As filed with the Securities and Exchange Commission on May 21, 1999
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Investment Company
Act File no. 811-09243
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT
Amendment No. __
The Gabelli Utility Fund
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(Exact Name of Registrant as Specified in Charter)
One Corporate Center, Rye, New York 10580
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(Address of Principal Executive Offices) (Zip code)
(Registrant's telephone number, including area code) (914) 921-5070
Bruce N. Alpert
The Gabelli Utility Fund
One Corporate Center
Rye, New York 10580
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(Name and Address of Agent for Service)
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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
PART A - INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Outside Front Cover
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Not applicable.
Item 2. Inside Front Cover and Outside Back Cover Page
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Not applicable.
Item 3. Fee Table and Synopsis
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Item 3.1. Fee Table.
The following table sets forth certain fees and estimated
expenses of The Gabelli Utility Fund (the "Registrant").
TABLE OF FEES AND EXPENSES
Registrant
SHAREHOLDER TRANSACTION EXPENSES
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Automatic Dividend Reinvestment and Voluntary
Cash Purchase Plan Fees . . . . . . . . . . . . . . . . . . . (1)
ANNUAL OPERATING EXPENSES (as a percentage of net assets
attributable to common shares)
Management Fees . . . . . . . . . . . . . . . . . . . . . . . 1.00%
Other Expenses (2) . . . . . . . . . . . . . . . . . . . . . 0.75%
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Total Annual Operating Expenses . . . . . . . . . . . . 1.75%
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(1) Shareholders participating in the Registrant's Automatic Dividend
Reinvestment and Voluntary Cash Purchase Plan would pay $0.75 per
transaction to purchase shares and $2.50 per transaction to sell
shares. See "Automatic Dividend Reinvestment and Voluntary Cash
Purchase Plan" in Item 10.
(2) "Other expenses" are based on estimated amounts for the first full
fiscal year for the Registrant.
EXAMPLE
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The following examples illustrate the projected dollar amount of
cumulative expenses that would be incurred over various periods with
respect to a hypothetical investment in the Registrant. These amounts are
based upon payment by the Registrant of expenses at levels set forth in the
above table.
You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return: (3)
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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$18 $55 $95 $206
The foregoing table is to assist you in understanding the various
costs and expenses that an investor in the Registrant will bear directly or
indirectly. The assumed 5% annual return is not a prediction of, and does
not represent, the projected or actual performance of the common shares of
beneficial interest of the Registrant (the "Common Stock"). Actual
expenses and annual rates of return may be more or less than those assumed
for purposes of the Example.
The Registrant is a newly-formed entity with no operating
history. As such, expenses are estimated based on the anticipated size of
the Registrant as of the date of this Proxy Statement/Prospectus.
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(3) Amounts are exclusive of fees discussed in Note (1) above.
Item 3.2. Synopsis.
Not applicable.
Item 4. Financial Highlights
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Not applicable.
Item 5. Plan of Distribution
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Not applicable.
Item 6. Selling Shareholders
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Not applicable.
Item 7. Use of Proceeds
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Not applicable.
Item 8. General Description of the Registrant
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Item 8.1. General.
The Registrant is a non-diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Registrant was organized under the laws of the State of
Delaware on February 25, 1999.
Item 8.2. Investment Objectives and Policies.
The primary objective of the Registrant is long-term growth of
capital and income, which the Registrant attempts to achieve by investing
at least 65% of its total assets in common stock and other securities of
foreign and domestic companies involved to a substantial extent 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. The Registrant may also invest in
preferred stocks and debt securities of any quality and any maturity of
such companies when it appears that the Registrant will be better able to
achieve its investment objective through investments in such securities or
when the Registrant 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.
Morever, should extraordinary conditions affecting such sectors or
securities markets as a whole warrant, the Registrant may temporarily be
primarily invested in money market instruments.
The companies in which the Registrant 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 Registrant intends to focus on those companies whose
securities have the potential to increase in value. The Registrant'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 Registrant 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 Registrant intends to
position itself to take advantage of trends in consolidation.
Under normal circumstances the Registrant 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 Registrant 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 Registrant's investment
objectives and policies, see "Investment Objectives and Policies" in Item
17 and "Risk Factors" in Item 8.3.
Gabelli Funds, LLC, a New York limited liability company, with
offices at One Corporate Center, Rye, New York 10580-1434 (the "Investment
Adviser") will serve as investment adviser to the Registrant.
Item 8.3. Risk Factors.
INDUSTRY RISKS. The Registrant will invest a significant portion
of its assets in particular types of companies, and, as a result, the value
of the Registrant'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.
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 Registrant to
make certain investments.
In addition, deregulation of the utility industry could have a
positive or negative impact on the Registrant's shares. The Investment
Adviser believes that certain utility companies' fundamentals should
continue to improve as the industry undergoes deregulation. Companies may
seek to strengthen their competitive positions through mergers and
takeovers. The loosening of the government regulation of utilities should
encourage convergence within the industry. Improving earnings prospects,
strong cash flows, share repurchases and takeovers from industry
consolidation may tend to boost share prices. However, 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. The Registrant is intended for investors
seeking long-term capital growth and income. The Registrant is not meant
to provide a vehicle for those who wish to play short-term swings in the
stock market. An investment in shares of the Registrant 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 Registrant is classified as a "non-
diversified" investment company under the 1940 Act, which means that the
Registrant is not limited by the 1940 Act in the proportion of its assets
that may be invested in the securities of a single issuer. However, the
Registrant intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986, as amended (the "Code"), which will relieve it of any liability for
federal income tax if all of its earnings are distributed to shareholders.
See "Tax Status" in Item 22. To so qualify, among other requirements, the
Registrant 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 Registrant in U.S. Government Securities
are not subject to these limitations. Because the Registrant, as a non-
diversified investment company, may invest in the securities of individual
issuers to a greater degree than a diversified investment company, an
investment in the Registrant may, under certain circumstances, present
greater risk to an investor than an investment in a diversified company.
MARKET VALUE AND NET ASSET VALUE. The Registrant 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 Registrant's net asset value will decrease. The risk of holding
shares of a closed-end fund that might trade at a discount is more
pronounced for shareholders who wish to sell their shares in a relatively
short period of time after acquiring them because, for those investors,
realization of a gain or loss on their investments is likely to be more
dependent upon the existence of a premium or discount than upon portfolio
performance. The Registrant's shares are not subject to redemption.
Shareholders desiring liquidity may, subject to applicable securities laws,
trade their shares in the Registrant on the New York Stock Exchange or
other markets on which such shares may trade at the then current market
value, which may differ from the then current net asset value.
LOWER RATED SECURITIES. The Registrant may invest up to 10% of
its total assets in fixed-income securities rated in the lower rating
categories of recognized statistical rating agencies, such as securities
rated "CCC" or lower by S&P or "Caa" or lower by Moody's, Inc., or non-
rated securities of comparable quality. These debt securities are
predominantly speculative and involve major risk exposure to adverse
conditions and are often referred to in the financial press as "junk
bonds."
FOREIGN SECURITIES. There is no limitation on the amount of
foreign securities in which the Registrant 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 Registrant 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 Registrant 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 Registrant may also invest in debt
securities of foreign governments.
For a further description of lower rated securities and the risks
associated therewith, see "Investment Objectives and Policies Lower Rated
Securities" in Item 17.
RISKS TO HOLDERS OF COMMON STOCK OF ISSUANCE OF SENIOR
SECURITIES. As provided in the 1940 Act and subject to certain exceptions,
the Registrant 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 20% of the sum of the
amount of the debt outstanding. Such debt or preferred stock may be
convertible in accordance with Securities and Exchange Commission ("SEC")
guidelines which may permit the registrant to obtain leverage at attractive
rates. A leveraged capital structure creates certain special risks and
potential benefits not associated with unleveraged funds having similar
investment objectives and policies. Any investment income or gains from
the capital represented by preferred shares or debt which is in excess of
the dividends payable thereon will cause the total return of the common
shares to be higher than would otherwise be the case. Conversely, if the
investment performance of the capital represented by preferred shares or
debt fails to cover the dividends payable thereon, the total return of the
common shares would be less or, in the case of negative returns, would
result in higher negative returns to a greater extent than would otherwise
be the case. The requirement 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, the Registrant 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 Registrant
maintains the necessary asset coverage.
The class voting rights of preferred shares could make it more
difficult for the Registrant 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 Registrant's securities if such actions would be
adverse to the preferred shares, or such as changing to an open-end
investment company or acting inconsistently with its fundamental investment
restrictions or other fundamental policies or seeking to operate other than
as an investment company.
Preferred shares will be issued only if the Board of the
Registrant determines in light of all relevant circumstances known to the
Board that to do so would be in the best interests of the Registrant 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 to the historical performance of the
Registrant but also such matters as the terms on which the Registrant 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 Registrant to
meet the asset coverage tests and other requirements imposed by the rating
agencies for such preferred shares.
The issuance of preferred shares convertible into shares of
common stock might also reduce the net income and net asset value per share
of the common shares upon conversion. Such income dilution would occur if
the Registrant 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 Registrant 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.
Item 8.4. Other Policies.
The Registrant 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 Registrant may make short sales of
securities. See Item 17, "Investment Objectives and Policies," for a
discussion of these investments and techniques and the risks associated
with them.
Item 8.5. Share Price Data.
Not applicable. The Registrant's shares have been authorized for
listing on the New York Stock Exchange upon notice of issuance of such
shares.
Item 8.6. Business Development Companies.
Not applicable.
Item 9. Management
Item 9.1. General.
(a) BOARD OF TRUSTEES. Overall responsibility for management
and supervision of the Registrant rests with its Board of Trustees. The
Board of Trustees approves all significant agreements between the
Registrant and the companies that furnish the Registrant with services,
including agreements with the Investment Adviser, the Registrant's
custodian and the Registrant's transfer agent. The day-to-day operations
of the Registrant are delegated to the Investment Adviser.
(b) INVESTMENT ADVISER. 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. The Investment Adviser,
together with other affiliated investment advisers, has assets under
management totaling $16.2 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.
(c) PORTFOLIO MANAGEMENT. Mario J. Gabelli will be the leader
of a team which will manage the Registrant's assets. For a list of Mr.
Gabelli's other affiliations, see "Trustees and Officers" in Item 18.
(d) ADMINISTRATOR. The Investment Adviser has entered into sub-
administration agreement with First Data Investor Services Group Inc. (the
"Sub-Administrator") pursuant to which the Sub-Administrator provides
certain administrative services necessary for the Registrant 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 Sub-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 Registrant and all other
funds advised by the Investment Adviser and administered by the Sub-
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 and
both parties retain the right unilaterally to terminate the arrangements on
60 days written notice. The Sub-Administrator has its principal office at
101 Federal Street, Boston, MA 02110.
(e) EXPENSES. For purposes of the calculation of the fees
payable to the Investment Adviser by the Registrant, average weekly net
assets of the Registrant 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 Investment
Advisory Agreement between the Registrant and the Investment Adviser (the
"Advisory Agreement") including compensation of and office space for its
officers and employees connected with investment and economic research,
trading and investment management and administration of the Registrant, as
well as the fees of all trustees of the Registrant who are affiliated with
the Investment Adviser. The Registrant pays all other expenses incurred in
its operation including, among other things, expenses for legal and
independent accountants' services, costs of printing proxies, stock
certificates and shareholder reports, charges of the custodian, any
subcustodian and transfer and dividend paying agent, expenses in connection
with its respective Automatic Dividend Reinvestment and Voluntary Cash
Purchase Plan, SEC fees, fees and expenses of unaffiliated directors,
accounting and pricing costs, membership fees in trade associations,
fidelity bond coverage for its officers and employees, directors' and
officers' errors and omission insurance coverage, interest, brokerage
costs, taxes, stock exchange listing fees and expenses, expenses of
qualifying its shares for sale in various states, litigation and other
extraordinary or non-recurring expenses, and other expenses properly
payable by the Registrant.
(f) AFFILIATED BROKERAGE. Subject to policies established by
the Board of Trustees of the Registrant, the Investment Adviser is
responsible for placing purchase and sales orders and the allocation of
brokerage on behalf of the Registrant. 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 Registrant. 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
Registrant's Board of Trustees have determined that portfolio transactions
may be executed through Gabelli & Company and its broker-dealer affiliates
if, in the judgment of the 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 Registrant a rate at least as
favorable as that charged to comparable unaffiliated customers in similar
transactions. The Registrant 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 Registrant, 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 Registrant does not necessarily pay the lowest
commission available.
Item 9.2. Non-Resident Managers.
Not applicable.
Item 10. Capital Stock, Long-Term Debt and Other Securities
Item 10.1. Capital Stock.
The Registrant is authorized to issue an unlimited number of
shares of beneficial interest, par value $.001 per share, in multiple
classes and series thereof as determined from time to time by the Board of
Trustees. The Board of Trustees of the Registrant has authorized issuance
of an unlimited number of shares of two classes, the Common Stock and
preferred stock. Each share within a particular class or series thereof
has equal voting, dividend, distribution and liquidation rights. When
issued, in accordance with the terms thereof, shares of Common Stock will
be fully paid and non-assessable. Shares of Common Stock are not
redeemable and have no preemptive, conversion or cumulative voting rights.
DISTRIBUTION POLICY. The Registrant intends to file an exemptive
application with the SEC requesting an order of exemption from Section
19(b) of the 1940 Act enabling it to distribute to shareholders
substantially all of its net investment income monthly and capital gains
quarterly or more frequently. The Registrant intends to adopt a fixed
dividend policy, at a rate to be determined. The dividend policy of the
Registrant may be modified from time to time by the Registrant's Board of
Trustees. As a regulated investment company under the Code, the Registrant
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.
REPURCHASE OF SHARES. The Registrant is a closed-end, management
investment company and as such its shareholders do not, and will not, have
the right to redeem their shares. The Registrant, 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 Registrant's shares are
trading at a discount of 10% or more (or such other percentage as the Board
of Trustees of the Registrant may determine from time to time) from the net
asset value of the shares. Pursuant to the 1940 Act, the Registrant may
repurchase its shares on a securities exchange (provided that the
Registrant 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 Registrant.
When the Registrant 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.
DETERMINATION OF NET ASSET VALUE. The net asset value of the
Registrant's shares will be computed, based on the market value of the
securities it holds and determined daily as of the close of regular trading
on the New York Stock Exchange.
Portfolio instruments of the Registrant which are traded in a
market subject to government regulation on which trades are reported
contemporaneously will be valued at the last sale price on the principal
market for such instruments as of the close of regular trading on the day
the instruments are being valued, or lacking any sales, at the average of
the bid and asked price on the principal market for such instruments on the
most recent date on which bid and asked prices are available. Other
readily marketable assets will be valued at the average of quotations
provided by dealers maintaining an active market in such instruments.
Securities and other assets for which market quotations are not readily
available will be valued at fair value as determined in good faith by or
under the direction of the Board of Trustees. Short-term investments that
mature in more than 60 days are valued at the highest bid price 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 Trustees. Short-term investments that mature in 60 days or fewer are
valued at amortized cost, unless the Board of Trustees determines that such
valuation does not constitute fair value. The Registrant may employ
recognized pricing services from time to time for the purpose of pricing
portfolio instruments.
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.
AUTOMATIC DIVIDEND REINVESTMENT AND VOLUNTARY CASH PURCHASE PLAN.
Under the Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan
adopted by the Registrant ( 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 Registrant valued
at market price. If the Registrant should declare a dividend or capital
gains distribution payable only in cash, State Street will buy the
Registrant's Common Stock for the 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 Registrant 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, twice per month for the Registrant, for
investment in the shares. Such payments may be made in any amount from
$250 to $10,000. State Street will use all funds received from
participants to purchase shares of the Registrant in the open market on the
1st and 15th of each month. 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 Registrant. There are no brokerage
charges with respect to shares issued directly by the Registrant 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 Registrant 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.
CERTAIN PROVISIONS OF THE DECLARATION OF TRUST AND BY-LAWS OF THE
REGISTRANT. The Registrant presently has provisions in its Declaration of
Trust and By-Laws (together, its "Governing Documents") which could have
the effect of limiting, in each case, (i) the ability of other entities or
persons to acquire control of the fund, (ii) the Registrant's freedom to
engage in certain transactions, or (iii) the ability of the Registrant's
trustees or shareholders to amend the Governing Documents or effectuate
changes in the Registrant's management. These provisions of the Governing
Documents of the Registrant may be regarded as "anti-takeover" provisions.
The Board of Trustees of the Registrant is divided into three classes, each
having a term of no more than three years (except, to ensure that the term
of a class of the Registrant's trustees expires each year, one class of the
Registrant's trustees will serve an initial one-year term and three-year
terms thereafter and another class of its trustees will serve an initial
two-year term and three-year terms thereafter). Each year the term of one
class of trustees will expire. Accordingly, only those trustees in one
class may be changed in any one year, and it would require a minimum of two
years to change a majority of the Board of Trustees. Such system of
electing trustees may have the effect of maintaining the continuity of
management and, thus, make it more difficult for the shareholders of the
Registrant to change the majority of trustees. See "Trustees and Officers"
in Item 18. A trustee of the Registrant may be removed with or without
cause by 662/3% of the votes entitled to be cast for the election of such
trustees. This voting requirement also applies to mergers into or a sale
of all or substantially all of the Registrant's 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 Registrant issues preferred stock, a
majority of the outstanding shares of preferred stock or, if less, 662/3%
of the preferred stock voting on such matter if a majority of such shares
are present and voting. In addition, 80% of the holders of the outstanding
voting securities of the Registrant voting as a class is generally required
in order to authorize any of the following transactions:
(i) merger or consolidation of the Registrant with or into any
other corporation;
(ii) issuance of any securities of the Registrant to any person
or entity for cash;
(iii) sale, lease or exchange of all or any substantial part
of the assets of the Registrant 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 Registrant, in exchange for
securities of the Registrant, of any assets of any entity or person
(except assets having an aggregate fair market value of less than
$1,000,000);
(v) the purchase of the Registrant's Common Stock by the
Registrant 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 Registrant. However, such vote would not be required when, under
certain conditions, the Board of Trustees approves the transaction.
Reference is made to the Governing Documents of the Registrant, on file
with the SEC, for the full text of these provisions.
The provisions of the Governing Documents described above could
have the effect of depriving the owners of shares in the Registrant of
opportunities to sell their shares at a premium over prevailing market
prices, by discouraging a third party from seeking to obtain control of the
Registrant 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 TRUSTEES' LIABILITY. The Governing
Documents of the Registrant provide that the Registrant will indemnify its
trustees and officers and may indemnify its employees or agents against
liabilities and expenses incurred in connection with litigation in which
they may be involved because of their positions with the Registrant, to the
fullest extent permitted by law. However, nothing in the Governing
Documents of the Registrant protects or indemnifies a trustee, officer,
employee or agent of the Registrant 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.
Item 10.2. Long-Term Debt.
Not applicable. The Registrant has not issued any long-term
debt.
Item 10.3. General.
The Registrant has authorized the issuance of preferred stock as
described in Item 10.1.
Item 10.4. Taxes.
The following is a summary of the material federal tax
considerations affecting the Registrant and its shareholders; see Item 22,
"Tax Status," for a further discussion. In addition to the considerations
described below and in Item 22, which are applicable to any investment in
the Registrant, there may be other federal, state, local or foreign tax
considerations applicable to particular investors. Prospective
shareholders are urged to consult their tax advisors with respect to the
consequences to them of an investment in the Registrant.
The Registrant intends to elect and qualify to be treated as a
regulated investment company under the Code. Accordingly, if the
Registrant 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),
then the Registrant will not be subject to federal income tax on the
portion of the taxable income and gain it distributes to its shareholders.
The Registrant will be subject to tax at regular corporate rates on any
undistributed ordinary income or net capital gain. In addition, if the
Registrant 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 Registrant), 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 Registrant intends to make such
distributions as are necessary to avoid the application of this excise tax.
For any period in which the Registrant 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 the Registrant's current and
accumulated earning and profits, whether paid in cash or reinvested in the
shares of the Registrant. Distributions by the Registrant of net long-term
capital gains (designated by the Registrant 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 Registrant
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 Registrant 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 Registrant
(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 Registrant to its shareholders, that corresponds to the
dividends paid with respect to such securities will not be eligible for the
corporate dividends-received deduction.
CAPITAL GAIN DISTRIBUTIONS. To the extent that the Registrant
retains any net long-term capital gains, the Registrant may designate such
gains as "deemed distributions" and pay a tax thereon for the benefit of
its shareholders. In that event, the shareholders report their share of
the Registrant's 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 the Registrant. 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
Registrant upon filing appropriate returns or claims for refund with the
proper tax authorities.
Item 10.5. Outstanding Securities.
Set forth below is information with respect to the Common Stock as of
May 21, 1999.
Amount Held by Company Amount
Amount Authorized or for Its Own Account Outstanding
----------------- ---------------------- -----------
unlimited 0 shares 10,000 shares
Item 10.6. Securities Ratings
Not applicable.
Item 11. Defaults and Arrears on Senior Securities
-----------------------------------------
Item 11.1.
Not applicable. No issue of capital stock of the Registrant is
in arrears as to the payment of dividends.
Item 11.2.
Not applicable. The Registrant has not issued any long-term
debt.
Item 12. Legal Proceedings
-----------------
To the knowledge of the Registrant, there are no material pending
legal proceedings, as that term is defined in the instructions to this
item, to which the Registrant or Investment Adviser is a party.
Item 13. Table of Contents of the Statement of Additional Information
------------------------------------------------------------
Not applicable.
PART B - INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 14. Cover Page
----------
Not applicable.
Item 15. Table Of Contents
-----------------
Not applicable.
Item 16. General Information and History
-------------------------------
Not applicable.
Item 17. Investment Objectives and Policies
----------------------------------
INVESTMENT OBJECTIVES AND POLICIES. The primary objective of the
Registrant is long-term growth of capital and income, which the Registrant
attempts to achieve by investing at least 65% of its total assets in common
stock and other securities of foreign and domestic companies involved to a
substantial extent 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. The Registrant may also
invest in preferred stocks and debt securities of any quality and any
maturity of such companies when it appears that the Registrant will be
better able to achieve its investment objective through investments in such
securities or when the Registrant 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.
Morever, should extraordinary conditions affecting such sectors or
securities markets as a whole warrant, the Registrant may temporarily be
primarily invested in money market instruments.
The companies in which the Registrant 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 Registrant intends to focus on those companies whose
securities have the potential to increase in value. The Registrant'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 Registrant 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 Registrant intends to
position itself to take advantage of trends in consolidation.
Under normal circumstances the Registrant 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 Registrant 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 Registrant's investment
objectives and policies, see "Risk Factors" in Item 8.3.
INVESTMENT METHODOLOGY. In selecting securities for the
Registrant, 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 Registrant 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.
OTHER INVESTMENT PRACTICES. The Registrant is permitted to
invest in securities subject to reorganization, 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" and or "delayed delivery" basis and make short sales of securities.
SECURITIES SUBJECT TO REORGANIZATION. The Registrant 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 Registrant, 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 Registrant'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 Registrant 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 Registrant may invest are obligations
of the United States Government, its agencies or instrumentalities ("U.S.
Government Securities"); commercial paper rated A-1 or higher by Standard &
Poor's Corporation ("S&P") or Prime-1 by Moody's Investors Service, Inc.
("Moody's"); and certificates of deposit and bankers' acceptances issued by
domestic branches of U.S. banks that are members of the Federal Deposit
Insurance Corporation. During temporary defensive periods, the Registrant
may also invest to the extent permitted by applicable law in shares of
money market mutual funds. Money market mutual funds are investment
companies and the investments in those companies in some cases by the
Registrant are subject to certain fundamental investment restrictions and
applicable law. See "Investment Restrictions" in Item 17. As a
shareholder in a mutual fund, the Registrant will bear its ratable share of
the its expenses, including management fees, and will remain subject to
payment of the fees to the Investment Adviser, with respect to assets so
invested. See Item 20, "Investment Advisory and Other Services."
LOWER RATED SECURITIES. The Registrant 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 the Registrant
to obtain accurate market quotations for purposes of valuing its portfolio
and calculating its net asset value. Moreover, the lack of a liquid
trading market may restrict the availability of securities for the
Registrant to purchase and may also have the effect of limiting the ability
of the Registrant 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
Registrant 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
Registrant 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 Registrant may invest in securities of issuers in default
within their limitations on the purchase of fixed-income securities. The
Registrant 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 Registrant 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 Registrant, 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 Registrant, 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 Registrant, although the Investment Adviser will consider these
events in determining whether the Registrant 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 Registrant. If an issuer exercises these rights
during periods of declining interest rates, the Registrant may have to
replace the security with a lower yielding security, thus resulting in a
decreased return for the Registrant.
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 Registrant 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 Registrant 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
Registrant 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 Registrant 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 Registrant will be unable to effect a closing purchase transaction.
Similarly, if the Registrant 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 Registrant so desires.
The Registrant 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 Registrant 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 or in a
private transaction. Although the Registrant 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
Registrant 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 Registrant, 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 Registrant
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 Registrant is obligated, in return for the premium
received, to make delivery of this amount. The Registrant 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 Registrant 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 Registrant 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. The Registrant will not purchase
these options unless the Investment Adviser is satisfied with the
development, depth and liquidity of the market and the Investment Adviser
believes the options can be closed out.
Price movements in the portfolio of the Registrant 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 Registrant's writing of put
and call options, there can be no assurance that the Registrant will
succeed in any option-writing program it undertakes.
FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Registrant will
not enter into futures contracts or options on futures contracts unless (i)
the aggregate initial margins and premiums do not exceed 5% of the fair
market value of its assets and (ii) the aggregate market value of its
outstanding futures contracts and the market value of the currencies and
futures contracts subject to outstanding options written by the Registrant
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 Registrant
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 Registrant. In
this regard, the Registrant 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 Registrant upon
the purchase or sale of a futures contract. Initially, the Registrant 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 Registrant 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 Registrant.
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 Registrant 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 Registrant sells a put option or enters into
long futures contracts, under current interpretations of the 1940 Act, an
amount of cash, obligations of the U.S. Government and its agencies and
instrumentalities or other liquid securities equal to the market value of
the contract must be deposited and maintained in a segregated account with
the custodian of the Registrant to collateralize the positions, in order
for the Registrant 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 Registrant 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 Registrant 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
Registrant 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 Registrant, 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 Registrant will segregate liquid assets
consisting of cash, U.S. Government Securities or other liquid securities
with its custodian, or a designated sub-custodian, in an amount at all
times equal to or exceeding its commitment with respect to the contracts.
The dealings of the Registrant in forward foreign exchange are
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is the purchase or sale of one forward
foreign currency for another currency with respect to specific receivables
or payables of the Registrant 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 Registrant 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 Registrant 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 Registrant 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 Registrant 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 Registrant 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 Registrant 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
Registrant prior to the settlement date. The Registrant will segregate
with its custodian cash or liquid securities in an aggregate amount at
least equal to the amount of its outstanding forward commitments.
SHORT SALES. The Registrant may make short sales of securities.
A short sale is a transaction in which the Registrant sells a security it
does not own in anticipation that the market price of that security will
decline. The market value of the securities sold short of any one issuer
will not exceed either 5% of the Registrant's total assets or 5% of such
issuer's voting securities. The Registrant also will not make a short
sale, if, after giving effect to such sale, the market value of all
securities sold short exceeds 25% of the value of its assets or the
Registrant's aggregate short sales of a particular class of securities
exceeds 25% of the outstanding securities of that class. The Registrant
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
Registrant owns, or has the immediate and unconditional right to acquire at
no additional cost, the identical security.
The Registrant 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 Registrant 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 Registrant 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 Registrant'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
Registrant 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 Registrant on such security, the Registrant 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 Registrant replaces the
borrowed security, the Registrant will incur a loss; conversely, if the
price declines, the Registrant will realize a capital gain. Any gain will
be decreased, any loss increased, by the transaction costs described above.
Although the Registrant'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 Registrant 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
Registrant 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 Registrant, because the Registrant 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 Registrant may engage in repurchase
agreement transactions involving money market instruments with banks,
registered broker-dealers and government securities dealers approved by the
Board of Trustees. The Registrant will not enter into repurchase
agreements with the Investment Adviser or any of its affiliates. Under the
terms of a typical repurchase agreement, the Registrant 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 Registrant 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 Registrant 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 Registrant bears a risk of loss in the event that the other
party to a repurchase agreement defaults on its obligations and the
Registrant 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 Trustees of the Registrant, reviews the
creditworthiness of those banks and dealers with which the Registrant
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 Registrant may issue debt or preferred stock so long as the
Registrant'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. Such debt or preferred
stock may be convertible in accordance with SEC staff guidelines which may
permit the Registrant 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
Registrant's total return to holders of common stock more volatile. In
addition, the Registrant 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
Registrant to make common stock dividend payments and such a failure to pay
dividends or make distributions could result in the Registrant ceasing to
qualify as a regulated investment company under the Code. See "Tax Status"
in Item 22. 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 Registrant 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.
INVESTMENT RESTRICTIONS. The Registrant operates under the
following restrictions that constitute fundamental policies that, except as
otherwise noted, cannot be changed without the affirmative vote of the
holders of a majority of the outstanding voting securities of the
Registrant. Except as otherwise noted, all percentage limitations set
forth below apply immediately after a purchase or initial investment and
any subsequent change in any applicable percentage resulting from market
fluctuations does not require any action. The Registrant may not:
1. invest 25% or more of its total assets, taken at market
value at the time of each investment, in the securities of issuers in
any particular industry other than the utility industry as described
in Item 8.2. This restriction does not apply to investments in U.S.
Government Securities.
2. purchase or sell commodities or commodity contracts except
that the Registrant 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 Registrant do not exceed 50% of the market
value of its total assets. The Registrant may not purchase or sell
real estate, provided that the Registrant may invest in securities
secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein.
3. make loans of money, except by the purchase of a portion of
private or publicly distributed debt obligations or the entering into
of repurchase agreements. The Registrant reserves the authority to
make loans of its portfolio securities to financial intermediaries in
an aggregate amount not exceeding 20% of its total assets. Any such
loans will only be made upon approval of, and subject to any
conditions imposed by, the Board of Trustees of the Registrant.
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.
4. borrow money except to the extent permitted by applicable
law. The 1940 Act currently requires that the Registrant have 300%
asset coverage with respect to all borrowings other than temporary
borrowings of up to 5% of the value of its total assets.
5. issue senior securities, except to the extent permitted by
applicable law.
6. underwrite securities of other issuers except insofar as the
Registrant may be deemed an underwriter under the Securities Act 1933
(the "1933 Act") in selling portfolio securities; provided, however,
this restriction shall not apply to securities of any investment
company organized by the Registrant that are to be distributed pro
rata as a dividend to its shareholders.
PORTFOLIO TURNOVER. It is not expected that the annual portfolio
turnover rate for the Registrant 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 Registrant and its shareholders, as applicable.
Item 18. Management
TRUSTEES AND OFFICERS. The names and business addresses of the
trustees and principal officers of the Registrant are set forth in the
following table, together with their positions and their principal
occupations during the past five years and, in the case of the trustees,
their positions with certain other organizations and companies. Trustees
who are "interested persons" of the Registrant, as defined by the 1940 Act,
are indicated by an asterisk.
Name (and Age) and Position with the Registrant and Principal
Business Address Occupation During Past Five Years
------------------ ------------------------------------------
Dr. Thomas E. Bratter (60) Trustee of the Registrant. Director,
One Corporate Center President and Founder, The John Dewey
Rye, NY 10580-1434 Academy (residential college
preparatory therapeutic high school).
(10)(15)
Bill Callaghan (54) Trustee of the Registrant. President of
One Corporate Center Bill Callaghan Associates Ltd., an
Rye, NY 10580-1434 executive search company. (3)(10)(15)
Felix J. Christiana (73) Trustee of the Registrant. Retired;
One Corporate Center formerly Senior Vice President of
Rye, NY 10580-1434 Dollar Dry Dock Savings Bank.
(1)(2)(3)(4)(5)(8)(10)(13)(15)
Anthony J. Colavita (62 ) President and Attorney at law in the
One Corporate Center law firm of Anthony J. Colavita, P.C.
Rye, NY 10580-1434 since 1961.
(1)(2)(3)(4)(6)(7)(8)(9)(11)(12)(13)
(14)(15)
James P. Conn (61) Trustee of the Registrant. Former
One Corporate Center Managing Director and Chief Investment
Rye, New York 10580-1434 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)(15)
Vincent D. Enright (55) Trustee of the Registrant. Former
One Corporate Center Senior Vice President and Chief
Rye, NY 10580-1434 Financial Officer of KeySpan Energy
Corporation through 1998. (5)(6)(7)
Frank J. Fahrenkopf, Jr. (59) Trustee of the Registrant. President
One Corporate Center and CEO of the American Gaming
Rye, New York 10508-1434 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.
(15)
*Mario J. Gabelli (56) Chairman of the Board, President and
One Corporate Center Chief Investment Officer of the
Rye, New York 10580-1434 Registrant. 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)(15)
*John D. Gabelli (53) Trustee of the Registrant, Senior Vice
One Corporate Center President of Gabelli & Company and
Rye, New York 10580-1434 Director of Gabelli Advisers, Inc.
(1)(2)(5)(8)
*Karl Otto POEhl (69) Trustee of the Registrant. Member of
One Corporate Center the Shareholder Committee of Sal.
Rye, New York 10580-1434 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)(15)
Anthony R. Pustorino (73) Trustee of the Registrant. Certified
One Corporate Center Public Accountant, Professor of
Rye, New York 10580-1434 Accounting, Pace University, since
1965. (1)(2)(3) (4)(5)(10)(11)(13)(15)
*Salvatore J. Zizza (53) Trustee of the Registrant; Adviser to
One Corporate Center The Gabelli Growth Fund; Chairman of
Rye, New York 10580-1434 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)(15)
Bruce N. Alpert (47) Vice President and Treasurer of the
One Corporate Center Registrant. Executive Vice President
Rye, New York 10580-1434 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 Registrant. Vice
One Corporate Center President, General Counsel and
Rye, New York 10580-1434 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
_______________
* "Interested person" of the Registrant, as defined in the 1940 Act.
Mr. Mario Gabelli is an "interested person" of the Registrant as a result
of his employment as an officer of the Registrant and the Investment
Adviser. Messrs. John and Mario Gabelli are registered representatives of
an affiliated broker-dealer. Mr. POEhl 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.
(1) Trustee of The Gabelli Asset Fund.
(2) Trustee of The Gabelli Growth Fund.
(3) Director of The Gabelli Value Fund Inc.
(4) Director of The Gabelli Convertible Securities Fund, Inc.
(5) Director of Gabelli Equity Series Funds, Inc.
(6) Director of The Gabelli Money Market Funds
(7) Director of Gabelli Investor Funds, Inc.(8)Director of Gabelli Global
Series Funds, Inc.
(9) Director of Gabelli Gold Fund, Inc.
(10) Trustee of The Gabelli Global Multimedia Trust Inc.
(11) Director of Gabelli Capital Series Funds
(12) Director of Gabelli International Growth Fund, Inc.
(13) Director of the Treasurer's Fund, Inc.
(14) Director of the Gabelli Westwood Funds
(15) Director of the Gabelli Equity Trust Inc. (the "Equity Trust")
The Board of Trustees of the Registrant are divided into three
classes, with a class having a term of three years except as described
below. Each year the term of office of one class of trustees of the
Registrant will expire. However, to ensure that the term of a class of the
Registrant's trustees expires each year, one class of the Registrant's
trustees will serve an initial one-year term and three-year terms
thereafter and another class of its trustees will serve an initial two-year
term and three-year terms thereafter. The terms of Messrs. Conn, John
Gabelli, POEhl and Pustorino as trustees of the Registrant expire in 2000;
the terms of Messrs. Bratter, Christiana, Enright and Mario Gabelli as
trustees of the Registrant expire in 2001; The terms of Messrs.
Callaghan, Fahrenkopf and Zizza as trustees of the Registrant expire in
2002; See "Certain Provisions of the Declaration of Trust and the By-Laws
of the Registrant" in Item 10.1.
NON-RESIDENT TRUSTEES
Karl Otto POEhl, a trustee of the Registrant, resides outside the
United States and substantially all of his assets are located outside the
United States. Mr. POEhl 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.
The Registrant will pay each trustee 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 trustee's actual out-of-pocket
expenses relating to attendance at such meetings.
Item 19. Control Persons and Principal Holders of Securities
Ten thousand (10,000) shares of the Registrant's Common Stock,
par value $.001, are presently issued and outstanding and are owned,
beneficially and of record, by the Equity Trust. These shares were issued
on February 26, 1999 in respect of the Equity Trust's contribution to the
Registrant of the $100,000 of initial capital needed to satisfy the
requirements of Section 14(a) of the 1940 Act.
The Equity Trust commenced operations in August 1986 and is
registered under the 1940 Act as a non-diversified, closed-end management
investment company. The Investment Adviser also serves as the investment
adviser to the Equity Trust.
The Board of Directors of the Equity Trust and its shareholders
have approved the contribution of a segment of the Equity Trust's assets
having a value of approximately $75 million of the Equity Trust's net
assets to the Registrant, in exchange for additional shares of common stock
of the Registrant (the "Transaction"). (It is anticipated that the
contributed assets will consist largely or exclusively of cash and short-
term fixed income instruments). All the shares of the common stock of the
Registrant will then be distributed by the Equity Trust to its shareholders
at a rate of one share of Registrant common stock for every fourteen shares
held of the Equity Trust.
Item 20. Investment Advisory and Other Services
Under the terms of the Advisory Agreement, the Investment Adviser
manages the portfolio of the Registrant in accordance with its stated
investment objective and policies, makes investment decisions for the
Registrant, places orders to purchase and sell securities on behalf of the
Registrant and manages its other business and affairs, all subject to the
supervision and direction of the Registrant's Board of Trustees. In
addition, under the Advisory Agreement, the Investment Adviser oversees the
administration of all aspects of the Registrant's business and affairs and
provides, or arranges for others to provide, at the Investment Adviser's
expense, certain enumerated services, including maintaining the
Registrant's books and records, preparing reports to the Registrant's
shareholders and supervising the calculation of the net asset value of its
shares. All expenses of computing the net asset value of the Registrant,
including any equipment or services obtained solely for the purpose of
pricing shares or valuing its investment portfolio, will be an expense of
the Registrant under its Advisory Agreement unless the Adviser voluntarily
assumes responsibility for such expense. For its services, the Investment
Adviser is paid a fee computed daily and paid monthly at an annual rate of
1.00% of the average weekly net assets of the Registrant.
The Advisory Agreement combines investment advisory and
administrative responsibilities in one agreement. For services rendered by
the Investment Adviser on behalf of the Registrant under the Advisory
Agreement, the Registrant 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 Registrant.
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties thereunder, the Investment Adviser is not liable for
any error or judgment or mistake of law or for any loss suffered by the
Registrant. As part of the Advisory Agreement, the Registrant 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 Registrant, the Registrant will change its name to one not including
"Gabelli."
Pursuant to its terms, the Advisory Agreement will remain in
effect with respect to the Registrant until the second anniversary of
shareholder approval of such Agreement, and from year to year thereafter if
approved annually (i) by the Registrant's Board of Trustees or by the
holders of a majority of its outstanding voting securities and (ii) by a
majority of the Trustees who are not "interested persons" (as defined in
the 1940 Act) of any party to the Advisory Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. The
Advisory Agreement terminates automatically on its assignment and may be
terminated without penalty on 60 days' written notice at the option of
either party thereto or by a vote of a majority (as defined in the 1940
Act) of the Registrant's outstanding shares.
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND
REGISTRAR Boston Safe located at One Boston Place, Boston, Massachusetts
02108, will serve as the custodian of the Registrant's assets pursuant to a
custody agreement. Under the custody agreement, Boston Safe will hold the
Registrant'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 Registrant, plus certain charges for
securities transactions.
State Street will serve as the Registrant's dividend disbursing
agent, as agent of the Plan and as transfer agent and registrar for shares
of Registrant's Common Stock.
INDEPENDENT PUBLIC ACCOUNTANTS. PricewaterhouseCoopers LLP,
independent accountants, 1177 Avenue of the Americas, New York, New York
10036, serve as auditors of the Registrant and will annually render an
opinion on the financial statements of the Registrant.
Item 21. Brokerage and Allocation and Other Practices
Subject to policies established by the Board of Trustees of the
Registrant, the Investment Adviser is responsible for placing purchase and
sales orders and the allocation of brokerage on behalf of the Registrant.
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 Registrant. However, Gabelli & Company
may execute transactions in the over-the-counter markets on an agency basis
and receive a stated commission therefrom. To the extent consistent with
applicable provisions of the 1940 Act and the rules and exemptions adopted
by the SEC thereunder, as well as other regulatory requirements, the
Registrant's Board of Trustees have determined that portfolio transactions
may be executed through Gabelli & Company and its broker-dealer affiliates
if, in the judgment of the 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 Registrant a rate consistent
with that charged to comparable unaffiliated customers in similar
transactions. The Registrant 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 Registrant, 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 Registrant does not necessarily pay the lowest
commission available.
Item 22. Tax Status
The following is a summary of the material federal tax
considerations affecting the Registrant and its shareholders. In addition
to the considerations described below, which are applicable to any
investment in the Registrant, there may be other federal, state, local or
foreign tax considerations applicable to particular investors. Prospective
shareholders are urged to consult their tax advisors with respect to the
consequences to them of an investment in the Registrant.
The Registrant intends to elect and qualify to be treated as a
regulated investment company under the Code. Accordingly, if the
Registrant 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),
then the Registrant will not be subject to federal income tax on the
portion of the taxable income and gain it distributes to its shareholders.
The Registrant will be subject to tax at regular corporate rates on any
undistributed ordinary income or net capital gain. In addition, if the
Registrant 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 Registrant), 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 Registrant intends to make such
distributions as are necessary to avoid the application of this excise tax.
For any period in which the Registrant 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 the Registrant's current and
accumulated earning and profits, whether paid in cash or reinvested in the
shares of the Registrant. Distributions by either the Registrant of net
long-term capital gains (designated by the Registrant as capital gain
dividends) will be taxable to shareholders as long-term capital gains
regardless of the shareholder's holding period in its shares.
CAPITAL GAIN DISTRIBUTIONS. Dividends received by a corporate
shareholder from the Registrant 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 Registrant 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 Registrant (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 Registrant 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 Registrant retains any net long-term
capital gains, the Registrant 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 the
Registrant's 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 the Registrant. 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
Registrant upon filing appropriate returns or claims for refund with the
proper tax authorities.
Item 23. Financial Statements
The statement of assets and liabilities of the Registrant as of
March 29, 1999 and the report of independent accountants with respect
thereto are incorporated herein by reference to Pre-Effective Amendment No.
1 to the Registrant's Registration Statement on Form N-14 as filed with the
Commission on March 30, 1999.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
1. Financial Statements
(a) Statement of Assets and Liabilities as of March 29, 1999**
(b) Report of Independent Accountant**
2. Exhibits
(a) Amended and Restated Agreement and Declaration of Trust of
Registrant*
(b) By-Laws of Registran*
(c) Not applicable
(d) Form of Registrant's Common Stock Certificate**
(e) Automatic Dividend Reinvestment and Voluntary Cash Purchase Plan
of Registrant
(f) Not applicable
(g) Form of Investment Advisory Agreement between Registrant and
Gabelli Funds, LLC**
(h) Not applicable
(i) Not applicable
(j)(1) Form of Custodian Contract between Registrant and Boston
Safe Deposit and Trust Company**
(j)(2) Form of Custodian Fee Schedule between Registrant and Boston
Safe Deposit and Trust Company**
(k)(1) Form of Registrar, Transfer Agency and Service Agreement
between Registrant and State Street Bank and Trust
Company**
(k)(2) Form of Transfer Agent and Registrar Service Fee Agreement
between Registrant and State Street Bank and Trust
Company**
(l) Not applicable
(m) Not applicable
(n) Consent of PricewaterhouseCoopers LLC*
(o) Not applicable
(p) Purchase Agreement dated March 29, 1999 between Registrant and
the Equity Trust Inc.**
(q) Not applicable
(r) Financial Data Schedule**
-------------------
* Filed herewith
** Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-14, filed with the
Commission on March 30, 1999.
Item 25. Marketing Arrangements
Not applicable.
Item 26. Other Expenses of Issuance and Distribution
Not applicable.
Item 27. Persons Controlled or Under Common Control
Insofar as the following have substantially identical boards of
directors or trustees they may be deemed with Registrant to be under common
control: The Gabelli Asset Fund, The Gabelli Growth Fund and The Gabelli
Westwood Funds, each a Massachusetts Business Trust, The Gabelli Money
Market Funds, a Delaware Business Trust, The Gabelli Equity Trust, The
Gabelli Global Multimedia Trust Inc., The Gabelli Value Fund Inc., The
Gabelli Investor Fund, Inc., Gabelli Capital Series Funds, Inc., The
Gabelli Global Series Funds, Inc., The Gabelli Convertible Securities Fund,
Inc., Gabelli International Growth Fund, Inc., Gabelli Gold Fund, Inc. and
Gabelli Equity Series Funds, Inc., each a Maryland corporation.
Item 28. Number of Holders of Securities
As of May 21, the Equity Trust was the sole holder of Common
Stock.
Item 29. Indemnification
The response of this Item is incorporated by reference to the
caption "Limitation of Officers' and Trustees Liability" in Item 10.1.
Insofar as indemnification for liability arising under the 1933
Act may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant
has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the 1933 Act, and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a director, officer or
controlling person of Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered. Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of
such issue.
Item 30. Business and Other Connections of Investment Adviser
The Investment Adviser, a limited liability company organized
under the laws of the State of New York, acts as investment adviser to the
Registrant. The Registrant is fulfilling the requirement of this Item 30
to provide a list of the officers and directors of the Investment Adviser,
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by the Investment Adviser or
those officers and directors during the past two years, by incorporating by
reference the information contained in the Form ADV of the Investment
Adviser filed with the Commission pursuant to the Investment Advisers Act
of 1940 (Commission File No. 801-26202).
Item 31. Location of Accounts and Records
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580
Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
Item 32. Management Services
Not applicable.
Item 33. Undertaking
Not applicable.
SIGNATURE
Pursuant to the requirements of the Investment Company Act of
1940, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Rye, State of New York on 21st day of May, 1999.
THE GABELLI UTILITY FUND
By:-----------------------------------
Bruce N. Alpert
Vice President and Treasurer
EXHIBIT 24(2)(A)
THE GABELLI UTILITY FUND
____________________________________________
AMENDED AND RESTATED AGREEMENT
AND DECLARATION OF TRUST
____________________________________________
MAY 19, 1999
TABLE OF CONTENTS
ARTICLE I
The Trust
1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Purpose and Powers of Trust . . . . . . . . . . . . . . . 4
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 . . . . . . . . . . . . . 9
3.6 Collection and Payment . . . . . . . . . . . . . . . . . 10
3.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . 10
3.9 Miscellaneous Powers . . . . . . . . . . . . . . . . . . 11
3.10 Delegation; Committees . . . . . . . . . . . . . . . . 11
3.11 Further Powers . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
Limitations of Liability
and Indemnification
4.1 No Personal Liability of Shareholders, Trustees, etc. . 12
4.2 Mandatory Indemnification . . . . . . . . . . . . . . . 12
4.3 No Duty of Investigation; Notice in Trust Instruments,
etc. . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.4 Reliance on Experts, etc . . . . . . . . . . . . . . . . 14
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
AMENDED AND RESTATED AGREEMENT
AND DECLARATION OF TRUST
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made as
of the 19th day of May, 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 Amended and Restated Agreement and
Declaration of Trust, as amended or amended and restated from time to time,
including by way of any classifying or reclassifying Shares of any class or
any series of any such class or determining any designations, powers,
preferences, voting, conversion and other rights, limitations,
qualifications and terms and conditions thereof.
"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.
"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 or series or series 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 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 not less than two-thirds 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. The Shareholders shall not have
authority to adopt or amend By-Laws.
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. 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) to the extent required
thereby. 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 Common Share 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 of record
entitled to such distribution 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 and entitled to vote on such matter 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 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, 3.8, 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, 3.8, 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)
(excluding Rule 23c-3 thereunder) 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 investment company" to an "open-end
investment company" as those terms are defined by the 1940 Act or a company
obligated to repurchase shares under Rule 23c-3 of the 1940 Act (and
"interval company"), 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" or "interval
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 pursuant to any offering in which such
Principal Shareholder acquires securities that represent no greater a
percentage of any class or series of securities being offered than the
percentage of any class of Shares beneficially owned by such Principal
Shareholder immediately prior to such offering or, in the case of
securities, offered in respect of another class or series, the percentage
of such other class or series beneficially owned by such Principal
Shareholder immediately prior to such offering).
(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 Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have
constituted a part of this Declaration to the extent of such conflict;
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 24(N)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the registration
statement on Form N-2 (the "Registration Statement") 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 "Independent Public Accountants" in the
Registration Statement.
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] Annual
[FISCAL-YEAR-END] 12/31/1999
[PERIOD-START] 01/01/1999
[PERIOD-END] 12/31/1999
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 100,000
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 100,000
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 10,000
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 100,000
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 0
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 100,000
[PER-SHARE-NAV-BEGIN] 10,000
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.00
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
