THE GABELLI UTILITIES FUND
ANNUAL REPORT
DECEMBER 31, 1999
[Photo of Timothy P. O'Brien omitted]
TIMOTHY P. O'BRIEN
TO OUR SHAREHOLDERS,
The fourth quarter of 1999 was challenging for utility investors. Interest
rates continued to rise, with a third Federal Reserve tightening in the fourth
quarter following two rounds of tightening in the second quarter. The 30-year
Treasury bond yield rose from 6.06% on September 30 to 6.48% by December 31. Oil
prices and a number of commodity prices continued to rise, exacerbating
inflationary concerns. Electric utility stocks bucked the interest rate headwind
and rose in absolute terms, but underperformed a rising broad market. Water
stocks surged, supported by continued merger speculation. Gas stocks were
basically flat. The incumbent telephone stocks generally traded down in the
fourth quarter, while challengers to the incumbent carriers enjoyed stock price
appreciation.
The outlook for utility stock performance in the new year looks reasonably
positive. The bulk of the interest rate increases are probably behind us. In the
current nervous market environment, defensive issues typically do well. Looking
beyond the immediate future, electric, gas and water stocks are likely to
benefit from continuing consolidation, while telecommunications companies should
continue to enjoy superior growth.
INVESTMENT PERFORMANCE
For the fourth quarter ended December 31, 1999, the Gabelli Utilities
Fund's (the "Fund") total return was 22.13%. The Lipper Utility Fund Average had
a total return of 11.32%, while The Standard & Poor's ("S&P") Utility Index
declined 5.38% over the same period. The S&P Utility Index is an unmanaged
indicator of electric and gas utility stock performance, while the Lipper
Average reflects the average performance of mutual funds classified in this
particular category. Since inception on August 31, 1999 through December 31,
1999, the Fund had a cumulative total return of 22.25%. The Lipper Utility Fund
Average rose 10.43%, while the S&PUtility Index declined 9.92% over the same
period.
<PAGE>
INVESTMENT RESULTS (a)
- --------------------------------------------------------------------------------
QUARTER
--------------------------------------
1ST 2ND 3RD 4TH YEAR
--- --- --- --- ----
1999: Net Asset Value ... -- -- $10.01 $10.89 $10.89
Total Return ...... -- -- 0.1%(b) 22.1% 22.3%(b)
- --------------------------------------------------------------------------------
DIVIDEND HISTORY
- -----------------------------------------------------------
PAYMENT (EX) DATE RATE PER SHARE REINVESTMENT PRICE
- ----------------- -------------- ------------------
December 27, 1999 $1.325 $10.89
(a) Total returns reflect changes in share price and reinvestment of dividends
and are net of expenses. The net asset value of the Fund is reduced on the
ex-dividend (payment) date by the amount of the dividend paid. Of course,
returns represent past performance and do not guarantee future results.
Investment returns and the principal value of an investment will fluctuate. When
shares are redeemed they may be worth more or less than their original cost. (b)
From commencement of investment operations on August 31, 1999. The returns
stated above cover short periods of less than one year beginning August 31, 1999
through December 31, 1999 and may not be indicative of long term results.
- --------------------------------------------------------------------------------
OUR APPROACH
There are over 80 publicly traded investor-owned electric utilities in the
U.S., and this is at least 50 more than we need. The balkanized structure of the
industry is inherently inefficient, and competitive forces are now punishing
inefficiency. The industry has consolidated substantially already, and would
have done so even faster except for regulatory sclerosis impeding the pace of
mergers and acquisitions. We are skeptical about the claims of the
mega-utilities to be able to deliver superior returns, but we believe that the
mid-cap and small-cap utilities are generally doing fine on their own and over
time are likely acquisition targets. Our investments in the electric and natural
gas stocks have generally focused on fundamentally sound, reasonably priced
mid-cap and small-cap utilities that are logical acquisition targets for large
utilities that are driven to bulk up. We have not made major investments in
water stocks for the moment, because of the substantial summer runup in their
stock prices following several acquisition bids. Our investments in the
telephone utility sector have been focused primarily on the larger domestic,
incumbent local exchange carriers
COMMENTARY
IMPROVING FUNDAMENTALS BUCKING AN INTEREST RATE HEADWIND
Electric utilities are in good and improving condition. Those with low
generating costs never had many problems, while the high cost generators have
mostly restructured and are poised to recover their riskiest investments and
move on. The biggest challenge facing most companies is how to redeploy capital
and rising free cash flow at attractive rates of return. The condition of the
gas utilities is generally
2
<PAGE>
stable and sound. Water companies (with few exceptions) are doing well, and
telecommunications companies continue to generate very impressive earnings
growth in the face of mounting competitive pressures. For the time being, the
adverse impact of rising interest rates on utility stock prices is overwhelming
the underlying strong and improving fundamental outlook for these companies.
Once interest rates stabilize, the improving earnings and lower risk
profile of utility stocks are likely to lead to much better price performance.
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Fund.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time.
DQE ENERGY INC. (DQE - $34.625 - NYSE) is a mid-sized electric utility serving
metropolitan Pittsburgh. As part of a restructuring plan approved by
Pennsylvania regulators, DQE is auctioning off its generating assets and will
use the proceeds to improve its already strong balance sheet. DQE has used much
of its free cash flow to buy back stock, and plans to buy back additional stock
in the future. The company has also moved aggressively into the water utility
business, investing over $250 million to acquire more than 300,000 water
customers in 13 states. While DQE is a logical acquisition target, it is doing
fine on its own. The company's 7% compounded EPS growth rate over the past five
years (driven partly by share repurchases and partly by returns on non-electric
investments) ranks ninth in the industry, yet DQE trades at a discount to the
electric utility average PE ratio. In addition, we think the company's
management is outstanding.
KANSAS CITY POWER & LIGHT CO. (KLT - $22.0625 - NYSE) came under pressure in
1999 because of its long-pending merger with Western Resources (WR - $16.9375 -
NYSE). The plunge in Western Resources' stock price dragged Kansas City Power &
Light down along with it. It seemed likely that KLT would walk away from the
merger once legally able to do so, which the company did on January 3, 2000.
While the stock has risen since the termination announcement, the dramatic
improvement in earnings from the pending return to service of a major generating
plant is yet to be fully reflected in the stock price. Also going unrecognized
is the company's 47% stake in Digital Teleport, a 20,000 mile fiber optic
network, which is valued at $7 to $14 per Kansas City Power & Light share.
MONTANA POWER CO. (MTP - $36.0625 - NYSE) has performed well as investors have
started to focus on the value of the company's telecommunications services
subsidiary, TouchAmerica. The company believes that the value of TouchAmerica is
still far from fully recognized in Montana Power's share price, and we agree.
MTP is likely to take TouchAmerica public in the current year and may spin it
off to shareholders, actions that we support.
3
<PAGE>
SCANA (SCG - $26.875 - NYSE) struggled for most of 1999 but performed relatively
well in the fourth quarter. Earlier in 1999, SCANA, the parent of South Carolina
Electric & Gas, agreed to buy Public Service of North Carolina (PGS - $32.3125 -
NYSE) for a large premium, at the same time sharply reducing its own dividend
rate. SCANA also entered the deregulated natural gas supply market in Georgia,
and is incurring heavy startup losses that have caused the company to disappoint
investor expectations. Investor concerns about the company's strategy and
performance have been largely ignored by the company's management, which is
understandably held in low regard by utility investors. Utility investors are
ignoring the company's highly successful telecommunications investments: we
value these investments at roughly $10 per SCANA share pretax. The largest
component of the telecom portfolio is over 14 million shares of Powertel, a
southeastern wireless personal communications services ("PCS") carrier providing
mobile telephone services. Powertel has three peer companies, VoiceStream,
Aerial and Omnipoint. VoiceStream is in the process of acquiring Aerial and
Omnipoint, and acquiring Powertel would complete its nationwide footprint. This
could provide the catalyst to change investors' negative perception of SCANA.
SPRINT CORP. (FON - $67.3125 - NYSE) is the third-largest long distance carrier
and the second-largest independent local telephone company in the U.S. Sprint
has positioned itself globally through a joint venture called Global One. Its
joint venture partners, France Telecom and Deutsche Telekom, each have a 20%
direct stake in Sprint. FON faces risks from prospective new entrants, including
the regional Bells, in its long distance business, which may be offset by the
"ION" high bandwidth network that the company is developing. Sprint PCS group is
the leading personal communications services ("PCS") carrier in the U.S., with
over 4 million customers and licenses covering over 230 million people. In
October, MCI WorldCom (WCOM - $53.0625 - Nasdaq) won a bidding contest and
agreed to acquire Sprint for a substantial premium. We view the acquisition
favorably in light of the substantial cost efficiencies that could result and
the potential for each company to plug the holes in the other's array of
products and services.
MINIMUM INITIAL INVESTMENT - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
Additionally, The Gabelli Utilities Fund and other Gabelli Funds are available
through the no-transaction fee programs at many major discount brokerage firms.
INTERNET
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Asset Management Inc.,
the Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and
other current news. You can send us e-mail at [email protected].
4
<PAGE>
IN CONCLUSION
This has been a challenging quarter for utility stocks, which are likely
to struggle until interest rates peak. We continue to take advantage of the
current price weakness to build positions in fundamentally sound, reasonably
priced and well-positioned companies that are likely to do substantially better
in a less hostile interest rate environment.
The Fund's daily net asset value is available each evening after 6:00 PM
(Eastern Time) by calling 1-800-GABELLI (1-800-422-3554). The Fund's Nasdaq
symbol is GABUX. Please call us during the business day for further information.
Sincerely,
/s/ signature
TIMOTHY P. O'BRIEN, CFA
Portfolio Manager
January 31, 2000
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
DECEMBER 31, 1999
-----------------
BroadWing Inc. Public Service Co. of North Carolina
Montana Power Co. Eastern Enterprises
US West Inc. BellSouth Corp.
United Illuminating Co. Kansas City Power and Light Co.
Bell Atlantic Corp. GTE Corp.
- --------------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
5
<PAGE>
THE GABELLI UTILITIES FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 94.8%
CABLE -- 4.6%
2,200 MediaOne Group Inc.+ $ 155,729 $ 168,987
---------- ----------
155,729 168,987
---------- ----------
ENERGY AND UTILITIES: ELECTRIC -- 26.6%
4,000 CMP Group Inc. ...... 107,700 110,250
3,500 DQE Inc. ............ 127,688 121,187
4,000 Eastern Utilities
Associates ......... 122,200 121,250
8,000 Kansas City Power
& Light Co. ........ 185,412 176,500
2,500 New England
Electric System .... 133,250 129,375
5,000 SCANA Corp. ......... 123,825 134,375
3,600 United Illuminating Co. 184,049 184,950
---------- ----------
984,124 977,887
---------- ----------
ENERGY AND UTILITIES: INTEGRATED -- 6.6%
5,500 Montana Power Co. ... 155,475 198,344
2,000 SIGCORP Inc. ........ 52,137 45,500
---------- ----------
207,612 243,844
---------- ----------
ENERGY AND UTILITIES: NATURAL GAS -- 9.7%
3,100 Eastern Enterprises . 163,542 178,056
5,600 Public Service Co.
of North Carolina .. 177,818 180,950
---------- ----------
341,360 359,006
---------- ----------
ENERGY AND UTILITIES: WATER -- 3.7%
2,000 Aquarion Co. ........ 74,025 74,000
3,000 Philadelphia
Suburban Corp. ..... 66,525 62,063
---------- ----------
140,550 136,063
---------- ----------
TELECOMMUNICATIONS: LONG DISTANCE -- 6.4%
1,500 Global Crossing Ltd.+ 48,645 75,000
3,000 MCI WorldCom Inc.+ .. 156,294 159,187
---------- ----------
204,939 234,187
---------- ----------
TELECOMMUNICATIONS: NATIONAL -- 8.4%
2,400 GTE Corp. ........... 177,961 169,350
2,100 Sprint Corp. ........ 151,111 141,356
---------- ----------
329,072 310,706
---------- ----------
MARKET
SHARES COST VALUE
------ ---- ------
TELECOMMUNICATIONS: REGIONAL -- 28.8%
1,800 Alltel Corp. ........ $ 137,603 $ 148,838
3,000 Bell Atlantic Corp. . 193,369 184,687
3,800 BellSouth Corp. ..... 170,109 177,888
5,500 BroadWing Inc.+ ..... 142,087 202,813
3,300 SBC Communications Inc. 165,873 160,875
2,600 US West Inc. ........ 160,318 187,200
---------- ----------
969,359 1,062,301
---------- ----------
TOTAL COMMON STOCKS . 3,332,745 3,492,981
---------- ----------
PRINCIPAL
AMOUNT
---------
U.S. GOVERNMENT OBLIGATIONS -- 7.0%
$260,000 U.S. Treasury Bills,
5.20% to 5.29%++,
due 01/13/00 to 03/16/00 258,595 258,638
---------- ---------
TOTAL
INVESTMENTS -- 101.8% $3,591,340 3,751,619
==========
OTHER ASSETS AND
LIABILITIES (NET)-- (1.8)% ..... (66,658)
----------
NET ASSETS -- 100.0%
(338,445 shares outstanding) ... $3,684,961
==========
NET ASSET VALUE,
OFFERING AND REDEMPTION
PRICE PER SHARE ................ $10.89
======
------------------------
For Federal tax purposes:
Aggregate cost .................. $3,593,457
==========
Gross unrealized appreciation ... $ 221,570
Gross unrealized depreciation ... (63,408)
----------
Net unrealized appreciation ..... $ 158,162
==========
------------------------
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
See accompanying notes to financial statements.
6
<PAGE>
THE GABELLI UTILITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost $3,591,340) ..... $3,751,619
Cash ........................................ 7,683
Dividends receivable ........................ 8,748
Receivable for Fund shares sold ............. 82,786
Receivable from adviser ..................... 63,698
----------
TOTAL ASSETS ................................ 3,914,534
----------
LIABILITIES:
Payable for Fund shares redeemed ............ 200,000
Payable for investment advisory fees ........ 3,515
Payable for distribution fees ............... 878
Other accrued expenses ...................... 25,180
----------
TOTAL LIABILITIES ........................... 229,573
----------
NET ASSETS applicable to 338,445
shares outstanding ........................ $3,684,961
==========
NET ASSETS CONSIST OF:
Shares of beneficial interest, at par value . $ 339
Additional paid-in capital .................. 3,526,460
Distributions in excess of net realized
gain on investments ....................... (2,117)
Net unrealized appreciation on investments .. 160,279
----------
TOTAL NET ASSETS ............................ $3,684,961
==========
NET ASSET VALUE, offering and redemption
price per share ($3,684,961 / 338,445
shares outstanding; 500,000,000 shares
authorized of $0.001 par value) ........... $10.89
======
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999+
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends ................................. $ 18,079
Interest .................................. 4,021
---------
TOTAL INVESTMENT INCOME ................... 22,100
---------
EXPENSES:
Investment advisory fees .................. 7,382
Distribution fees ......................... 1,845
Registration fees ......................... 25,900
Legal and audit fees ...................... 24,000
Shareholder communications expenses ....... 10,000
Trustees' fees ............................ 5,350
Custodian fees ............................ 3,980
---------
TOTAL EXPENSES ............................ 78,457
---------
Less: Expense reimbursements .............. (63,698)
---------
TOTAL NET EXPENSES ........................ 14,759
---------
NET INVESTMENT INCOME ..................... 7,341
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .......... 379,590
Net change in unrealized appreciation
on investments .......................... 160,279
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS .......................... 539,869
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ......................... $547,210
=========
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1999+
------------------
<S> <C>
OPERATIONS:
Net investment income ......................................................................... $ 7,341
Net realized gain on investments .............................................................. 379,590
Net change in unrealized appreciation on investments .......................................... 160,279
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......................................... 547,210
----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ......................................................................... (7,740)
Net realized gain on investments .............................................................. (379,590)
In excess of net realized gain on investments ................................................. (22,931)
----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ........................................................... (410,261)
----------
SHARE TRANSACTIONS:
Net increase in net assets from shares of beneficial interest transactions .................... 3,448,012
----------
NET INCREASE IN NET ASSETS .................................................................... 3,584,961
NET ASSETS:
Beginning of period ........................................................................... 100,000
----------
End of period ................................................................................. $3,684,961
==========
--------------
+ From commencement of investment operations on August 31, 1999 through
December 31, 1999.
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
THE GABELLI UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION. The Gabelli Utilities Fund (the "Fund") was organized on May
18, 1999 as a Delaware business trust. The Fund is a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund had no operations until August 31,
1999 other than the purchase of 10,000 shares at a cost of $100,000 by Gabelli
Funds, LLC. The Fund's primary objective is to provide a high level of total
return through a combination of capital appreciation and current income. The
Fund commenced investment operations on August 31, 1999.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day, except for open short positions, which are
valued at the last asked price). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. Portfolio securities traded on more
than one national securities exchange or market are valued according to the
broadest and most representative market, as determined by Gabelli Funds, LLC
(the "Adviser"). Securities and assets for which market quotations are not
readily available are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Board
of Trustees. Short term debt securities with remaining maturities of 60 days or
less are valued at amortized cost, unless the Trustees determine such does not
reflect the securities' fair value, in which case these securities will be
valued at their fair value as determined by the Trustees. Debt instruments
having a maturity greater than 60 days are valued at the highest bid price
obtained from a dealer maintaining an active market in those securities.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System or with other brokers or dealers
that meet credit guidelines established by the Trustees. Under the terms of a
typical repurchase agreement, the Fund takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed-upon price and time, thereby determining the
yield during the Fund's holding period. The Fund will always receive and
maintain securities as collateral whose market value, including accrued
interest, will be at least equal to 100% of the dollar amount invested by the
Fund in each agreement. The Fund will make payment for such securities only upon
physical delivery or upon evidence of book entry transfer of the collateral to
the account of the custodian. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to maintain the adequacy of the collateral. If the seller defaults
and the value of the collateral declines or if bankruptcy proceedings are
commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
8
<PAGE>
THE GABELLI UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
For the period ended December 31, 1999, reclassifications were made to decrease
distributions in excess of net investment income for $399 and decrease
distributions in excess of net realized gain on investments for $20,814 with an
offsetting adjustment to additional paid-in capital.
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. As a result, a Federal income tax provision is not required.
3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
Officers and Trustees of the Fund who are its affiliates. The Adviser
voluntarily agreed to reimburse expenses of the Fund to the extent necessary to
maintain the annualized total operating expenses of the Fund at 2.00% of the
value of the Fund's average daily net assets. For the period ended December 31,
1999, the Adviser reimbursed the Fund in the amount of $63,698.
4. DISTRIBUTION PLAN. The Fund's Board of Trustees has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the period
ended December 31, 1999, the Fund incurred distribution costs payable to Gabelli
& Company, Inc., an affiliate of the Adviser, of $1,845, or 0.25% of average
daily net assets, the annual limitation under the Plan. Such payments are
accrued daily and paid monthly.
5. PORTFOLIO SECURITIES. Purchases and sales of securities for the period ended
December 31, 1999, other than short term securities, aggregated $5,045,612 and
$2,092,457, respectively.
6. SHARES OF BENEFICIAL INTEREST. Transactions in shares of beneficial interest
were as follows:
PERIOD ENDED
DECEMBER 31, 1999+
---------------------
SHARES AMOUNT
------ ------
Shares sold ........................................ 407,147 $4,392,319
Shares issued upon reinvestment of dividends ....... 36,041 389,605
Shares redeemed .................................... (114,743) (1,333,912)
------- ----------
Net increase ................................... 328,445 $3,448,012
======= ==========
+ From commencement of investment operations on August 31, 1999 through
December 31, 1999.
9
<PAGE>
THE GABELLI UTILITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout the
period:
PERIOD ENDED
DECEMBER 31, 1999+
------------------
OPERATING PERFORMANCE:
Net asset value, beginning of period ..................... $10.00
------
Net investment income .................................... 0.04(a)
Net realized and unrealized gain on investments .......... 2.18
------
Total from investment operations ......................... 2.22
------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income .................................... (0.03)
Net realized gain on investments ......................... (1.23)
In excess of net realized gain on investments ............ (0.07)
------
Total distributions ...................................... (1.33)
------
NET ASSET VALUE, END OF PERIOD ........................... $10.89
======
Total return++ ........................................... 22.3%
======
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ..................... $3,685
Ratio of net investment income to average net assets(c) .. 0.99%(b)
Ratio of operating expenses to average net assets(c) ..... 2.00%(b)
Portfolio turnover rate .................................. 94%
- --------------------------------
+ From commencement of investment operations on August 31, 1999 through
December 31, 1999.
++ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends. Total return for the period less than
one year is not annualized.
(a) Based on average month-end shares outstanding.
(b) Annualized.
(c) During the period ended December 31, 1999, the Adviser voluntarily
reimbursed certain expenses. Before reimbursement, the ratios of operating
expenses and net investment income to average net assets would have been
10.63% and (7.64)% for 1999 (annualized), respectively.
See accompanying notes to financial statements.
10
<PAGE>
THE GABELLI UTILITIES FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
The Gabelli Utilities Fund
We have audited the accompanying statement of assets and liabilities of The
Gabelli Utilities Fund (the "Fund"), including the portfolio of investments, as
of December 31, 1999, and the related statements of operations, changes in net
assets and the financial highlights for the period August 31, 1999 (commencement
of operations) to December 31, 1999. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Gabelli Utilities Fund as of December 31, 1999, and the results of its
operations, changes in its net assets and the financial highlights for the
period August 31, 1999 to December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
/s/ signature
Ernst & Young LLP
New York, New York
February 11, 2000
- --------------------------------------------------------------------------------
1999 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal period ended December 31, 1999, the Fund paid to shareholders, on
December 27, 1999, an ordinary income dividend (comprised of net investment
income and short term capital gains) totaling $1.325 per share. For the fiscal
period ended December 31, 1999, 3.53% of the ordinary income dividend qualifies
for the dividend received deduction available to corporations.
U.S. GOVERNMENT INCOME:
The percentage of the ordinary income dividend paid by the Fund during fiscal
period 1999 which was derived from U.S. Treasury securities was 0.98%. Such
income is exempt from state and local tax in all states. However, many states,
including New York and California, allow a tax exemption for a portion of the
income earned only if a mutual fund has invested at least 50% of its assets at
the end of each quarter of the Fund's fiscal year in U.S. Government securities.
The Gabelli Utilities Fund did not meet this strict requirement in 1999. Due to
the diversity in state and local tax law, it is recommended that you consult
your personal tax advisor as to the applicability of the information provided to
your specific situation.
- --------------------------------------------------------------------------------
11
<PAGE>
THE GABELLI UTILITIES FUND
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
FAX: 1-914-921-5118
HTTP://WWW.GABELLI.COM
E-MAIL: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
BOARD OF TRUSTEES
Mario J. Gabelli, CFA Karl Otto Pohl
CHAIRMAN AND CHIEF FORMER PRESIDENT
INVESTMENT OFFICER DEUTSCHE BUNDESBANK
GABELLI ASSET MANAGEMENT INC.
Anthony J. Colavita Werner J. Roeder, MD
ATTORNEY-AT-LAW MEDICAL DIRECTOR
ANTHONY J. COLAVITA, P.C. LAWRENCE HOSPITAL
Vincent D. Enright
FORMER SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
KEYSPAN ENERGY CORP.
OFFICERS AND PORTFOLIO MANAGERS
Mario J. Gabelli, CFA Timothy P. O'Brien, CFA
PRESIDENT AND CHIEF PORTFOLIO MANAGER
INVESTMENT OFFICER
Bruce N. Alpert James E. McKee
VICE PRESIDENT AND TREASURER SECRETARY
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Utilities Fund. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
GAB470Q499SR
[Photo of Mario J. Gabelli omitted]
THE
GABELLI
UTILITIES
FUND
ANNUAL Report
DECEMBER 31, 1999
