the
votes of the outstanding Shares of the Trust entitled to vote on the matter
or matters in question, such request specifying the purpose or purposes for
which such meeting is to be called. Any meeting of Shareholders shall be
held within or without the State of Delaware on such day and at such time
as the Trustees shall designate.
6.2 Voting. Shareholders shall have no power to vote on any
matter except matters on which a vote of Shares is required by applicable
law, this Declaration or resolution of the Trustees. Any matter required
to be submitted for approval of any of the Shares and affecting one or more
classes or series shall require approval by the required vote of Shares of
the affected class or classes and series voting together as a single class
and, if such matter affects one or more classes or series thereof
differently from one or more other classes or series thereof or from one or
more series of the same class, approval by the required vote of Shares of
such other class or classes or series or series voting as a separate class
shall be required in order to be approved with respect to such other class
or classes or series or series; provided, however, that except to the
extent required by the 1940 Act, there shall be no separate class votes on
the election or removal of Trustees or the selection of auditors for the
Trust. Shareholders of a particular class or series thereof shall not be
entitled to vote on any matter that affects the rights or interests of only
one or more other classes or series of such other class or classes or only
one or more other series of the same class. There shall be no cumulative
voting in the election or removal of Trustees.
6.3 Notice of Meeting, Shareholder Proposals and Record Date.
Notice of all meetings of Shareholders, stating the time, place and
purposes of the meeting, shall be given by the Trustees by mail to each
Shareholder of record entitled to vote thereat at its registered address,
mailed at least 10 days before the meeting or otherwise in compliance with
applicable law. Except with respect to an annual meeting, at which any
business required by the 1940 Act may be conducted, only the business
stated in the notice of the meeting shall be considered at such meeting.
Subject to the provisions of applicable law, any Shareholder wishing to
include a proposal to be considered at an annual meeting must submit such
proposal to the Trust at least 30 days in advance of such meeting. Any
adjourned meeting may be held as adjourned one or more times without
further notice not later than 130 days after the record date. For the
purposes of determining the Shareholders who are entitled to notice of and
to vote at any meeting the Trustees may, without closing the transfer
books, fix a date not more than 100 days prior to the date of such meeting
of Shareholders as a record date for the determination of the Persons to be
treated as Shareholders of record for such purposes.
6.4 Quorum and Required Vote.
(a) The holders of one-third of the outstanding Shares of
the Trust on the record date present in person or by proxy shall constitute
a quorum at any meeting of the Shareholders for purposes of conducting
business on which a vote of all Shareholders of the Trust is being taken.
The holders of one-third of the outstanding Shares of a class or classes on
the record date present in person or by proxy shall constitute a quorum at
any meeting of the Shareholders of such class or classes for purposes of
conducting business on which a vote of Shareholders of such class or
classes is being taken. The holders of one-third of the outstanding Shares
of a series or series on the record date present in person or by proxy
shall constitute a quorum at any meeting of the Shareholders of such series
or series for purposes of conducting business on which a vote of
Shareholders of such series or series is being taken. Shares underlying a
proxy as to which a broker or other intermediary states its absence of
authority to vote with respect to one or more matters shall be treated as
present for purposes of establishing a quorum for taking action on any such
matter only to the extent so determined by the Trustees at or prior to the
meeting of Shareholders at which such matter is to be considered.
(b) Subject to any provision of applicable law, this
Declaration or resolution of the Trustees specifying or requiring a greater
or lesser vote requirement for the transaction of any matter of business at
any meeting of Shareholders, (i) the affirmative vote of a plurality of the
Shares entitled to vote for the election of any Trustee or Trustees shall
be the act of such Shareholders with respect to the election of such
Trustee or Trustees, (ii) the affirmative vote of a majority of the Shares
present in person or represented by proxy and entitled to vote on any other
matter shall be the act of the Shareholders with respect to such matter,
and (iii) where a separate vote of one or more classes or series is
required on any matter, the affirmative vote of a majority of the Shares of
such class or classes or series or series present in person or represented
by proxy at the meeting shall be the act of the Shareholders of such class
or classes or series or series with respect to such matter.
6.5 Proxies, etc. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file with
the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote
shall be taken. Pursuant to a resolution of a majority of the Trustees,
proxies may be solicited in the name of one or more Trustees or one or more
of the officers or employees of the Trust. Only Shareholders of record
shall be entitled to vote. Each full Share shall be entitled to one vote
and each fractional Share shall be entitled to a vote equal to its fraction
of a full Share. When any Share is held jointly by several persons, any
one of them may vote at any meeting in person or by proxy in respect of
such Share, but if more than one of them shall be present at such meeting
in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in
respect of such Share. A proxy purporting to be given by or on behalf of a
Shareholder of record on the record date for a meeting shall be deemed
valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. If the holder of any such
Share is a minor or a person of unsound mind, and subject to guardianship
or to the legal control of any other person as regards the charge or
management of such Share, he may vote by his guardian or such other person
appointed or having such control, and such vote may be given in person or
by proxy. The Trustees shall have the authority to make and modify from
time to time regulations regarding the validity of proxies. In addition to
signed proxies, such regulations may authorize facsimile, telephonic,
Internet and other methods of appointing a proxy that are subject to such
supervision by or under the direction of the Trustees as the Trustees shall
determine.
6.6 Reports. The Trustees shall cause to be prepared and sent
to Shareholders at least annually and more frequently to the extent and in
the form required by law, regulation or any exchange on which Trust Shares
are listed a report of operations containing financial statements of the
Trust prepared in conformity with generally accepted accounting principles
and applicable law.
6.7 Inspection of Records. The records of the Trust shall be
open to inspection by Persons who have been holders of record of at least
$25,000 in net asset value or liquidation preference of Shares for a
continuous period of not less than six months to the same extent and for
the same purposes as is permitted under the Delaware General Business
Corporation Law to shareholders of a Delaware business corporation.
6.8 Shareholder Action by Written Consent. Any action which may
be taken by Shareholders by vote may be taken without a meeting if the
holders of all of the Shares entitled to vote thereon consent to the action
in writing and the written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes
as a vote taken at a meeting of Shareholders.
ARTICLE VII
Duration: Termination of Trust;
Amendment; Mergers, Etc.
7.1 Duration. Subject to termination in accordance with the
provisions of Section 7.2 hereof, the Trust created hereby shall have
perpetual existence.
7.2 Termination.
(a) The Trust may be dissolved, after two thirds of the
Trustees have approved a resolution therefor, upon approval by Shares
having at least 75% of the votes of all of the Shares outstanding on the
record date for such meeting, voting as a single class except to the extent
required by the 1940 Act. Upon the dissolution of the Trust:
(i) The Trust shall carry on no business except
for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the
affairs of the Trust and all of the powers of the Trustees under
this Declaration shall continue until the affairs of the Trust
shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust, collect its assets, sell,
convey, assign, exchange, merger where the Trust is not the
survivor, transfer or otherwise dispose of all or any part of the
remaining Trust Property to one or more Persons at public or
private sale for consideration which may consist in whole or in
part in cash, securities or other property of any kind, discharge
or pay its liabilities, and do all other acts appropriate to
liquidate its business; provided that any sale, conveyance,
assignment, exchange, merger in which the Trust is not the
survivor, transfer or other disposition of all or substantially
all the Trust Property of the Trust shall require approval of the
principal terms of the transaction and the nature and amount of
the consideration with the same vote as required for dissolution
pursuant to paragraph (a) above.
(iii) After paying or adequately providing for
the payment of all liabilities, and upon receipt of such
releases, indemnities and refunding agreements, as they deem
necessary for their protection, the Trustees may distribute the
remaining Trust Property, in cash or in kind or partly each,
among the Shareholders according to their respective rights.
(b) After the winding up and termination of the Trust and
distribution to the Shareholders as herein provided, a majority of the
Trustees shall execute and lodge among the records of the Trust an
instrument in writing setting forth the fact of such termination and shall
execute and file a certificate of cancellation with the Secretary of State
of the State of Delaware. Upon termination of the Trust, the Trustees
shall thereupon be discharged from all further liabilities and duties
hereunder, and the rights and interests of all Shareholders shall thereupon
cease.
7.3 Amendment Procedure.
(a) Other than Sections 2.2, 2.3, 6.1, 6.8, 7.2, 7.3, 7.4,
7.5 and 7.6 and other than as set forth in the last sentence of this
Section 7.3(a), this Declaration may be amended, after a majority of the
Trustees have approved a resolution therefor, by the affirmative vote of
the holders of not less than a majority of the affected Shares outstanding
on the record date and present and voting on such amendment. Sections 2.2,
2.3, 6.1, 7.2, 7.3, 7.4, 7.5 and 7.6 may be amended, after a majority of
the Trustees have approved a resolution therefor by the affirmative vote of
the holders of not less than 75% of the affected Shares outstanding on the
record date. The Trustees also may amend this Declaration without any vote
of Shareholders for any of the purposes set forth in Section 6.2, to change
the name of the Trust or any class or series, to make any change that does
not adversely affect the relative rights or preferences of any class or
series of Shares or to conform this Declaration to the requirements of the
1940 Act or any other applicable law, but the Trustees shall not be liable
for failing to do so.
(b) Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of
the Trust or to permit assessments upon Shareholders.
(c) An amendment duly adopted by the requisite vote of the
Board of Trustees and, if required, Shareholders as aforesaid, shall become
effective at the time of such adoption or at such other time as may be
designated by the Board of Trustees or Shareholders, as the case may be. A
certification signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Trustees and, if
required, Shareholders as aforesaid, or a copy of the Declaration, as
amended, and executed by a majority of the Trustees, shall be conclusive
evidence of such amendment when lodged among the records of the Trust or at
such other time designated by the Board.
Notwithstanding any other provision hereof, until such time as
Shares are issued and outstanding, this Declaration may be terminated or
amended in any respect by the affirmative vote of a majority of the
Trustees or by an instrument signed by a majority of the Trustees.
7.4 Merger, Consolidation and Sale of Assets. Subject to
Section 7.6, the Trust may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all
or substantially all of the Trust Property or the property, including its
good will, upon such terms and conditions and for such consideration when
and as authorized by two-thirds of the Trustees and approved by the
affirmative vote of the holders of not less than 75% of the affected Shares
outstanding on the record date for the meeting of Shareholders to approve
such transaction, and any such merger, consolidation, sale, lease or
exchange shall be determined for all purposes to have been accomplished
under and pursuant to the statutes of the State of Delaware.
7.5 Redemption; Conversion. No holder of Shares of any class or
series, other than in accordance with the provisions of Section 23(c) of
the 1940 Act and other than to the extent expressly determined by the
Trustees with respect to Shares qualifying as preferred stock pursuant to
Section 18(a) of the 1940 Act, shall have any right to require the Trust or
any person controlled by the Trust to purchase any of such holder's Shares.
The Trust may be converted at any time from a "closed-end company" to an
"open-end company" as those terms are defined by the 1940 Act, upon the
approval of such a proposal, together with the necessary amendments to this
Declaration to permit such a conversion, by a majority of the Trustees then
in office, by the holders of not less than 75% of the Trust's outstanding
Shares entitled to vote thereon and by such vote or votes of the holders of
any class or classes or series of Shares as may be required by the 1940
Act. From time to time, the Trustees may consider recommending to the
Shareholders a proposal to convert the Trust from a "closed-end company" to
an "open-end company." Upon the recommendation and subsequent adoption of
such a proposal and the necessary amendments to this Declaration to permit
such a conversion of the Trust's outstanding Shares entitled to vote, the
Trust shall, upon complying with any requirements of the 1940 Act and state
law, become an "open-end" investment company.
7.6 Certain Transactions. (a) Notwithstanding any other
provision of this Declaration and subject to the exceptions provided in
paragraph (d) of this Section, the types of transactions described in
paragraph (c) of this Section shall require the affirmative vote or consent
of the holders of eighty percent (80%) of the Shares of each class
outstanding and entitled to vote, voting as a class, when a Principal
Shareholder (as defined in paragraph (b) of this Section) is a party to the
transaction. Such affirmative vote or consent shall be in addition to the
vote or consent of the holders of Shares otherwise required by law or by
the terms of any class or series of preferred stock, whether now or
hereafter authorized, or any agreement between the Trust and any national
securities exchange.
(b) The term "Principal Shareholder" shall mean any Person which is
the beneficial owner, directly or indirectly, of five percent (5%) or more
of the outstanding Shares and shall include any affiliate or associate, as
such terms are defined in clause (ii) below, of such Person. For the
purposes of this Section, in addition to the Shares which a Person
beneficially owns directly, (a) any Person shall be deemed to be the
beneficial owner of any Shares (i) which it has the right to acquire
pursuant to any agreement or upon exercise of conversion rights or
warrants, or otherwise (but excluding share options granted by the Trust)
or (ii) which are beneficially owned, directly or indirectly (including
Shares deemed owned through application of clause (i) above), by any other
Person with which its "affiliate" or "associate" (as defined below) has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of Shares, or which is its "affiliate" or
"associate" as those terms are defined in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934 as in effect on
the date of initial adoption of this Declaration, and (b) the outstanding
Shares shall include Shares deemed owned through application of clauses (i)
and (ii) above but shall not include any other Shares which may be issuable
pursuant to any agreement, or upon exercise of conversion rights or
warrants, or otherwise.
(c) This Section shall apply to the following transactions:
(i) The merger or consolidation of the Trust or any subsidiary
of the Trust with or into any Principal Shareholder.
(ii) The issuance of any securities of the Trust to any
Principal Shareholder for cash (other than pursuant to any automatic
dividend reinvestment plan or any offering in which such Principal
Shareholder acquires securities that do not increase the percentage of any
class of Shares beneficially owned by such Principal Shareholder).
(iii) The sale, lease or exchange of all or any substantial part
of the assets of the Trust to any Principal Shareholder (except assets
having an aggregate fair market value of less than $1,000,000, aggregating
for the purpose of such computation all assets sold, leased or exchanged in
any series of similar transactions within a twelve-month period.)
(iv) The sale, lease or exchange to the Trust or any subsidiary
thereof, in exchange for securities of the Trust of any assets of any
Principal Shareholder (except assets having an aggregate fair market value
of less than $1,000,000, aggregating for the purposes of such computation
all assets sold, leased or exchanged in any series of similar transactions
within a twelve-month period).
(v) The purchase by the Trust or any Person controlled by the
Trust of any Common Shares of the Trust from such Principal Shareholder or
any person to whom such Principal Shareholder shall have transferred such
Common Shares.
(d) The provisions of this Section shall not be applicable to (i) any
of the transactions described in paragraph (c) of this Section if two-
thirds of the Board of Trustees of the Trust shall by resolution have
approved a memorandum of understanding with such Principal Shareholder with
respect to and substantially consistent with such transaction prior to the
time such Person shall have become a Principal Shareholder, or (ii) any
such transaction with any corporation of which a majority of the
outstanding shares of all classes of a stock normally entitled to vote in
elections of directors is owned of record or beneficially by the Trust and
its subsidiaries and of which such Person is not a Principal Shareholder.
(e) The Board of Trustees shall have the power and duty to determine
for the purposes of this Section on the basis of information known to the
Trust whether (i) a Person beneficially owns five percent (5%) or more of
the outstanding Shares, (ii) a Person is an "affiliate" or "associate" (as
defined above) of another, (iii) the assets being acquired or leased to or
by the Trust or any subsidiary thereof constitute a substantial part of the
assets of the Trust and have an aggregate fair market value of less than
$1,000,000, and (iv) the memorandum of understanding referred to in
paragraph (d) hereof is substantially consistent with the transaction
covered thereby. Any such determination shall be conclusive and binding
for all purposes of this Section.
ARTICLE VIII
Miscellaneous
8.1 Filing. This Declaration and any amendment (including any
supplement) hereto shall be filed in such places as may be required or as
the Trustees deem appropriate. Each amendment shall be accompanied by a
certificate signed and acknowledged by a Trustee stating that such action
was duly taken in a manner provided herein, and shall, upon insertion in
the Trust's minute book, be conclusive evidence of all amendments contained
therein. A restated Declaration, containing the original Declaration and
all amendments theretofore made, may be executed from time to time by a
majority of the Trustees and shall, upon insertion in the Trust's minute
book, be conclusive evidence of all amendments contained therein and may
thereafter be referred to in lieu of the original Declaration and the
various amendments thereto.
8.2 Resident Agent. The Trust shall maintain a resident agent
in the State of Delaware, which agent shall initially be The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801 The Trustees
may designate a successor resident agent, provided, however, that such
appointment shall not become effective until written notice thereof is
delivered to the office of the Secretary of the State.
8.3 Governing Law. This Declaration is executed by a majority
of the Trustees and delivered in the State of Delaware and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said State and reference shall be specifically
made to the business corporation law of the State of Delaware as to the
construction of matters not specifically covered herein or as to which an
ambiguity exists, although such law shall not be viewed as limiting the
powers otherwise granted to the Trustees hereunder and any ambiguity shall
be viewed in favor of such powers.
8.4 Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the
same instrument, which shall be sufficiently evidenced by any such original
counterpart.
8.5 Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the name of the Trust, (c) the due authorization of the
execution of any instrument or writing, (d) the form of any vote passed at
a meeting of Trustees or Shareholders, (e) the fact that the number of
Trustees or Shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration, (f) the form of
any By Laws adopted by or the identity of any officers elected by the
Trustees, or (g) the existence of any fact or facts which in any manner
relate to the affairs of the Trust, shall be conclusive evidence as to the
matters so certified in favor of any person dealing with the Trustees and
their successors.
8.6 Provisions in Conflict with Law or Regulation.
(a) The provisions of this Declaration are severable, and
if the Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, the regulated investment
company provisions of the Internal Revenue Code or with other applicable
laws and regulations, the conflicting provision shall be deemed never to
have constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior
to such determination.
(b) If any provision of this Declaration shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction
and shall not in any manner affect such provision in any other jurisdiction
or any other provision of this Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned has caused these presents to
be executed as of the day and year first above written.
By: /s/ Bruce N. Alpert
--------------------------
Bruce N. Alpert
EXHIBIT (2)
BY-LAWS
OF
THE GABELLI UTILITY FUND
TABLE OF CONTENTS
Page
ARTICLE I
Shareholder Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Proxies; Voting . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Fixing Record Dates . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Inspectors of Election . . . . . . . . . . . . . . . . . . . . 1
1.5 Records at Shareholder Meetings . . . . . . . . . . . . . . . . 2
ARTICLE II
Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Annual and Regular Meetings . . . . . . . . . . . . . . . . . . 2
2.2 Chairman; Records . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Officers of the Trust . . . . . . . . . . . . . . . . . . . . . 3
3.2 Election and Tenure . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Removal of Officers . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Bonds and Surety . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Chairman, President, and Vice Presidents . . . . . . . . . . . 4
3.6 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Other Officers and Duties . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Depositories . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V
Stock Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Transfer Agents, Registrars and the Like . . . . . . . . . . . 6
5.2 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . 6
5.3 Registered Shareholders . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI
Amendment of By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Amendment and Repeal of By-Laws . . . . . . . . . . . . . . . . 7
THE GABELLI UTILITY FUND
BY-LAWS
These By-Laws are made and adopted pursuant to Section 3.9 of the
Declaration of Trust establishing The Gabelli Utility Fund dated as of
March 29, 1999, as from time to time amended (hereinafter called the
"Declaration"). All words and terms capitalized in these By-Laws shall
have the meaning or meanings set forth for such words or terms in the
Declaration.
ARTICLE I
Shareholder Meetings
1.1 Chairman. The Chairman, if any, shall act as chairman at
all meetings of the Shareholders; in the Chairman's absence, the Trustee or
Trustees present at each meeting may elect a temporary chairman for the
meeting, who may be one of themselves.
1.2 Proxies; Voting. Shareholders may vote either in person or
by duly executed proxy and each full share represented at the meeting shall
have one vote, all as provided in Article 10 of the Declaration.
1.3 Fixing Record Dates. For the purpose of determining the
Shareholders who are entitled to notice of or to vote or act at any
meeting, including any adjournment thereof, or who are entitled to
participate in any dividends, or for any other proper purpose, the Trustees
may from time to time, without closing the transfer books, fix a record
date in the manner provided in Section 10.3 of the Declaration. If the
Trustees do not prior to any meeting of Shareholders so fix a record date
or close the transfer books, then the date of mailing notice of the meeting
or the date upon which the dividend resolution is adopted, as the case may
be, shall be the record date.
1.4 Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the Chairman, if any, of any meeting of Shareholders may, and on
the request of any Shareholder or Shareholder proxy shall, appoint
Inspectors of Election of the meeting. The number of Inspectors shall be
either one or three. If appointed at the meeting on the request of one or
more Shareholders or proxies, a majority of Shares present shall determine
whether one or three Inspectors are to be appointed, but failure to allow
such determination by the Shareholders shall not affect the validity of the
appointment of Inspectors of Election. In case any person appointed as
Inspector fails to appear or fails or refuses to act, the vacancy may be
filled by appointment made by the Trustees in advance of the convening of
the meeting or at the meeting by the person acting as chairman. The
Inspectors of Election shall determine the number of Shares outstanding,
the Shares represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies, shall receive votes, ballots
or consents, shall hear and determine all challenges and questions in any
way arising in connection with the right to vote, shall count and tabulate
all votes or consents, determine the results, and do such other acts as may
be proper to conduct the election or vote with fairness to all
Shareholders. If there are three Inspectors of Election, the decision, act
or certificate of a majority is effective in all respects as the decision,
act or certificate of all. On request of the Chairman, if any, of the
meeting, or of any Shareholder or Shareholder proxy, the Inspectors of
Election shall make a report in writing of any challenge or question or
matter determined by them and shall execute a certificate of any facts
found by them.
1.5 Records at Shareholder Meetings. At each meeting of the
Shareholders, there shall be made available for inspection at a convenient
time and place during normal business hours, if requested by Shareholders,
the minutes of the last previous Annual or Special Meeting of Shareholders
of the Trust and a list of the Shareholders of the Trust, as of the record
date of the meeting or the date of closing of transfer books, as the case
may be. Such list of Shareholders shall contain the name and the address
of each Shareholder in alphabetical order and the number of Shares owned by
such Shareholder. Shareholders shall have such other rights and procedures
of inspection of the books and records of the Trust as are granted to
shareholders of a Delaware business corporation.
ARTICLE II
Trustees
2.1 Annual and Regular Meetings. Meetings of the Trustees shall
be held from time to time upon the call of the Chairman, if any, the
President, the Secretary or any two Trustees. Regular meetings of the
Trustees may be held without call or notice and shall generally be held
quarterly. Neither the business to be transacted at, nor the purpose of,
any meeting of the Board of Trustees need be stated in the notice or waiver
of notice of such meeting, and no notice need be given of action proposed
to be taken by unanimous written consent.
2.2 Chairman; Records. The Chairman, if any, shall act as
chairman at all meetings of the Trustees; in absence of a chairman, the
Trustees present shall elect one of their number to act as temporary
chairman. The results of all actions taken at a meeting of the Trustees,
or by unanimous written consent of the Trustees, shall be recorded by the
person appointed by the Board of Trustees as the meeting secretary.
ARTICLE III
Officers
3.1 Officers of the Trust. The officers of the Trust shall
consist of a Chairman, if any, a President, a Secretary, a Treasurer and
such other officers or assistant officers as may be elected or authorized
by the Trustees. Any two or more of the offices may be held by the same
Person, except that the same person may not be both President and
Secretary. The Chairman, if any, shall be a Trustee, but no other officer
of the Trust need be a Trustee.
3.2 Election and Tenure. At the initial organization meeting,
the Trustees shall elect the Chairman, if any, President, Secretary,
Treasurer and such other officers as the Trustees shall deem necessary or
appropriate in order to carry out the business of the Trust. Such officers
shall serve at the pleasure of the Trustees or until their successors have
been duly elected and qualified. The Trustees may fill any vacancy in
office or add any additional officers at any time.
3.3 Removal of Officers. Any officer may be removed at any
time, with or without cause, by action of a majority of the Trustees. This
provision shall not prevent the making of a contract of employment for a
definite term with any officer and shall have no effect upon any cause of
action which any officer may have as a result of removal in breach of a
contract of employment. Any officer may resign at any time by notice in
writing signed by such officer and delivered or mailed to the Chairman, if
any, President, or Secretary, and such resignation shall take effect
immediately upon receipt by the Chairman, if any, President, or Secretary,
or at a later date according to the terms of such notice in writing.
3.4 Bonds and Surety. Any officer may be required by the
Trustees to be bonded for the faithful performance of such officer's duties
in such amount and with such sureties as the Trustees may determine.
3.5 Chairman, President, and Vice Presidents. The Chairman, if
any, shall, if present, preside at all meetings of the Shareholders and of
the Trustees and shall exercise and perform such other powers and duties as
may be from time to time assigned to such person by the Trustees. Subject
to such supervisory powers, if any, as may be given by the Trustees to the
Chairman, if any, the President shall be the chief executive officer of the
Trust and, subject to the control of the Trustees, shall have general
supervision, direction and control of the business of the Trust and of its
employees and shall exercise such general powers of management as are
usually vested in the office of President of a corporation. Subject to
direction of the Trustees, the Chairman, if any, and the President shall
each have power in the name and on behalf of the Trust or any of its Series
to execute any and all loans, documents, contracts, agreements, deeds,
mortgages, registration statements, applications, requests, filings and
other instruments in writing, and to employ and discharge employees and
agents of the Trust. Unless otherwise directed by the Trustees, the
Chairman, if any, and the President shall each have full authority and
power, on behalf of all of the Trustees, to attend and to act and to vote,
on behalf of the Trust at any meetings of business organizations in which
the Trust holds an interest, or to confer such powers upon any other
persons, by executing any proxies duly authorizing such persons. The
Chairman, if any, and the President shall have such further authorities and
duties as the Trustees shall from time to time determine. In the absence
or disability of the President, the Vice-Presidents in order of their rank
as fixed by the Trustees or, if more than one and not ranked, the
Vice-President designated by the Trustees, shall perform all of the duties
of the President, and when so acting shall have all the powers of and be
subject to all of the restrictions upon the President. Subject to the
direction of the Trustees, and of the President, each Vice-President shall
have the power in the name and on behalf of the Trust to execute any and
all instruments in writing, and, in addition, shall have such other duties
and powers as shall be designated from time to time by the Trustees or by
the President.
3.6 Secretary. The Secretary shall maintain the minutes of all
meetings of, and record all votes of, Shareholders, Trustees and the
Executive Committee, if any. The Secretary shall be custodian of the seal
of the Trust, if any, and the Secretary (and any other person so authorized
by the Trustees) shall affix the seal, or if permitted, facsimile thereof,
to any instrument executed by the Trust which would be sealed by a Delaware
business corporation executing the same or a similar instrument and shall
attest the seal and the signature or signatures of the officer or officers
executing such instrument on behalf of the Trust. The Secretary shall also
perform any other duties commonly incident to such office in a Delaware
business corporation, and shall have such other authorities and duties as
the Trustees shall from time to time determine.
3.7 Treasurer. Except as otherwise directed by the Trustees,
the Treasurer shall have the general supervision of the monies, funds,
securities, notes receivable and other valuable papers and documents of the
Trust, and shall have and exercise under the supervision of the Trustees
and of the President all powers and duties normally incident to the office.
The Treasurer may endorse for deposit or collection all notes, checks and
other instruments payable to the Trust or to its order. The Treasurer
shall deposit all funds of the Trust in such depositories as the Trustees
shall designate. The Treasurer shall be responsible for such disbursement
of the funds of the Trust as may be ordered by the Trustees or the
President. The Treasurer shall keep accurate account of the books of the
Trust's transactions which shall be the property of the Trust, and which
together with all other property of the Trust in the Treasurer's
possession, shall be subject at all times to the inspection and control of
the Trustees. Unless the Trustees shall otherwise determine, the Treasurer
shall be the principal accounting officer of the Trust and shall also be
the principal financial officer of the Trust. The Treasurer shall have
such other duties and authorities as the Trustees shall from time to time
determine. Notwithstanding anything to the contrary herein contained, the
Trustees may authorize any adviser, administrator, manager or transfer
agent to maintain bank accounts and deposit and disburse funds of any
Series of the Trust on behalf of such Series.
3.8 Other Officers and Duties. The Trustees may elect such
other officers and assistant officers as they shall from time to time
determine to be necessary or desirable in order to conduct the business of
the Trust. Assistant officers shall act generally in the absence of the
officer whom they assist and shall assist that officer in the duties of the
office. Each officer, employee and agent of the Trust shall have such
other duties and authority as may be conferred upon such person by the
Trustees or delegated to such person by the President.
ARTICLE IV
Miscellaneous
4.1 Depositories. In accordance with Section 3.9 of the
Declaration, the funds of the Trust shall be deposited in such custodians
as the Trustees shall designate and shall be drawn out on checks, drafts or
other orders signed by such officer, officers, agent or agents (including
the adviser, administrator or manager), as the Trustees may from time to
time authorize.
4.2 Signatures. All contracts and other instruments shall be
executed on behalf of the Trust by its properly authorized officers, agent
or agents, as provided in the Declaration or By-laws or as the Trustees may
from time to time by resolution provide.
4.3 Seal. The Trust is not required to have any seal, and the
adoption or use of a seal shall be purely ornamental and be of no legal
effect. The seal, if any, of the Trust, or any Series of the Trust, if
any, may be affixed to any instrument, and the seal and its attestation may
be lithographed, engraved or otherwise printed on any document with the
same force and effect as if it had been imprinted and affixed manually in
the same manner and with the same force and effect as if done by a Delaware
business corporation. The presence or absence of a seal shall have no
effect on the validity, enforceability or binding nature of any document or
instrument that is otherwise duly authorized, executed and delivered.
ARTICLE V
Stock Transfers
5.1 Transfer Agents, Registrars and the Like. As provided in
Section 6.9 of the Declaration, the Trustees shall have authority to employ
and compensate such transfer agents and registrars with respect to the
Shares of the various Series of the Trust as the Trustees shall deem
necessary or desirable. In addition, the Trustees shall have power to
employ and compensate such dividend disbursing agents, warrant agents and
agents for the reinvestment of dividends as they shall deem necessary or
desirable. Any of such agents shall have such power and authority as is
delegated to any of them by the Trustees.
5.2 Transfer of Shares. The Shares of the Trust shall be
transferable on the books of the Trust only upon delivery to the Trustees
or a transfer agent of the Trust of proper documentation as provided in
Section 5.8 of the Declaration. The Trust, or its transfer agents, shall
be authorized to refuse any transfer unless and until presentation of such
evidence as may be reasonably required to show that the requested transfer
is proper.
5.3 Registered Shareholders. The Trust may deem and treat the
holder of record of any Shares as the absolute owner thereof for all
purposes and shall not be required to take any notice of any right or claim
of right of any other person.
ARTICLE VI
Amendment of By-Laws
6.1 Amendment and Repeal of By-Laws. In accordance with Section
3.9 of the Declaration, only the Trustees shall have the power to amend or
repeal the By-Laws or adopt new By-Laws at any time. Action by the
Trustees with respect to the By-Laws shall be taken by an affirmative vote
of a majority of the Trustees. The Trustees shall in no event adopt
By-Laws which are in conflict with the Declaration, and any apparent
inconsistency shall be construed in favor of the related provisions in the
Declaration.
EXHIBIT (5)
TEMPORARY CERTIFICATE: EXCHANGEABLE FOR DEFINITIVE
ENGRAVED CERTIFICATE WHEN READY FOR DELIVERY
COMMON SHARES OF BENEFICIAL INTEREST
THE GABELLI UTILITY FUND
FORMED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN BOSTON, MASSACHUSETTS AND NEW YORK, NEW
YORK
CUSIP [ ]
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF BENEFICIAL INTEREST OF
THE GABELLI UTILITY FUND
transferable on the books of the Trust by the holder hereto in person or by
duly authorized Attorney upon surrender of this Certificate properly
endorsed. This Certificate and the shares represented hereby are issued
and shall be subject to all the provisions of the Agreement and Declaration
of the Trust and the ByLaws of the Trust, and all amendments thereof,
copies of which are on file at the principal office of the Trust and with
the Transfer Agent.
This Certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile seal of the Trust and the facsimile signatures of its
duly authorized officers.
DATED:
Countersigned and Registered:
STATE STREET BANK AND TRUST COMPANY
(BOSTON, MASSACHUSETTS.) Chairman of the Board
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE Secretary
AUTHORIZED SIGNATURE President
THE GABELLI UTILITY FUND
A full statement of the designations and any preferences,
conversions and other rights, voting powers, restrictions, limitations as
to dividends, qualifications and terms and conditions of redemption of the
common shares of beneficial interest which the Trust is authorized to
issues, and the differences in the relative rights and preferences between
the shares of each series to the extent that they have been set and the
authority of the Board of Trustees to set the relative nights and
preferences of subsequent series will be furnished by the Trust and any
shareholder, without charge, upon request to the Secretary of the Trust at
its principal office.
The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were written
out in full according to applicable laws or regulations.
TEN COM - as tenants in common UNIF GIFT MIN ACT____ Custodian____
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right Act________________________
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
For value Received, ______________________ hereby sells, assigns and
transfers unto
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
____________________________________________________________________Shares
of the Common Shares of beneficial interest represented by the within
Certificate, and do hereby irrevocably constitute
and appoint_______________________________________________________Attorney
to transfer the said Shares on the books of the within-named Trust, with
full power of substitution in the premises.
Dated ___________________
______________________________
EXHIBIT (9)(a)
3/98
NON-ERISA
W/O RE
CUSTODY AGREEMENT
BY AND BETWEEN
AND
BOSTON SAFE DEPOSIT AND TRUST COMPANY
TABLE OF CONTENTS
SECTION PAGE
1. Establishment of/Additions to Account . . . . . . . . . . . . . . . 1
2. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Authorized Parties . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. Authorized Instructions . . . . . . . . . . . . . . . . . . . . . . 2
5. Directed Powers of Custodian . . . . . . . . . . . . . . . . . . . . 2
6. Discretionary Powers of Custodian . . . . . . . . . . . . . . . . . 3
7. Duties of Custodian . . . . . . . . . . . . . . . . . . . . . . . . 4
8. Contractual Income and Settlement . . . . . . . . . . . . . . . . . 5
9. Tax Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. Non-Account Assets . . . . . . . . . . . . . . . . . . . . . . . . . 6
11. Reporting and Recordkeeping . . . . . . . . . . . . . . . . . . . . 6
12. Standard of Care . . . . . . . . . . . . . . . . . . . . . . . . . . 7
13. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
14. Compensation and Expenses . . . . . . . . . . . . . . . . . . . . . 8
15. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 8
16. Amendment or Termination . . . . . . . . . . . . . . . . . . . . . . 8
17. Governing, Law and Legal Proceedings . . . . . . . . . . . . . . . . 8
18. Representations . . . . . . . . . . . . . . . . . . . . . . . . . . 9
19. Necessary Parties . . . . . . . . . . . . . . . . . . . . . . . . . 9
20. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . 9
TAXPAYER IDENTIFICATION NUMBER CERTIFICATION . . . . . . . . . . . . . 11
CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT made as of __________________, 19__
("Agreement") by and between _______________________________, a
____________________________ organized under the laws of
_______________________________ ("Client") and Boston Safe Deposit and
Trust Company, a Massachusetts trust company ("Custodian").
WITNESSETH:
WHEREAS, the Client and the Custodian desire to establish a custody
account to provide for the safekeeping and recordkeeping of certain
property of the Client;
NOW, THEREFORE, the Client and the Custodian, each intending to be
legally bound, agree as follows:
1. Establishment of/Additions to Account
The Client hereby appoints Boston Safe Deposit and Trust Company as
Custodian for any property acceptable to the Custodian which the Client may
deposit to the Custodian's care ("Account"). The Custodian shall have no
responsibility for any property until it in fact is received by the
Custodian or its agents or subcustodians. "Property" as used herein shall
not include any direct interest in real property, leaseholds or mineral
interests.
2. Distributions
The Custodian shall make distributions or transfers out of the Account
pursuant to Authorized Instructions, as defined below. In making payments
to service providers pursuant to Authorized Instructions, the Client
acknowledges that the Custodian is acting as a paying agent, and not as the
payor, for tax information reporting and withholding purposes.
3. Authorized Parties
The Client shall furnish the Custodian with a written list of the
names and signatures of all persons authorized to direct the Custodian on
behalf of the Client under the terms of this Agreement. In addition, the
Client may appoint and remove one or more investment managers ("Investment
Manager") for such portion of the Account as the Client shall designate to
the Custodian in writing. The Investment Manager shall furnish the
Custodian with a written list of the names and signatures of the person or
persons who are authorized to represent the Investment Manager in dealings
with the Custodian. The Custodian shall be entitled to deal with any
person or entity so identified by the Client or Investment Manager
("Authorized Party or Authorized Parties") until notified otherwise in
writing. The Custodian shall be under no duty to question any direction of
an Authorized Party with respect to the portion of the Account over which
such Authorized Party has authority, to review any Property held in the
Account, to make any suggestions with respect to the investment and
reinvestment of the assets in the Account, or to evaluate or question the
performance of any Authorized Party. The Custodian shall not be
responsible or liable for any diminution of value of any securities or
other property held by the Custodian (or its subcustodians).
4. Authorized Instructions
All directions and instructions to the Custodian from an Authorized
Party shall be in writing, by facsimile transmission, electronic
transmission, or any other method specifically agreed to in writing by the
Client and the Custodian, provided the Custodian may, in its discretion,
accept oral directions and instructions and may require confirmation in
writing. The Custodian shall be fully protected in acting in accordance
with all such directions and instructions ("Authorized Instructions") which
it reasonably believes to have been given by an Authorized Party or in
failing to act in the absence thereof.
5. Directed Powers of Custodian
The Custodian shall have and exercise the following powers and
authority in the administration of the Account upon the direction of an
Authorized Party:
a. Settle purchases and sales and engage in other transactions,
including free receipts and deliveries, exchanges and other voluntary
corporate actions, with respect to securities or other property received by
the Custodian;
b. Execute proxies for any stocks, bonds or other securities held in
the Account;
c. Lend the assets of the Account in accordance with the terms and
conditions of a separate securities lending agreement; and
d. Take any and all actions necessary to settle transactions in
futures and/or options contracts, short-selling programs, foreign exchange
or foreign exchange contracts, swaps and other derivative investments.
Settlements of transactions may be effected in trading and processing
practices customary in the jurisdiction or market where the transaction
occurs. The Client acknowledges that this may, in certain circumstances,
require the delivery of cash or securities (or other property) without the
concurrent receipt of securities (or other property) or cash and, in such
circumstances, the Client shall have responsibility for nondelivery of
securities or other property (or late delivery) or nonreceipt of payment
(or late payment) by the counterparty.
6. Discretionary Powers of Custodian
The Custodian shall have and exercise the following powers and
authority in the administration of the Account:
a. Appoint sub-custodians (including a corporate affiliate of the
Custodian), domestic or foreign, as to part or all of the Account;
b. Hold property in nominee name, in bearer form or in book entry
form, in a clearinghouse corporation or in a depository, so long as the
Custodian's records clearly indicate that the assets held are a part of the
Account;
c. Commence or defend suits or legal proceedings and represent the
Account in all suits or legal proceedings in any court or before any other
body or tribunal as the Custodian shall deem necessary to protect the
Account;
d. Employ suitable agents and legal counsel, who may be counsel for
the Client, and, as a part of its reimbursable expenses under this
Agreement, pay their reasonable compensation and expenses. The Custodian
shall be entitled to rely on and may act upon advice of counsel on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice;
e. Take all action necessary to pay for authorized transactions,
including exercising the power to borrow or raise monies from the Custodian
in its corporate capacity or an affiliate of the Custodian and shall hold
any property in the Account as security for advances made to the Account
for any such authorized transactions, including disbursements or expenses,
or the purchase or sale of foreign exchange, or of contracts for foreign
exchange. The Custodian shall be entitled to collect from the Account
sufficient cash for reimbursement, and if such cash is insufficient,
dispose of the assets of the Account to the extent necessary to obtain
reimbursement;
f. Make, execute and deliver any and all documents, agreements or
other instruments in writing as is necessary or desirable for the
accomplishment of any of the powers in this Agreement; and
g. Generally take all action, whether or not expressly authorized,
which the Custodian may deem necessary or desirable for the fulfillment of
its duties hereunder.
The powers described in this Section 6 may be exercised by the
Custodian with or without Authorized Instructions, but where the Custodian
acts on Authorized Instructions, the Custodian shall be fully protected as
described in Section 4. Without limiting the generality of the foregoing,
the Custodian shall not be liable for the acts or omissions of any
subcustodian appointed under paragraph (a) of this Section 6 pursuant to
Authorized Instructions including, but not limited to, any broker-dealer or
other entity designated by the Client or Investment Manager to hold any
property of the Account as collateral or otherwise pursuant to investment
strategy.
7. Duties of Custodian
The Custodian shall perform or cause its agents or subcustodians to
perform the following duties with respect to the Account:
a. Hold the property in safekeeping facilities of the Custodian or
of other custodian banks or clearing corporations, in the United States or
elsewhere; provided that the Custodian shall not be responsible for any
losses resulting from the deposit or maintenance of securities or other
property (in accordance with market practice, custom, or regulation) with
any recognized foreign or domestic clearing facility, book-entry system,
centralized custodial depository, or similar organization;
b. Collect all income payable to and all distributions due to the
Account and sign on the Account's behalf all declarations, affidavits, and
certificates of ownership required to collect income and principal
payments; provided that the Custodian shall not be responsible for the
failure to receive payment of (or late payment of) distributions with
respect to securities or other property held in the Account;
c. Subject to the timely receipt of notice from an issuer or
Authorized Party, collect all proceeds from securities, certificates of
deposit or other investments which may mature or be called;
d. Submit or cause to be submitted to the Client or the Investment
Manager, as designated by the Client, information actually received by the
Custodian regarding ownership rights pertaining to property held in the
Account;
e. Attend to involuntary corporate actions;
f. Determine the fair market value of the Account as of such dates
as the Client and the Custodian may agree upon, in accordance with methods
consistently followed and uniformly applied. In determining fair market
value of the Account, the Custodian shall be protected in relying on values
recommended by an Authorized Party; and
g. Render periodic statements for property held hereunder.
8. Contractual Income and Settlement
a. Contractual Income. The Custodian shall credit the Account with
income and maturity proceeds on securities on contractual payment date net
of any taxes or upon actual receipt as agreed between the Custodian and the
Client. To the extent the Client and the Custodian have agreed to credit
income on contractual payment date, the Custodian may reverse such
accounting entries with back value to the contractual payment date if the
Custodian reasonably believes that it will not receive such amount.
b. Contractual Settlement. The Custodian will attend to the
settlement of securities transactions on the basis of either contractual
settlement date accounting or actual settlement date accounting as agreed
between the Client and the Custodian. To the extent the Client and the
Custodian have agreed to settle certain securities transactions on the
basis of contractual settlement date accounting, the Custodian may reverse
with back value to the contractual settlement date any entry relating to
such contractual settlement where the related transaction remains unsettled
in accordance with established procedures.
9. Tax Law
a. The Custodian shall use reasonable efforts to assist the
Authorized Party, to the extent the Authorized Party has provided necessary
information, with respect to any tax obligations, including responsibility
for taxes, withholding, certification and reporting requirements, claims
for exemptions or refund, interest, penalties and other expenses ("Tax
Obligations"). The Client shall cause the Authorized Party to notify the
Custodian in writing of any such Tax Obligations. The Custodian shall have
no responsibility or liability for any Tax Obligations now or hereafter
imposed on the Client or the Account by any taxing authorities, domestic or
foreign.
b. To the extent the Custodian is responsible under any applicable
law for any Tax Obligation, the Client shall cause the Authorized Party to
inform the Custodian of all Tax Obligations, shall direct the Custodian
with respect to the performance of such Tax Obligations and shall provide
the Custodian with the necessary funds and all information required by the
Custodian to meet such Tax Obligations.
10. Non-Account Assets
The Client may request the Custodian to perform a recordkeeping
function with respect to property held by others and not otherwise subject
to the terms of this Agreement. To the extent the Custodian shall agree to
perform this service, its sole responsibility shall be to accurately
reflect information on its books which it has received from an Authorized
Party.
11. Reporting and Recordkeeping
If, within ninety (90) days after the Custodian mails to the Client a
statement with respect to the Account, the Client has not given the
Custodian written notice of any exception or objection thereto, the
statement shall be deemed to have been approved, and in such case, the
Custodian shall not be liable for any matters in such statements. The
Client shall have the right, at its own expense and with prior written
notice to the Custodian, to inspect the Custodian's books and records
directly relating to the Account during normal business hours or to
designate an accountant to make such inspection.
12. Standard of Care
In performing its duties under this Agreement, the Custodian shall
exercise the same care and diligence that it would devote to its own
property in like circumstances. The duties of the Custodian shall only be
those specifically undertaken pursuant to this Agreement. The Custodian
shall not be responsible or liable for any losses or damages suffered by
the Client arising as a result of the insolvency of any subcustodian,
except to the extent the Custodian was negligent in its selection or
continued retention of such subcustodian.
The Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in
acting upon any notice, request, direction, instruction, consent,
certification or other instrument believed by it to be genuine and
delivered by an Authorized Party. The Custodian shall not be liable for
any act or omission of any other person in carrying out any responsibility
imposed upon such person and under no circumstances shall the Custodian be
liable for any indirect, consequential or special damages with respect to
the role as Custodian.
13. Force Majeure
Notwithstanding anything in this Agreement to the contrary contained
herein, the Custodian shall not be responsible or liable for its failure to
perform under this Agreement or for any losses to the Account resulting
from any event beyond the reasonable control of the Custodian, its agents
or subcustodians, including but not limited to nationalization, strikes,
expropriation, devaluation, seizure, or similar action by any governmental
authority, de facto or de jure; or enactment, promulgation, imposition or
enforcement by any such governmental authority of currency restrictions,
exchange controls, levies or other charges affecting the Account's
property; or the breakdown, failure or malfunction of any utilities or
telecommunications systems; or any order or regulation of any banking or
securities industry including changes in market rules and market conditions
affecting the execution or settlement of transactions or acts of war,
terrorism, insurrection or revolution; or acts of God; or any other similar
event. This Section shall survive the termination of this Agreement.
14. Compensation and Expenses
The Custodian shall be entitled to compensation for services under
this Agreement as mutually agreed. The Client acknowledges that, as part
of the Custodian's compensation, the Custodian may earn interest on
balances, including disbursement balances and balances arising from
purchase and sale transactions. The Custodian shall also be entitled to
reimbursement for reasonable expenses incurred by it in the discharge of
its duties under this Agreement. The Custodian is authorized to charge and
collect from the Account any and all fees and expenses earned unless such
fees and expenses are paid directly by the Client. To the extent the
Custodian advances funds to the Account for disbursements or to effect the
settlement of purchase transactions, the Custodian shall be entitled to
collect from the Account either (i) with respect to domestic assets, an
amount equal to what would have been earned on the sums advanced (an amount
approximating the "federal funds" interest rate) or (ii) with respect to
non-domestic assets, the rate applicable to the appropriate foreign market.
15. Indemnification
The Client shall indemnify and hold harmless the Custodian from all
liability and expense, including reasonable counsel fees and expenses,
arising out of the performance of its obligations under this Agreement,
except as a result of the Custodian's own negligence or willful misconduct.
This indemnification shall survive the termination of this Agreement.
16. Amendment or Termination
This Agreement may be amended by written agreement of the Client and
the Custodian and may be terminated by either party upon ninety (90) days'
notice in writing to the other party.
17. Governing, Law and Legal Proceedings
This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Massachusetts. The parties hereby
expressly waive, to the full extent permitted by applicable law, any right
to trial by jury with respect to any judicial proceeding arising from or
related to this Agreement.
18. Representations
The Client and the Custodian hereby each represent and warrant to the
other that it has full authority to enter into this Agreement upon the
terms and conditions hereof and that the individual executing this
Agreement on its behalf has the requisite authority to bind the Client or
the Custodian to this Agreement
19. Necessary Parties
All of the understandings, agreements, representations and warranties
contained herein are solely for the benefit of the Client and the Custodian
and there are no other parties who are intended to be benefitted, in any
way whatsoever, by this Agreement.
20. Execution in Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, and said counterparts shall constitute
but one and the same instrument and may be sufficiently evidenced by one
counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
Authorized Signer of: Authorized Officer of:
_______________________ BOSTON SAFE DEPOSIT
(Client) AND TRUST COMPANY
By:____________________ By: ______________________
Name: Name:
Title: Title:
Date:__________________ Date: _____________________
Address for Notice: Address for Notice:
________________________ One Cabot Road
________________________ Medford, MA 02155
________________________ Attention: _________________
Taxable: _______________
or
Tax Exempt: _____________
(Under IRC Section: _____)
__________________________
Fiscal Year
TAXPAYER IDENTIFICATION NUMBER CERTIFICATION
By signing below the Client hereby certifies under penalties of perjury
that the taxpayer identification number provided below is correct and that
the Client is not subject to backup withholding on reportable payments
credited to the Client's Account by the Custodian. The Client may not be
subject to back-up withholding either because (a) the Client is exempt from
back-up withholding because it is an "exempt recipient", (b) the Client has
not been notified by the Internal Revenue Service that it is subject to
back-up withholding for failure to report all interest or dividends, or (c)
the IRS has notified the Client that it is no longer subject to back-up
withholding. (If (a), (b), or (c) do not apply, please cross out.)
FAILURE TO SIGN BELOW AND PROVIDE A VALID TAXPAYER IDENTIFICATION NUMBER
MAY REQUIRE THAT THE CUSTODIAN APPLY FEDERAL INCOME TAX WITHHOLDING AT THE
RATE OF 31% (OR THE RATE AS REQUIRED BY LAW) ON ALL REPORTABLE PAYMENTS
MADE TO THE ACCOUNT ESTABLISHED UNDER THIS AGREEMENT.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID
BACKUP WITHHOLDING.
__________________________
(CLIENT)
BY: _______________________
NAME: _____________________
TITLE: ____________________
____________________________
TAXPAYER IDENTIFICATION NUMBER
EXHIBIT (9)(b)
Mellon Trust
Proposed Custody Fee Schedule
The Gabelli Funds
February 2, 1999
Mellon Trust, acting as custodian for the mutual fund assets of Gabelli
Equity and Gabelli Value, would base its compensation according to the
schedule which follows.
Core custody administration services provided by Mellon Trust include
transaction processing, preparation of cash availability and forecasting as
well as providing daily custody reports. Core Custody services includes
global safekeeping of assets, transaction, settlement, foreign exchange,
income collection, corporation action processing and basic online inquiry.
Mellon Trust will pass though to the client any expenses including, but not
limited to, courier expense, registration and application fees, stamp
duties, telex charges, custom reporting or custom programming,
internal/external tax, legal or consulting costs and proxy voting expenses.
Asset-based fees and transactions will be calculated and payable on a
monthly basis.
If funds are left uninvested at the Custodian by the Fund, an earnings
credit will be give at the 90 day T-Bill rate on 90% of the uninvested
balance. Monthly credit balances will roll forward to offset future
Custodian charges. However, all unused credits will expire at the end of
the calendar year. Credit balances are used exclusively to offset custody
charges. They will not apply to investment related expenses and may not be
transferred.
Mellon is willing to guarantee the attached fee schedule for three years.
However, should the nature of the account change dramatically, Mellon
reserves the right to renegotiate its compensation based on the situation
that exists in the account at such time. If non-standard or special
services are requested, Mellon may negotiate additional compensation
accordingly.
Domestic Fee Schedule
Asset Based Fees:
1 basis points (.0001) on the first $ 1 billion of market value of assets
1/2 basis points (.0005) on the market value of assets in excess $1 billion
Transaction Fees:
$ 6.50 per DTC/PTC transaction
$ 6.50 per Fed transaction
$ 30.00 per physical transaction
$ 5.00 per paydown
$ 3.00 per Fed Wire Delivery
$ 5.00 per wire in/out
$ 7.00 per futures transaction
$ 30.00 per non-Mellon foreign exchange
$ 25.00 per option round-trip
$ 250.00 per broker relationship (assumes utilization of Mellon boilerplate
agreement)
Global Fee Schedule:
Network Based Charges:
Category 1 4 basis points
Category 2 6 basis points
Category 3 8 basis points
Category 4 15 basis points
Category 5 20 basis points
Category 6 40 basis points
Transaction Fees:
Category 1 Canada, Euroclear, France, Germany, Japan, Italy, $20.00
Netherlands, Spain, Sweden, Switzerland, United
Kingdom
Category 2 Australia, Belgium, CEDEL, Ireland, Luxembourg, $40.00
Mexico, New Zealand, Norway, South Africa
Category 3 Argentina, Austria, Brazil, Denmark, Finland, $50.00
Hong Kong, Portugal, Singapore, Sri Lanka, Thailand,
Turkey
Category 4 Czech Republic, Greece, Israel, Poland, South Korea $50.00
Zimbabwe
Category 5 Bangladesh, Bermuda, Botswana, Ghana, Hungary, $60.00
Indonesia, Kenya, Malaysia, Mauritius, Pakistan, Peru
Philippines, Slovak Republic, Taiwan, Uruguay
Category 6 Chile, China, Colombia, Cyprus, Egypt, India, Jordan, $85.00
Venezuela
EXHIBIT (9)(c)
REGISTRAR,
TRANSFER AGENCY AND SERVICE AGREEMENT
between
GABELLI UTILITY FUND
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK . . . . . . . . . . 3
ARTICLE 2 FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BANK . . . . . . . . . 6
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND . . . . . . . . . 7
ARTICLE 5 DATA ACCESS AND PROPRIETARY INFORMATION . . . . . . . . . . 8
ARTICLE 6 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 7 STANDARD OF CARE . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 8 COVENANTS OF THE FUND AND THE BANK . . . . . . . . . . . . 13
ARTICLE 9 TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . 14
ARTICLE 10 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 11 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 12 MASSACHUSETTS LAW TO APPLY . . . . . . . . . . . . . . . . 16
ARTICLE 13 FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 14 CONSEQUENTIAL DAMAGES . . . . . . . . . . . . . . . . . . 16
ARTICLE 15 MERGER OF AGREEMENT . . . . . . . . . . . . . . . . . . . 16
ARTICLE 16 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 18 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . 17
REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the ___________________ day of
____________________, 1999, by and between Gabelli Utility Fund a
_____________________ corporation, having its principal office and place of
business at ______________________________ (the "Fund"), and STATE STREET
BANK AND TRUST, Gabelli, a Massachusetts trust company having its principal
office and place of business at 225 Franklin Street, Boston, Massachusetts
02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its registrar,
transfer agent, dividend disbursing agent and agent in connection with
certain other activities and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints the Bank to act as, and the
Bank agrees to act as registrar, transfer agent for the Fund's authorized
and issued shares of its common stock ("Shares"), dividend disbursing agent
and agent in connection with any dividend reinvestment plan as set out in
the prospectus of the Fund, corresponding to the date of this Agreement.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and the Bank, the Bank shall:
(i) Issue and record the appropriate number of Shares as
authorized and hold such shares in the appropriate
Shareholder account
(ii) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate documentation;
(iii) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(iv) Act as agent for Shareholders pursuant to the dividend
reinvestment and cash purchase plan as amended from time to
time in accordance with the terms of the agreement to be
entered into between the Shareholders and the Bank in
substantially the form attached as Exhibit hereto;
(v) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon receipt
by the Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at its
option, may issue replacement certificates in place of
mutilated stock certificates upon presentation thereof and
without such indemnity.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i) perform
all of the customary services of a registrar, transfer agent, dividend
disbursing agent and agent of the dividend reinvestment anc cash purchase
plan as described in Article 1 consistent with those requirements in effect
as of the date of this agreement. The detailed definition, frequency,
limitations and associated costs (if any) set out in the attached fee
schedule, include but are not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, and mailing
Shareholder reports to current Shareholders, withholding taxes on U.S.
resident and non-resident alien accounts where applicable, preparing and
filing U.S. Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by federal authorities
for all registered Shareholders.
(c) The Bank shall provide additional services on behalf of the
Fund (i.e., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
ARTICLE 2 FEES AND EXPENSES
2.01 For the performance by the Bank pursuant to this Agreement,
the Fund agrees to pay the Bank an annual maintenance fee as set out in the
initial fee schedule attached hereto. Such fees and out-of-pocket expenses
and advances identified under Section 2.02 below may be changed from time
to time subject to mutual written agreement between the Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse the Bank for out-of-pocket expenses, including but not
limited to confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances incurred by
the Bank for the items set out in the fee schedule attached hereto. In
addition, any other expenses incurred by the Bank at the request or with
the consent of the Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective billing notice.
Postage and the cost of materials for mailing of dividends, proxies, Fund
reports and other mailings to all Shareholder accounts shall be advanced to
the Bank by the Fund at least seven (7) days prior to the mailing date of
such materials.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing and in good
standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement
4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is a closed-end, diversified investment company registered
under the Investment Company Act of 1940, as amended.
4.05 To the extent required by federal securities laws a
registration statement under the Securities Act of 1933, as amended is
currently effective and appropriate state securities law filings have been
made with respect to all Shares of the Fund being offered for sale;
information to the contrary will result in immediate notification to the
Bank.
4.06 It shall make all required filings under federal and state
securities laws.
ARTICLE 5 DATA ACCESS AND PROPRIETARY INFORMATION
5.01 The Fund acknowledges that the data bases, computer programs,
screen formats, interactive design techniques, and other information
furnished to the Fund by the Bank are provided solely in connection with
the services rendered under this Agreement and constitute copyrighted trade
secrets or proprietary information of substantial value to the Bank. Such
databases, programs, formats, designs, techniques and other information are
collectively referred to below as "Proprietary Information." The Fund
agrees that it shall treat all Proprietary Information to any person or
organization except as expressly permitted hereunder. The Fund agrees for
itself and its employees and agents:
(a) to use such programs and databases (i) solely on the Fund
computers, or (ii) solely from equipment at the locations agreed to between
the Fund and the Bank and (iii) in accordance with the Bank's applicable
user documentation;
(b) to refrain from copying or duplicating in any way (other than
in the normal course of performing processing on the Fund's computers) any
part of any Proprietary Information;
(c) to refrain from obtaining unauthorized access to any programs,
data or other information not owned by the Fund, and if such access is
accidentally obtained, to respect and safeguard the same Proprietary
Information;
(d) to refrain from causing or allowing information transmitted
from the Bank's computer to the Funds' terminal to be retransmitted to any
other computer terminal or other device except as expressly permitted by
the Bank, (such permission not to be unreasonably withheld);
(e) that the Fund shall have access only to those authorized
transactions as agreed to between the Fund and the Bank; and
(f) to honor reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in Proprietary
Information at common law and under applicable statues.
5.02 If the transactions available to the Fund include the ability
to originate electronic instructions to the Bank in order to (i) effect the
transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information, then in such event the Bank shall be
entitled to rely on the validity and authenticity of such instruction
without undertaking any further inquiry as long as such instruction is
undertaken in conformity with security procedures established by the Bank
from time to time.
ARTICLE 6 INDEMNIFICATION
6.01 The Bank shall not be responsible for, and the Fund shall
indemnify and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability
arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors
required to be taken pursuant to this Agreement; provided that such actions
are taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty
of the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person or firm
on behalf of the Fund including but not limited to any previous transfer
agent registrar.
(d) The reliance on, or the carrying out by the Bank or its agents
or subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in
such State.
6.02 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under
this Agreement, and the Bank and its agents or subcontractors shall not be
liable and shall be indemnified by the Fund for any action taken or omitted
by it in reliance upon such instructions or upon the opinion of such
counsel. The Bank, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf
of the Fund, reasonably believed to be genuine and to have been signed by
the proper person or persons, or upon any instruction, information, data,
records or documents provided the Bank or its agents or subcontractors by
telephone, in person, machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have
notice thereof from the Fund. The Bank, its agents and subcontractors
shall also be protected and indemnified in recognizing stock certificates
which are reasonably believed to bear the proper manual or facsimile
signatures of the officers of the Fund, and the proper countersignature of
any former transfer agent or former registrar, or of a co-transfer agent or
co-registrar.
6.03 In order that the indemnification provisions contained in this
Article 6 shall apply, upon the assertion of a claim for which the Fund may
be required to indemnify the Bank, the Bank shall promptly notify the Fund
in writing of such assertion, and shall keep the Fund advised with respect
to all developments concerning such claim. The Fund shall have the option
to participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in any case in
which the Fund may be required to indemnify the Bank except with the Fund's
prior written consent.
ARTICLE 7 STANDARD OF CARE
7.01 The Bank shall at all times act in good faith and agrees to
use its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility and
shall not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct of that of its
employees.
ARTICLE 8 COVENANTS OF THE FUND AND THE BANK
8.01 The Fund shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
8.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To
the extent required by Section 31 of the Investment Company Act of 1940, as
amended, and the Rules thereunder, the Bank agrees that all such records
prepared or maintained by the Bank relating to the services to be performed
by the Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules,
and will be surrendered promptly to the Fund on and in accordance with its
request.
8.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which
are exchanged or received pursuant to the negotiation or the carrying out
of this Agreement shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be requested by a governmental
entity or as may be required by law.
8.05 In cases of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the Fund
and to secure instructions from an authorized officer of the Fund as to
such inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
ARTICLE 9 TERMINATION OF AGREEMENT
9.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate, all out-of-
pocket expenses associated with the movement of records and material will
be borne by the Fund. Additionally, the Bank reserves the right to charge
for any other reasonable expenses associated with such termination and/or a
charge equivalent to the average of three (3) month's fees.
ARTICLE 10 ASSIGNMENT
10.01 Except as provided in Section 10.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and
assigns.
10.03 The Bank may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i) Boston EquiServe
Limited Partnership., a Massachusetts limited partnership ("Boston
EquiServe"), which is duly registered as a transfer agent pursuant to
Section 17A(c)(2) of the Securities Exchange Act of 1934 ("Section
17A(c)(2)"), or (ii) a Boston EquiServe affiliate duly registered as a
transfer agent pursuant to Section 17A(c)(2), provided, however, that the
Bank shall be as fully responsible to the Fund for the acts and omissions
of any subcontractor as it is for its own acts and omissions.
ARTICLE 11 AMENDMENT
11.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a
resolution of the Board of Directors of the Fund.
ARTICLE 12 MASSACHUSETTS LAW TO APPLY
12.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of The
Commonwealth of Massachusetts.
ARTICLE 13 FORCE MAJEURE
13.01 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party shall
not be liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
ARTICLE 14 CONSEQUENTIAL DAMAGES
14.01 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement
or for any consequential damages arising out of any act or failure to act
hereunder.
ARTICLE 15 MERGER OF AGREEMENT
15.01 This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written.
ARTICLE 16 SURVIVAL
16.01 All provisions regarding indemnification, warranty,
liability and limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination of this
Agreement.
ARTICLE 17 SEVERABILITY
17.01 If any provision or provisions of this Agreement shall be
held to be invalid, unlawful, or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired.
ARTICLE 18 COUNTERPARTS
18.01 This Agreement may be executed by the parties hereto on
any number of counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in their names and on their behalf by and through their
duly authorized officers, as of the day and year first above written.
Gabelli Utility Fund
BY: __________________________
State Street Bank and Trust Company
BY: ____________________________
EXHIBIT (9)(d)
STATE STREET BANK AND TRUST COMPANY
TRANSFER AGENT AND REGISTRAR SERVICES
FEE AGREEMENT
FOR
ALL GABELLI CLOSED-END FUNDS
ONGOING TRANSFER AGENT FEES
$6.00 per shareholder account per annum for open accounts and $4.00 per
closed shareholder account per annum. Includes the issuance and
registration of the first 1,500 credit certificates in a calendar years,
per fund. Excess credits beyond 1,500 to be billed at $1.25 each within a
calendar year.
For each dividend reinvestment per participant
$.75
For each optional cash infusion
$.75
ACCOUNT MAINTENANCE SERVICES
Establishing new accounts
Preparation and mailing of W-9 solicitation to new accounts without
T.I.N.'s
Address changes
Processing T.I.N. changes
Processing routine and non-routine transfers of ownership
Issuance of credit certificates (see limits)
Posting debit and credit transactions
Providing a daily transfer journal of ownership changes
Responding to written shareholder communications
Responding to shareholder telephone inquiries; toll-free number
Placing and releasing stop transfers
Replacing lost certificates
Registration of credit certificates (see limits)
DIVIDEND DISBURSEMENT SERVICES
Generate and mail twelve dividend checks per annum with one enclosure
Replace lost dividend checks
Processing of backup withholding and remittance
Processing of non-resident alien withholding and remittance
Preparation and filing of Federal Tax Forms 1099 and 1042
Preparation and filing of State Tax Information as directed
DIVIDEND REINVESTMENT SERVICES PROVIDED
Processing optional cash investments and acknowledging same
The reinvestment of dividend proceeds for participants
Participant withdrawal or sell requests
Preparation, mailing and filing of Federal Tax Form 1099B for sales
Preparation and mailing of reinvestment statements
ANNUAL MEETING SERVICES
Coordination of mailing of proxies, proxy statement, annual report and
business reply envelope (all out-of-pocket expenses, including
printing of proxy cards, postage, and envelope costs will be billed as
incurred)
Providing one set of labels of banks, brokers and nominees for broker
search
Providing an annual Meeting Record Date list
Tabulation of returned proxies
Daily reporting of tabulation results
Interface support during solicitation effort
Providing one Inspector of Election at Annual Meeting (out-of-pocket
travel expenses billed as cost as incurred)
Providing an Annual Meeting Final Voted list
ADDRESSING AND MAILING SERVICES
One complete statistical report annually
-Shareholders by state
-Shareholders by classification code
-Shareholders by share grouping
Geographical Analysis monthly
TERMS OF FEE AGREEMENT
Minimum $1,000. per month
MISCELLANEOUS
All out-of-pocket expenses such as postage, stationery, etc. will be
billed as incurred
ADDITIONAL SERVICES
Services over and above this Fee Schedule will be invoiced in
accordance with our current Schedule of Services or priced by
appraisal.
STATE STREET BANK AND TRUST COMPANY
STOCK TRANSFER AGENT FEE AGREEMENT
FOR
ALL GABELLI CLOSED-END FUNDS
FEE AGREEMENT EFFECTIVE DATE: 4/1/95
REQUIRED SIGNATURES:
______________________________________
State Street Bank and Trust Company
Date
Name: Charles V. Rossi
Title: Vice President
____________________________________
Gabelli Funds, Inc.
Date
Name:
Title:
EXHIBIT (10)
INVESTMENT ADVISORY AGREEMENT
___________________, 1999
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1434
Dear Sir:
The Gabelli Utility Fund (the "Fund"), a business trust organized
under the laws of the state of Delaware, confirms its investment advisory
agreement with Gabelli Funds, LLC, (the "Adviser") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in
its Agreement and Declaration of Trust, as amended from time to time (the
"Declaration of Trust"), and in its Registration Statement on Form N-2
under the Investment Company Act of 1940, as amended (the "1940 Act") as
from time to time in effect (the "Registration Statement") and in such
manner and to such extent as may from time to time be approved by the
Fund's Board of Trustees. Copies of the Declaration of Trust and the
Registration Statement have been submitted to the Adviser. The Fund
desires to employ and hereby appoints the Adviser to act as its investment
Adviser and to oversee the administration of all aspects of the Fund's
business and affairs and provided, or arrange for others whom it believes
to be competent to provide, certain services as specified in subparagraph
(b) below. The Adviser accepts the appointment and agrees to furnish the
services set forth below for the compensation set forth below. Nothing
contained herein shall be construed to restrict the Fund's right to hire
its own employees or to contract for administrative services to be
performed by third parties, including but not limited to, the calculation
of the net asset value of the Fund's shares.
2. Services
(a) INVESTMENT ADVICE. Subject to the direction and control of the
Fund's Board of Trustees, the Adviser will (i) act in strict conformity
with the Declaration of Trust, the 1940 Act and the Investment Advisers Act
of 1940, as the same may from time to time be amended, (ii) manage the
Fund's assets in accordance with the Fund's investment objective and
policies as stated in the Registration Statement, (iii) make investment
decisions for the Fund and (iv) place purchase and sale orders on behalf of
the Fund. In rendering those services, the Adviser will provide investment
research and supervision of the Fund's investments and conduct a continual
program of investment, evaluation and, if appropriate, sale and
reinvestment of the Fund's assets. In addition, the Adviser will furnish
the Fund with whatever statistical information the Fund may reasonably
request with respect to the securities that the Fund may hold or
contemplate purchasing.
(b) ADMINISTRATION. The specific services to be provided or arranged
for by the Adviser for the Fund are (i) maintaining the Fund's books and
records, such as journals, ledger accounts and other records in accordance
with application laws and regulations to the extent not maintained by the
Fund's custodian, transfer agent or dividend disbursing agent; (ii)
initiating all money transfers to the Fund's custodian and from the Fund's
custodian for the payment of the Fund's expenses, investments, and
dividends; (iii) reconciling account information and balances among the
Fund's custodian, transfer agent, dividend disbursing agent and the
Adviser; (iv) providing the Fund, upon request, with such office space and
facilities, utilities and office equipment as are adequate for the Fund's
needs; (v) preparing, but not paying for, all reports by the Fund to its
shareholders and all reports and filings required to maintain registration
and qualification of the Fund's shares under federal and state law
including the updating of the Fund's Registration Statement, when
necessary; (vi) supervising the calculation of net asset value of the
Fund's shares; and (vii) preparing notices and agendas for meetings of the
Fund's shareholders and the Fund's Board of Trustees as well as minutes of
such meetings in all matters required by applicable law to be acted upon by
the Board of Trustees.
3. Brokerage
In executing transactions for the Fund and selecting brokers or
dealers, the Adviser will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any
transaction on behalf of the Fund, the Adviser will consider all factors it
deems relevant including, but not limited to, the breadth of the market in
the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of any
commission for the specific transaction and on a continuing basis. In
selecting brokers or dealers to execute a particular transaction and in
evaluating the best overall terms available, the Adviser may consider the
brokerage and research services provided to the Fund and/or other accounts
over which the Adviser or an affiliate of the Adviser exercises investment
discretion.
4. Information Provided to the Fund
The Adviser will keep the Fund informed of developments materially
affecting the Fund, and will, on its own initiative, furnish the Fund from
time to time with whatever information the Adviser believes is appropriate
for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the services
described in paragraphs 2 and 3 above. The Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Fund in connection with the matters of which this Agreement relates,
provided that nothing in this paragraph shall be deemed to protect or
purport to protect the Adviser against any liability to the Fund or to its
shareholders to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Adviser's reckless disregard
of its obligations and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Fund will pay the Adviser a monthly fee, on the first business day of
each month a fee for the previous month at the annual rate equal to 1.00%
of the Fund's average weekly net assets. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month
shall be prorated according to the proportion that such period bears to the
full monthly period and shall be payable upon the date of termination of
this Agreement. For the purpose of determining fees payable to the
Adviser, the value of the Fund's net assets shall be computed at the times
and in the manner specified in the Registration Statement.
7. Expenses
The Adviser will bear all expenses in connection with the performance
of its services under this Agreement. The Fund will bear certain other
expenses to be incurred in its operation, including: expenses for legal
and independent accountants' services, costs of printing proxies, stock
certificates and shareholder reports, charges of the custodian, any sub-
custodian and transfer and dividend paying agent, expenses in connection
with the Automatic Dividend Reinvestment and Cash Purchase Plan, Securities
and Exchange Commission fees, fees and expenses of unaffiliated directors,
accounting and pricing costs, membership fees in trade associations,
fidelity bond coverage for the Fund's officers and employees, directors'
and officers' errors and omissions insurance coverage, interest, brokerage
costs, taxes, stock exchange listing fees and expenses, all expenses of
computing the Fund's net asset value per share, including any equipment or
services obtained solely for the purpose of pricing shares or valuing the
Fund's investment portfolios, expenses of qualifying the Fund's shares for
sale in various states, litigation and other extraordinary or non-recurring
expenses, and other expenses properly payable by the Fund.
8. Services to Other Companies or Accounts
The Fund understands that the Adviser now acts and will continue to
act as investment Adviser to other investment companies and may act in the
future as investment Adviser to other investment companies or portfolios,
and the Fund has no objection to the Adviser so acting, provided that
whenever the Fund and one or more other portfolios of or investment
companies advised by the Adviser have available funds for investment,
investments suitable and appropriate for each will be allocated in a manner
believed to be equitable to each entity. The Fund recognizes that in some
cases this procedure may adversely affect the size of the position
obtainable for the Fund. In addition, the Fund understands that the
Adviser's duties under this Agreement will not devote their full time to
such service and nothing contained herein shall be deemed to limit or
restrict the right of the Adviser or any affiliate of the Adviser to engage
in and devote time and attention to other businesses or to render services
of whatever kind of nature.
9. Use of the Word "Gabelli"
It is understood and agreed that the word "Gabelli" is the Adviser's
property for copyright and other purposes. The Fund further agrees that
the word "Gabelli" in its name is derived from the name of Mario J. Gabelli
and such name may freely be used by the Adviser of other investment
companies, entities or products. The Fund further agrees that, in the
event that the Adviser shall cease to act as an investment Adviser to the
Fund, the Fund shall promptly take all necessary and appropriate action to
change its name to one that does not include the word "Gabelli"; provided,
however, that the Fund may continue to use such name if the Adviser
consents in writing to such use.
10. Term of Agreement
This Agreement shall become effective on the date it is approved by
the shareholders of the Fund and shall continue in effect for two years and
thereafter shall continue for successive annual periods, provided such
continuance is specifically approved at least annually in accordance with
the requirements of the 1940 Act. This Agreement is terminable, without
penalty, on 60 days' written notice by the Fund's Board of Trustees, by
vote of holders of a majority of the Fund's shares, or by the Adviser.
This Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act and the rules thereunder).
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy.
Very truly yours,
THE GABELLI UTILITY FUND
By: ____________________________
Name:
Title:
Agreed to and Accepted:
GABELLI FUNDS, LLC
By: _____________________________
Name:
Title:
EXHIBIT (11)
March 30, 1999
The Gabelli Utility Fund
One Corporate Center
Rye, NY 10580
Re: The Gabelli Utility Fund
Registration on Form N-14
Ladies and Gentlemen:
We have acted as special counsel to The Gabelli Utility Fund, a
business trust formed under the Delaware Business Trust Act (the "Fund"),
in connection with the registration by the Fund of 8,000,000 shares of the
Fund's Common Shares of Beneficial Interest, par value $.001 per share (the
"Shares").
In connection with this opinion, we have examined originals or
copies (including facsimile transmission), certified or otherwise
identified to our satisfaction, of (i) the Registration Statement on Form
N-14 (File No. 333-72983), as filed with the Securities and Exchange
Commission (the "Commission") on February 26, 1999 under the Securities Act
of 1933, as amended (the "1933 Act"), and Pre-Effective Amendment No. 1
thereto, as filed with the Commission on March 30, 1999, (such Registration
Statement, as so amended, being hereinafter referred to as the
"Registration Statement"); (ii) a specimen certificate representing the
Shares; (iii) the Agreement and Declaration of Trust of the Fund, as
currently in effect (the "Declaration"); (iv) the By-Laws of the Fund, as
currently in effect; and (v) certain resolutions of the Board of Trustees
of the Fund relating to the issuance and sale of the Shares and related
matters. We have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such records of the Fund and such
agreements, certificates of public officials, certificates of officers or
other representatives of the Fund and others, and such other documents,
certificates and records as we have deemed necessary or appropriate as a
basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed,
facsimile or photostatic copies and the authenticity of the originals of
such latter documents. In making our examination of documents executed or
to be executed by parties other than the Fund, we have assumed that such
parties had or will have the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due
authorization by all requisite action, corporate or other, and execution
and delivery by such parties of such documents and the validity and binding
effect thereof. As to any facts material to the opinions expressed herein
which we have not independently established or verified, we have relied
upon statements and representations of officers and other representatives
of the Fund and others.
Members of our firm are admitted to the bar in the States of New
York and Delaware, and we do not express any opinion as to any laws other
than the Delaware Business Trust Act.
Based upon and subject to the foregoing, we are of the opinion
that when Pre-Effective Amendment No. 1 to the Registration Statement
becomes effective, and, upon consommation of the transaction contemplated
by the Registration Statement, the issuance and sale of the Shares will
have been duly authorized, and the Shares will be validly issued, fully
paid and nonassessable.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. We also consent to
the reference to our firm under the caption "Legal Matters" in the
Registration Statement. In giving this consent, we do not thereby admit
that we are included in the category of persons whose consent is required
under Section 7 of the 1933 Act or the rules and regulations of the
Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
EXHIBIT (12)
March 30, 1999
The Gabelli Utility Fund
One Corporate Center
Rye, New York 10580
Ladies and Gentlemen:
We have acted as special counsel to the Gabelli Utility Fund (the
"Utility Fund"), a Delaware business trust, in connection with the proposed
issuance of all the common stock of Utility Fund to the Gabelli Equity
Trust Inc. (the "Equity Trust") in exchange for a portion of the assets of
Equity Trust, and the subsequent distribution of all the outstanding common
shares of Utility Fund common stock by Equity Trust to the holders of
record of Equity Trust's common stock.
This opinion is being furnished to you, at your request, in
connection with the filing of the Registration Statement on Form N-14 (File
No. 333-72983) with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act") on March 30, 1999
(the "Registration Statement"). Capitalized terms used but not defined
herein shall have the meanings ascribed to such terms in the Registration
Statement.
In rendering our opinion set forth below, we have examined, and
with your consent relied upon the accuracy and completeness (which we have
neither investigated nor verified) of the facts, information and
representations contained in originals or copies certified or otherwise
identified to our satisfaction of the Registration Statement and such other
documents and corporate records as we have deemed necessary or appropriate
as a basis for our opinions set forth below. In addition, we have assumed
that (i) the transactions will be consummated as described in the
Registration Statement and (ii) the Registration Statement reflects all the
material facts relating to the transactions. Our opinion is conditioned
upon, among other things, the continuing accuracy and completeness of the
facts information and representations contained in the Registration
Statement. Any material change or inaccuracy in the facts referred to, set
forth or assumed herein, or in the Registration Statement (giving effect to
all events occurring subsequent to the effective date of the Registration
Statement) may affect the conclusions stated herein.
We have also assumed the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents.
In rendering our opinion set forth below, we have considered
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations promulgated thereunder (the "Regulations"),
pertinent judicial authorities, rulings of the Internal Revenue Service and
such other authorities as we have considered relevant. It should be noted
that such laws, the Code, the Regulations, judicial decisions and
administrative interpretations are subject to change at any time and, in
some circumstances, with retroactive effect. Additionally, there can be no
assurance that contrary positions may not be taken by the Internal Revenue
Service. A material change in any of the authorities upon which our
opinion is based could affect our conclusions herein.
Based solely upon and subject to the foregoing and other
limitations, qualifications, exceptions and assumptions set forth herein,
we are of the opinion that:
The discussion in the Proxy Statement/Prospectus that forms part of
the Registration Statement under the captions "Proxy
Statement/Prospectus Summary Federal Income Tax Consequences of the
Transaction," "The Transaction Federal Income Tax Consequences of the
Transaction" and "Taxation" insofar as such discussion purports to
summarize the material United States federal income tax consequences
of the distribution of shares of common stock of Utility Fund to the
Equity Trust shareholders, and subject to the qualifications and
exceptions referred to therein, accurately summarizes such
consequences in all material respects.
Except as expressly set forth above, we express no other opinion.
This opinion is for your benefit and is not to be used,
circulated, quoted or otherwise referred to for any purpose, except we
consent to the filing of this opinion as an Exhibit to the Registration
Statement. In giving such consent, we do not thereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the Securities and Exchange
Commission thereunder.
The opinion expressed herein is as of the date hereof, and we
disclaim any undertaking to advise you of changes of facts stated or
assumed herein or any subsequent changes in applicable law.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
EXHIBIT 14
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Proxy Statement/Prospectus constituting
part of this Registration Statement on Form N-14 of our report dated March
30, 1999, relating to the statement of assets and liabilities of The
Gabelli Utility Fund at March 29, 1999. We also consent to the reference
to us under the heading "Experts" in such Proxy Statement/Prospectus.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on
Form N-14 (the "Registration Statement") of our report dated February
25,1999, relating to the financial statements and financial highlights
appearing in the December 31,1998 Annual Report to the Shareholders of The
Gabelli Equity Trust Inc. which are also incorporated by reference into the
Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Proxy Statement/Prospectus.
Exhibit (17)(a)(i)
|X| PLEASE MARK VOTES AS IN
THIS EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
For Against Abstain
|_| |_| |_|
1) To consider and vote upon a proposal to
THE GABELLI distribute to Equity Trust shareholders
EQUITY TRUST INC. of approximately $75 million of the
Equity Trust's net assets in the
HOLDERS form of shares of The Gabelli Utility Fund
OF a newly organized closed-end, registered
COMMON STOCK investment company; and
For Withhold For All
All Authority Except
|_| |_| |_|
2) To elect three (3) Directors of the
Equity Trust: Bill Callaghan,
Frank J. Fahrenkopf, Jr.,
Salvatore J. Zizza; and
Note: If you do not wish your shares voted
"For" a a particular nominee(s), mark the
"For All Except" box and strike a line
through the name(s) of the nominee(s).
Your shares will be voted for the
remaining nominee(s)
For Against Abstain
|_| |_| |_|
3) To ratify the selection of
PricewaterhouseCoopers LLP
as the independent accountants
of the Equity Trust for the
year ending December 31, 1999; and
4) To consider and vote upon such
other matters as may come before
said meeting or any adjournment
thereof.
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------
Shareholder sign here Co-owner sign here
- --------------------------------------------------------------------
Mark box at right if comments |_|
or address changes have been noted
on the reverse side of this card.
</TABLE>
DETACH CARD
THE GABELLI EQUITY TRUST INC.
Dear Shareholder:
Please take note of the important information enclosed with this Proxy
Ballot. The enclosed proxy materials discuss the proposed transaction in
detail.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on the proxy card to indicate how your shares shall
be voted. Then sign the card, detach it and return your proxy vote in the
enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders, May
17, 1999.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
The Gabelli Equity Trust Inc.
The Gabelli Equity Trust Inc.
This proxy is solicited on behalf of the Directors
The undersigned hereby appoints Mario J. Gabelli, Bruce N. Alpert and James
E. McKee, and each of them, attorneys and proxies of the undersigned, with
full powers of substitution and revocation, to represent the undersigned
and to vote on behalf of the undersigned all shares of The Gabelli Equity
Trust Inc. (the "Equity Trust") which the undersigned is entitled to vote
at the Annual Meeting of Shareholders of the Equity Trust to be held On May
17, 1999 at 9:00 a.m., and at any adjournments thereof. The undersigned
hereby acknowledges receipt of the Notice of Meeting and Proxy
Statement/Prospectus and hereby instructs said attorneys and proxies to
vote said shares as indicated herein, in their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
Meeting.
A majority of the proxies present, and acting at the Meeting in person or
by substitute (or, if only one shall be so present, then that one) shall
have and may exercise all of the power and authority of said proxies
hereunder. The undersigned hereby revokes any proxy previously given.
This proxy, if properly executed, will be voted in the manner directed by
the undersigned shareholder. If no direction is made, this proxy will be
voted FOR the proposed transaction. Please refer to the Proxy
Statement/Prospectus for a discussion of the proposed transaction.
- ---------------------------------------------------------------------------
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE
Please sign this proxy exactly as your name appears on the books of the
Equity Trust. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation, the
signature should be that of an authorized officer who should state his or
her title.
- ---------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ---------------------------------- --------------------------------
- ---------------------------------- --------------------------------
- ---------------------------------- --------------------------------
- ---------------------------------- --------------------------------
Exhibit (17)(a)(ii)
|X| PLEASE MARK VOTES AS IN
THIS EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
For Against Abstain
|_| |_| |_|
1) To consider and vote upon a proposal to
THE GABELLI distribute to Equity Trust shareholders
EQUITY TRUST INC. of approximately $75 million of the
Equity Trust's net assets in the
HOLDERS form of shares of The Gabelli Utility Fund
OF a newly organized closed-end, registered
CUMULATIVE investment company; and
PREFERRED STOCK
For Withhold For All
All Authority Except
|-| |-| |-|
2) To elect three (3) Directors of the
Equity Trust: Bill Callaghan,
Frank J. Fahrenkopf, Jr.,
Salvatore J. Zizza; and
Note: If you do not wish your shares voted "For"
a a particular nominee(s), mark the "For All
Except" box and strike a line through the
name(s) of the nominee(s). Your shares will be
voted for the remaining nominee(s)
For Against Abstain
|_| |_| |_|
3) To ratify the selection of
PricewaterhouseCoopers LLP as
the independent accountants of
the Equity Trust for the year ending
December 31, 1999; and
4) To consider and vote upon such
other matters as may come before
said meeting or any adjournment
thereof.
Please be sure to sign and date this Proxy. Date
Shareholder sign here Co-owner sign here
- ---------------------------------------------------------------
Mark box at right if comments |_|
or address changes have been noted
on the reverse side of this card.
</TABLE>
DETACH CARD
THE GABELLI EQUITY TRUST INC.
Dear Shareholder:
Please take note of the important information enclosed with this Proxy
Ballot. The enclosed proxy materials discuss the proposed transaction in
detail.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on the proxy card to indicate how your shares shall
be voted. Then sign the card, detach it and return your proxy vote in the
enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders, May
17, 1999.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
The Gabelli Equity Trust Inc.
The Gabelli Equity Trust Inc.
This proxy is solicited on behalf of the Directors
The undersigned hereby appoints Mario J. Gabelli, Bruce N. Alpert and James
E. McKee, and each of them, attorneys and proxies of the undersigned, with
full powers of substitution and revocation, to represent the undersigned
and to vote on behalf of the undersigned all shares of The Gabelli Equity
Trust Inc. (the "Equity Trust") which the undersigned is entitled to vote
at the Annual Meeting of Shareholders of the Equity Trust to be held On May
17, 1999 at 9:00 a.m., and at any adjournments thereof. The undersigned
hereby acknowledges receipt of the Notice of Meeting and Proxy
Statement/Prospectus and hereby instructs said attorneys and proxies to
vote said shares as indicated herein, in their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
Meeting.
A majority of the proxies present, and acting at the Meeting in person or
by substitute (or, if only one shall be so present, then that one) shall
have and may exercise all of the power and authority of said proxies
hereunder. The undersigned hereby revokes any proxy previously given.
This proxy, if properly executed, will be voted in the manner directed by
the undersigned shareholder. If no direction is made, this proxy will be
voted FOR the proposed transaction. Please refer to the Proxy
Statement/Prospectus for a discussion of the proposed transaction.
- ---------------------------------------------------------------------------
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE
Please sign this proxy exactly as your name appears on the books of the
Equity Trust. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation, the
signature should be that of an authorized officer who should state his or
her title.
- -----------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- --------------------------------- -------------------------------
- --------------------------------- -------------------------------
- --------------------------------- -------------------------------
- --------------------------------- -------------------------------
EXHIBIT (17)(b)
PURCHASE AGREEMENT
The Gabelli Utility Fund, a business trust organized under the
laws of the State of Delaware (the "Fund"), and The Gabelli Equity Trust
Inc. (the "Equity Trust"), a corporation organized under the laws of the
State of Maryland, hereby agree as follows:
1. The Fund offers to the Equity Trust and the Equity Trust
hereby purchases from the Fund 10,000 shares of common stock, par value
$.001 per share, of the Fund (the "Shares") at a price of $10 per Share.
The Equity Trust hereby acknowledges that it has been advised that the
Shares, which are not represented by certificates, have been recorded for
the account of the Equity Trust in the records of the Fund's transfer agent
and the Fund hereby acknowledges receipt from the Equity Trust of $100,000
in full payment for the Shares.
2. The Equity Trust represents and warrants to the Fund that
the Shares are being acquired for investment purposes and not for the
purpose of distribution.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 29th day of March 1999.
THE GABELLI UTILITY FUND
Attest:
By: /s/ Bruce N. Alpert
-------------------------
Name: Bruce N. Alpert
/s/ Gus Coutsouros Title: Treasurer
------------------------
THE GABELLI EQUITY TRUST INC.
Attest: By: /s/ Marc S. Diagonale
----------------------------
Name: Marc S. Diagonale
James E. McKee Title: Vice President
--------------------------
EXHIBIT (17)(d)
TERMS AND CONDITIONS OF
AUTOMATIC DIVIDEND REINVESTMENT
AND
VOLUNTARY CASH PURCHASE PLAN
1. Each shareholder (a "Shareholder") holding shares of common stock
("Shares") of The Gabelli Utility Fund (the "Fund") will automatically be a
participant in the Automatic Dividend Reinvestment and Voluntary Cash
Purchase Plan (the "Plan"), unless the Shareholder specifically elects to
receive all dividends and capital gains in cash paid by check mailed
directly to the Shareholder (or sent to the Shareholder's bank account) by
State Street Bank and Trust Company as agent under the Plan (the "Agent").
The Agent will open an account for each Shareholder under the Plan in the
same name in which such Shareholder's shares of Common Stock are
registered.
2. Whenever the Fund declares a capital gains distribution or an income
dividend payable in Shares or cash, participating Shareholders will take
the distribution or dividend entirely in Shares and the Agent will
automatically receive the Shares, including fractions, for the
Shareholder's account. The process is as follows:
Whenever the market price per Share is equal to or exceeds
the net asset value at the time Shares are valued for the purpose
of determining the number of Shares equivalent to the cash
dividend or capital gains distribution (the "Valuation Date"),
participants will be issued Shares at the greater of (i) net
asset value or (ii) 95% of the then current market price of the
Shares. The Valuation Date is the dividend or distribution
payment date or, if that date is not a New York Stock Exchange
trading day, the next trading day. If the net asset value of the
Shares on the Valuation Date exceeds the market price of the
Shares at that time, participants will receive shares from the
Fund valued at market price.
If the Fund should declare a dividend or capital gains
distribution payable only in cash, the Agent will, as purchasing
agent for the participants, buy Shares in the open market, on the
New York Stock Exchange (the "exchange") or elsewhere, for the
participants' accounts after the payment date, except that the
Agent will endeavor to terminate purchases in the open market and
cause the Fund to issue the remaining Shares if, following the
commencement of the purchases, the market value of the Shares
exceeds that day's closing net asset value. These remaining
shares will be issued by the Fund at a price equal to the greater
of (i) net asset value or (ii) 95% of the then current market
price.
In a case where the Agent has terminated open market
purchases and caused the issuance of remaining Shares by the
Fund, the number of shares received by the participant in respect
of the cash dividend or distribution will be based on the
weighted average of prices paid for Shares purchased in the open
market and the price at which the Fund issues remaining Shares.
To the extent that the Agent is unable to terminate purchases in
the open market before the Agent has completed its purchases, or
remaining Shares cannot be issued by the Fund because the Fund
declared a dividend or distribution payable only in cash, and the
market price exceeds the net asset value of the Shares, the
average Share purchase price paid by the Agent may exceed the net
asset value of the Shares, resulting in the acquisition of fewer
Shares than if the dividend or capital gains distribution had
been paid in Shares issued by the Fund.
The Agent will apply all cash received as a dividend or
capital gains distribution to purchase shares of common stock on
the open market as soon as practicable after the payment date of
the dividend or capital gains distribution, but in no event later
than 45 days after that date, except when necessary to comply
with applicable provisions of the federal securities laws.
3. For all purposes of the Plan: (a) the market price of Fund Shares on a
particular date shall be the last sale price on the Exchange on that date
or, if no sale occurred on the Exchange on that date, then the mean between
the closing bid and asked quotations for the Shares on the Exchange on such
date and (b) net asset value per share on a particular date shall be as
determined by or on behalf of the Fund.
4. The open-market purchases provided for above may be made on any
securities exchange on which the Shares of the Fund are traded, in the
over-the-counter market or in negotiated transactions, and may be on such
terms as to price, delivery and otherwise as the Agent shall determine.
Funds held by the Agent uninvested will not bear interest, and it is
understood that, in any event, the Agent shall have no liability in
connection with any inability to purchase Shares within 45 days after the
initial date of such purchase as herein provided, or with the timing of any
purchases effected. The Agent shall have no responsibility as to the value
of the Shares of the Fund acquired for the Shareholder's account.
5. The Agent will hold Shares acquired pursuant to the Plan in non-
certificated form in the Agent's name or that of its nominee. The Agent
will forward to the Shareholder any proxy solicitation material and will
vote any Shares so held for the Shareholder only in accordance with the
proxy returned by her or him to the Fund. Upon the Shareholder's written
request, the Agent will deliver to her or him, without charge, a
certificate or certificates for the full Shares.
6. The Agent will confirm to the Shareholder each acquisition made for her
or his account as soon as practicable but not later than 60 days after the
date thereof. Although the Shareholder may from time to time have an
individual fractional interest (computed to four decimal places) in a Share
of the Fund, no certificates for a fractional Share will be issued.
However, dividends and distributions on fractional Shares will be credited
to the Shareholder's account. In the event of a termination of a
Shareholder's account under the Plan, the Agent will adjust for any such
undivided fractional interest in cash at the opening market value of the
Shares at the time of termination.
7. Any stock dividends or split Shares distributed by the Fund on Shares
held by the Agent for the Shareholder will be credited to the Shareholder's
account. In the event that the Fund makes available to the Shareholder
rights to purchase additional Shares or other securities, the Shares held
for a Shareholder under the Plan will be added to other shares held by the
Shareholder in calculating the number of rights to be issued to such
Shareholder.
8. The Agent's service fee for handling capital gains distributions or
income dividends will be paid by the Fund. The Shareholder will be charged
a pro rata share of brokerage commissions on all open market purchases.
9. A Shareholder wishing to terminate her or his account under the Plan
may do so by written or telephone notification to the Agent of such intent.
If such notice is received by the Agent less than 10 days prior to any
dividend or distribution record date, then such termination shall be
immediately effective with respect to all shares then held in the
Shareholder's account except that any shares to be received pursuant to the
reinvestment of dividends or distributions shall be terminated on the first
trading day after such shares have been credited to the Shareholder's
account. Upon any termination the Agent will cause a certificate or
certificates for the full Shares held for the Shareholder under the Plan
and cash adjustment for any fraction to be delivered to her or him. If the
Shareholder elects by notice to the Agent in writing in advance of such
termination to have the Agent sell part or all of her or his shares and
remit the proceeds to her or him, the Agent is authorized to deduct $2.50
per transaction plus brokerage commissions for this transaction from the
proceeds.
10. Shareholders have the option of sending additional funds, two times
per month, in any amount from $250 to $10,000, for the purchase on the open
market of shares of the common stock of the Fund for Shareholder's
accounts. Voluntary payments will be invested on or shortly after the 1st
or the 15th of each month, and in no event more than 45 days after such
dates except where temporary curtailment or suspension of purchases is
necessary to comply with applicable provisions of federal securities law.
Funds not received at least five business days before the 1st or the 15th
will be held for investment on the next investment date. Shareholders may
withdraw their entire voluntary cash payment by written notice not less
that 48 hours before such payment is to be invested.
11. Investments of voluntary cash payments and other open-market purchases
provided for above may be made on any securities exchange where the Fund's
Common stock is traded, in the over-the-counter market or in negotiated
transactions and may be on such terms as to price, delivery and otherwise
as the Agent shall determine. Funds held by the Agent uninvested will not
bear interest, and it is understood that, in any event, the Agent shall
have no liability in connection with any inability to purchase shares
within 45 days after the initial date of such purchase as herein provided,
or with the timing of any Purchases effected. The Agent shall have no
responsibility as to the value of the common stock of the Fund acquired for
the Shareholders' account. For the Purposes of cash investments the Agent
may commingle Shareholder funds with those of other Shareholders of the
Fund for whom the Agent also acts as Agent, and the average price
(including brokerage commissions) of all shares purchased by the Agent
shall be the price per share allocable to the Shareholder in connection
therewith. The cost per transaction is $0.75.
12. The Agent may hold Shareholder's shares acquired pursuant to
Shareholder authorization, together with the shares of other Shareholders
of the Fund acquired pursuant to similar authorization, in non-certificated
form in the name of the Agent or that of the Agent's nominee. The Agent
will forward to each Shareholder any proxy solicitation material and will
vote any shares held for the Shareholder only in accordance with the proxy
returned by the Shareholder to the Fund. Upon written request the Agent
will deliver to the Shareholder, without charge, a certificate or
certificates for the full shares.
13. These terms and conditions may be amended or supplemented by the Agent
or the Fund at any time or times but, except when necessary or appropriate
to comply with applicable law or the rules or policies of the Securities
and Exchange Commission or any other regulatory authority, only by mailing
to the Shareholder appropriate written notice at least 90 days prior to the
effective date thereof. The amendment or supplement shall be deemed to be
accepted by the Shareholder unless, prior to the effective date thereof,
the Agent receives written notice of the termination of the Shareholder
account under the Plan. Any such amendment may include an appointment by
the Fund of a successor agent in its place and stead under these terms and
conditions, with full power and authority to perform all or any of the acts
to be performed by the Agent. Upon any such appointment of an Agent for
the purpose of receiving dividends and distributions, the Fund will be
authorized to pay to such successor Agent, for Shareholders' accounts, all
dividends and distributions payable on Shares held in the Shareholders'
name or under the Plan for retention or application by such successor Agent
as provided in these terms and conditions.
14. In the case of Shareholders, such as banks, brokers or nominees, which
hold Shares for others who are the beneficial owners, the Agent wflI
administer the Plan on the basis of the number of Shares certified from
time to time by the Shareholders as representing the total amount
registered in the Shareholder's name and held for the account of beneficial
owners who are to participate in the Plan.
15. The Agent shall at all times act in good faith and agree to use its
best efforts within reasonable limits to insure the accuracy of all
services performed under this agreement and to comply with applicable law,
but assumes no responsibility and shall not be liable for loss or damage
due to errors unless the errors are caused by its negligence, bad faith or
willful misconduct or that of its employees.
