UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-09397
----------
The Gabelli Utilities Fund
----------------------------------------------------
(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
----------------------------------------------------
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
----------------------------------------------------
(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
Date of fiscal year end: December 31
Date of reporting period: December 31, 2005
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
THE GABELLI UTILITIES FUND
ANNUAL REPORT
DECEMBER 31, 2005
TO OUR SHAREHOLDERS,
The Sarbanes-Oxley Act requires a Fund's principal executive and financial
officers to certify the entire contents of the semi-annual and annual
shareholder reports in a filing with the Securities and Exchange Commission on
Form N-CSR. This certification would cover the portfolio manager's commentary
and subjective opinions if they are attached to or a part of the financial
statements. Many of these comments and opinions would be difficult or impossible
to certify.
Because we do not want our portfolio managers to eliminate their opinions
and/or restrict their commentary to historical facts, we have separated their
commentary from the financial statements and investment portfolio and have sent
it to you separately. Both the commentary and the financial statements,
including the portfolio of investments, will be available on our website at
www.gabelli.com/funds.
Enclosed are the audited financial statements and the investment portfolio
as of December 31, 2005 with a description of factors that affected the
performance during the past year.
PERFORMANCE DISCUSSION
During 2005, the Gabelli Utilities Fund rose 8.36% compared to gains by
the S&P 500 Utility Index and the average utility fund monitored by Lipper of
16.84% and 13.37%, respectively. The fourth quarter was a tough period for
utility stocks, but overall the full year 2005 was a good one for these stocks.
After positive moves during the first three quarters of 2005, utility stocks
suffered modest declines in the final quarter of the year.
Looking back at the full year 2005, the biggest event, with significant
positive long-term implications, was the passage of the Energy Policy Act of
2005. This was the first comprehensive energy legislation to be passed in more
than a decade and it was signed into law by President Bush in August. The Energy
Policy Act repealed the 1935 Public Utility Holding Company Act, known as PUHCA.
Repeal of PUHCA removes a number of rules that restricted utility mergers and
acquisitions in the U.S. For instance, the recently announced merger of FPL
Group Inc. and Constellation Energy Group could not have taken place if the 1935
PUHCA rules were still in effect. The Fund has investments in several of the
smaller and mid-sized utilities that we think are attractive takeover
candidates.
Another major event of 2005 for utilities was the huge increase in energy
prices. Fuel prices were moving up moderately during the first half of 2005, but
then they soared during the third quarter. However, during the fourth quarter,
fuel prices did not retreat much at all.
The Fund benefited from its large holding in Allegheny Energy Inc., that
rose by 60.5% during 2005. Other major electric utility holdings helping
performance in 2005 were Edison International, that went up by 36.2%, UniSource
Energy Corp., up 29.4%, and Electric Power Development Corp., up 22.9%.
Companies in diverse sectors that contributed to returns in 2005 included the
cable and wireless company Rogers Communications Inc. (+61.6%), the Denmark
based telecom TDC A/S (+63.0%), and the Spanish utility ENDESA SA (+28.5%),
which at the end of 2005 entered into talks to be acquired.
The Fund's performance was dimmed by its holding in Duquesne Light
Holdings Inc., that fell by 13.4% during 2005 and also by Energy East Corp.,
that declined by 14.5% for the same period. Cable and satellite holdings
Echostar Communications Corp. (-18.3%) and Cablevision Systems Corp. (-5.7%)
also delivered a negative impact on our Fund.
Sincerely yours,
/s/ Bruce N. Alpert
Bruce N. Alpert
President
February 13, 2006
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI UTILITIES FUND CLASS AAA SHARES AND THE S&P UTILITY INDEX
Gabelli Utilities Fund
Class AAA Shares S&P Utility Index
8/31/99 $10,000 $10,000
12/31/99 12,225 9,008
12/31/00 14,234 14,160
12/31/01 12,047 9,849
12/31/02 10,233 6,896
12/31/03 13,249 8,706
12/31/04 15,314 10,820
12/31/05 16,594 12,642
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The performance tables and
graph do not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 2005 (A)
----------------------------------------------------
Since
Inception
Quarter 1 Year 3 Year 5 Year (8/31/99)
------- ------ ------ ------ ---------
GABELLI UTILITIES FUND CLASS AAA ..................... (4.52)% 8.36% 17.48% 3.12% 8.31%
S&P 500 Utility Index ................................ (5.48) 16.84 22.39 (2.24) 3.81
Lipper Utility Fund Average .......................... (4.40) 13.37 19.96 0.73 4.16
Class A .............................................. (4.50) 8.46 17.59 3.17 8.36
(10.00)(b) 2.24(b) 15.32(b) 1.95(b) 7.35(b)
Class B .............................................. (4.64) 7.63 16.55 2.63 7.91
(9.41)(c) 2.63(c) 15.81(c) 2.26(c) 7.70(c)
Class C .............................................. (4.62) 7.60 16.66 2.68 7.95
(5.58)(c) 6.60(c) 16.66(c) 2.68(c) 7.95(c)
(a) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS.
TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND ARE NET OF EXPENSES. 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. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PRESENTED.
VISIT WWW.GABELLI.COM FOR PERFORMANCE INFORMATION AS OF THE MOST RECENT
MONTH END. INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS,
CHARGES, AND EXPENSES OF THE FUND CAREFULLY BEFORE INVESTING. THE
PROSPECTUS CONTAINS MORE INFORMATION ABOUT THIS AND OTHER MATTERS AND
SHOULD BE READ CAREFULLY BEFORE INVESTING. PERFORMANCE RETURNS FOR PERIODS
LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE VALUE OF UTILITY STOCKS CHANGE
AS LONG-TERM INTEREST RATES CHANGE. FUNDS INVESTING IN A SINGLE SECTOR,
SUCH AS UTILITIES, MAY BE SUBJECT TO MORE VOLATILITY THAN FUNDS THAT INVEST
MORE BROADLY. THE UTILITIES INDUSTRY CAN BE SIGNIFICANTLY AFFECTED BY
GOVERNMENT REGULATION, FINANCING DIFFICULTIES, SUPPLY OR DEMAND OF SERVICES
OR FUEL AND NATURAL RESOURCES CONSERVATION. THE CLASS AAA SHARES' NET ASSET
VALUES ARE USED TO CALCULATE PERFORMANCE FOR THE PERIODS PRIOR TO THE
ISSUANCE OF CLASS A SHARES, CLASS B SHARES AND CLASS C SHARES ON DECEMBER
31, 2002. THE ACTUAL PERFORMANCE FOR THE CLASS B SHARES AND CLASS C SHARES
WOULD HAVE BEEN LOWER DUE TO THE ADDITIONAL EXPENSES ASSOCIATED WITH THESE
CLASSES OF SHARES. THE S&P 500 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.
(b) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF
THE PERIOD.
(c) INCLUDES THE EFFECT OF THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE AT
THE END OF THE PERIOD SHOWN FOR CLASS B AND CLASS C SHARES, RESPECTIVELY.
CLASS B SHARES ARE NOT AVAILABLE FOR NEW PURCHASES.
- --------------------------------------------------------------------------------
2
THE GABELLI UTILITIES FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
For the Six Month Period from July 1, 2005 through December 31, 2005
EXPENSE TABLE
================================================================================
We believe it is important for you to understand the impact of fees and expenses
regarding your investment. All mutual funds have operating expenses. As a
shareholder of a fund, you incur ongoing costs, which include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund's
gross income, directly reduce the investment return of a fund. When a fund's
expenses are expressed as a percentage of its average net assets, this figure is
known as the expense ratio. The following examples are intended to help you
understand the ongoing costs (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period.
The Expense Table below illustrates your Fund's costs in two ways:
ACTUAL FUND RETURN: This section provides information about actual account
values and actual expenses. You may use this section to help you to estimate the
actual expenses that you paid over the period after any fee waivers and expense
reimbursements. The "Ending Account Value" shown is derived from the Fund's
ACTUAL return during the past six months, and the "Expenses Paid During Period"
shows the dollar amount that would have been paid by an investor who started
with $1,000 in the Fund. You may use this information, together with the amount
you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your Fund under the heading "Expenses Paid During Period" to estimate
the expenses you paid during this period.
HYPOTHETICAL 5% RETURN: This section provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio. It assumes a hypothetical annualized return of 5% before expenses during
the period shown. In this case -- because the hypothetical return used is NOT
the Fund's actual return -- the results do not apply to your investment and you
cannot use the hypothetical account value and expense to estimate the actual
ending account balance or expenses you paid for the period. This example is
useful in making comparisons of the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as sales
charges (loads), redemption fees, or exchange fees, if any, which are described
in the Prospectus. If these costs were applied to your account, your costs would
be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing
costs only, and will not help you determine the relative total costs of owning
different funds. The "Annualized Expense Ratio" represents the actual expenses
for the last six months and may be different from the expense ratio in the
Financial Highlights which is for the year ended December 31, 2005.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
07/01/05 12/31/05 Ratio Period*
- --------------------------------------------------------------------------------
GABELLI UTILITIES FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class AAA $1,000.00 $ 995.00 1.52% $ 7.64
Class A $1,000.00 $ 996.10 1.52% $ 7.65
Class B $1,000.00 $ 991.20 2.27% $11.39
Class C $1,000.00 $ 991.20 2.27% $11.39
HYPOTHETICAL 5% RETURN
Class AAA $1,000.00 $1,017.54 1.52% $ 7.73
Class A $1,000.00 $1,017.54 1.52% $ 7.73
Class B $1,000.00 $1,013.76 2.27% $11.52
Class C $1,000.00 $1,013.76 2.27% $11.52
* Expenses are equal to the Fund's annualized expense ratio for the last six
months multiplied by the average account value over the period, multiplied by
the number of days in the most recent fiscal half-year, then divided by 365.
3
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total net assets
as of December 31, 2005:
GABELLI UTILITIES FUND
Energy and Utilities: Integrated .................. 41.5%
Energy and Utilities: Electric .................... 18.6%
Energy and Utilities: Natural Gas ................. 9.5%
Telecommunications ................................ 7.4%
Cable and Satellite ............................... 5.6%
U.S. Government Obligations ....................... 4.5%
Exchange Traded Funds ............................. 4.1%
Entertainment ..................................... 2.7%
Computer Software and Services .................... 1.8%
Communications .................................... 1.6%
Communications Equipment .......................... 1.0%
Diversified Industrial ............................ 0.7%
Energy and Utilities: Water ....................... 0.4%
Energy and Utilities: Oil ......................... 0.4%
Metals and Mining ................................. 0.1%
Health Care ....................................... 0.0%
Other Assets and Liabilities - (Net) .............. 0.1%
------
100.0%
======
THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE
FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q, THE LAST OF WHICH WAS
FILED FOR THE QUARTER ENDED SEPTEMBER 30, 2005. SHAREHOLDERS MAY OBTAIN THIS
INFORMATION AT WWW.GABELLI.COM OR BY CALLING THE FUND AT 800-GABELLI
(800-422-3554). THE FUND'S FORM N-Q IS AVAILABLE ON THE SEC'S WEBSITE AT
WWW.SEC.GOV AND MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC
REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE PUBLIC
REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330.
PROXY VOTING
The Fund files Form N-PX with its complete proxy voting record for the 12 months
ended June 30th, no later than August 31st of each year. A description of the
Fund's proxy voting policies, procedures, and how the Fund voted proxies
relating to portfolio securities are available without charge, upon request, (i)
by calling 800-GABELLI (800-422-3554); (ii) by writing to The Gabelli Funds at
One Corporate Center, Rye, NY 10580-1422; and (iii) by visiting the Securities
and Exchange Commission's website at www.sec.gov.
- --------------------------------------------------------------------------------
2005 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended December 31, 2005, the Fund paid to shareholders,
ordinary income dividends (comprised of net investment income) totaling
$0.21769, $0.22519, $0.14584, and $0.18730 per share for Class AAA, Class A,
Class B, and Class C, respectively. The Fund paid a long-term capital gain
distribution totaling $0.01210 per share for each class which is designated as a
capital gain dividend. For the fiscal year ended December 31, 2005, 100% of the
ordinary income dividend qualifies for the dividend received deduction available
to corporations, and 100% of the ordinary income distribution was qualified
dividend income. Additionally, 72.64%. 71.75%, 81.20% and 76.26% for Class AAA,
Class A, Class B, and Class C Shares, respectively, of the distributions paid in
2005 were a nontaxable return of capital which should be deducted from the cost
basis of the securities held as of the payment date.
U.S. GOVERNMENT INCOME:
The percentage of the ordinary income dividend paid by the Fund during fiscal
year 2005 which was derived from U.S. Treasury securities was 6.34%. 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 2005. Due to
the diversity in state and local tax law, it is recommended that you consult
your personal tax adviser as to the applicability of the information provided to
your specific situation.
- --------------------------------------------------------------------------------
4
THE GABELLI UTILITIES FUND
SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2005
================================================================================
MARKET
SHARES COST VALUE
------ ---- -------
COMMON STOCKS -- 93.9%
CABLE AND SATELLITE -- 5.6%
280,000 Cablevision Systems Corp.,
Cl. A+ ......................... $ 7,879,607 $ 6,571,600
10,000 Cogeco Cable Inc. ................ 207,213 210,762
40,000 Cogeco Inc. ...................... 777,564 825,842
10,000 Comcast Corp., Cl. A+ ............ 320,620 259,600
55,000 DIRECTV Group Inc.+ .............. 941,124 776,600
82,000 EchoStar Communications
Corp., Cl. A+ .................. 2,498,241 2,227,940
35,000 Liberty Global Inc., Cl. A+ ...... 764,854 787,500
30,000 Liberty Global Inc., Cl. C+ ...... 630,786 636,000
6,000 Mediacom Communications
Corp., Cl. A+ .................. 35,001 32,940
58,900 PanAmSat Holding Corp. ........... 1,415,130 1,443,050
75,000 Rogers Communications Inc.,
Cl. B .......................... 2,008,921 3,169,500
1,000 Shaw Communications Inc.,
Cl. B, New York ................ 16,985 21,680
------------ ------------
17,496,046 16,963,014
------------ ------------
COMMUNICATIONS EQUIPMENT -- 1.0%
70,000 Scientific-Atlanta Inc. .......... 2,962,728 3,014,900
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 1.8%
500,000 Siebel Systems Inc. .............. 5,243,000 5,290,000
------------ ------------
DIVERSIFIED INDUSTRIAL -- 0.7%
20,000 Cooper Industries Ltd., Cl. A .... 1,504,602 1,460,000
15,000 Walter Industries Inc. ........... 672,241 745,800
------------ ------------
2,176,843 2,205,800
------------ ------------
ENERGY AND UTILITIES: ELECTRIC -- 18.6%
90,000 AES Corp.+ ....................... 434,950 1,424,700
235,000 Allegheny Energy Inc.+ ........... 3,103,912 7,437,750
26,000 ALLETE Inc. ...................... 865,004 1,144,000
75,000 American Electric Power Co. Inc. . 2,665,384 2,781,750
35,000 Cleco Corp. ...................... 721,890 729,750
340,000 DPL Inc. ......................... 8,838,684 8,843,400
6,000 DTE Energy Co. ................... 240,835 259,140
90,000 Duquesne Light Holdings Inc. ..... 1,511,623 1,468,800
52,000 Edison International ............. 671,304 2,267,720
108,000 El Paso Electric Co.+ ............ 1,566,675 2,272,320
160,000 Electric Power Development
Co. Ltd. ....................... 4,680,039 5,494,552
210,000 FPL Group Inc. ................... 8,132,197 8,727,600
142,000 Great Plains Energy Inc. ......... 4,201,427 3,970,320
30,000 Green Mountain Power Corp. ....... 682,200 863,100
100,000 Pepco Holdings Inc. .............. 2,029,205 2,237,000
1,000 Pike Electric Corp.+ ............. 14,000 16,220
72,000 Pinnacle West Capital Corp. ...... 3,144,090 2,977,200
8,000 TXU Corp. ........................ 58,500 401,520
MARKET
SHARES COST VALUE
------ ---- -------
10,000 UIL Holdings Corp. ............... $ 490,136 $ 459,900
70,000 Unisource Energy Corp. ........... 1,641,096 2,184,000
------------ ------------
45,693,151 55,960,742
------------ ------------
ENERGY AND UTILITIES: INTEGRATED -- 40.9%
25,000 Alliant Energy Corp. ............. 566,406 701,000
50,000 Ameren Corp. ..................... 2,391,301 2,562,000
890,000 Aquila Inc.+ ..................... 3,080,330 3,204,000
4,000 Areva ............................ 1,690,915 1,920,277
33,000 Black Hills Corp. ................ 973,139 1,142,130
24,500 CH Energy Group Inc. ............. 1,079,930 1,124,550
24,000 Chubu Electric Power Co. Inc. .... 574,288 571,840
24,000 Chugoku Electric Power Co. Inc. .. 457,538 465,002
120,000 Cinergy Corp. .................... 4,899,525 5,095,200
95,000 CMS Energy Corp.+ ................ 647,475 1,378,450
45,000 Consolidated Edison Inc. ......... 1,958,936 2,084,850
55,000 Constellation Energy Group ....... 2,718,966 3,168,000
80,000 Duke Energy Corp. ................ 1,850,732 2,196,000
350,000 El Paso Corp. .................... 3,479,841 4,256,000
300 Electricite de France+ ........... 11,619 11,358
20,000 Empire District Electric Co. ..... 466,100 406,600
310,000 Endesa SA ........................ 7,889,024 8,154,901
100 Endesa SA, ADR ................... 2,535 2,601
130,000 Enel SpA ......................... 888,729 1,021,168
4,000 Energias de Portugal SA, ADR ..... 112,064 123,480
165,000 Energy East Corp. ................ 3,878,038 3,762,000
4,000 Entergy Corp. .................... 152,640 274,600
46,000 FirstEnergy Corp. ................ 1,679,999 2,253,540
48,000 Florida Public Utilities Co. ..... 578,609 655,200
90,000 Hawaiian Electric Industries Inc. 2,335,104 2,331,000
100,000 Hera SpA ......................... 174,312 267,264
12,000 Hokkaido Electric Power Co. Inc. . 238,323 244,202
24,000 Hokuriku Electric Power Co. ...... 442,615 474,160
2,000 Iberdrola SA ..................... 46,240 54,672
96,000 Kansai Electric Power Co. Inc. ... 1,925,246 2,063,510
65,000 Korea Electric Power Corp., ADR .. 995,553 1,266,850
24,000 Kyushu Electric Power Co. Inc. ... 503,470 520,965
34,000 Maine & Maritimes Corp. .......... 1,014,972 526,320
60,000 MGE Energy Inc. .................. 2,036,884 2,034,600
40,000 Mirant Corp.+ .................... 58,080 52,800
8,775 National Grid plc, ADR ........... 386,383 427,255
45,000 NiSource Inc. .................... 978,651 938,700
175,000 Northeast Utilities .............. 3,448,536 3,445,750
30,000 NorthWestern Corp. ............... 941,505 932,100
220,000 NSTAR ............................ 5,842,879 6,314,000
155,000 OGE Energy Corp. ................. 4,072,862 4,152,450
See accompanying notes to financial statements.
5
THE GABELLI UTILITIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2005
================================================================================
MARKET
SHARES COST VALUE
------ ---- -------
COMMON STOCKS (CONTINUED)
ENERGY AND UTILITIES: INTEGRATED (CONTINUED)
1,000 Ormat Technologies Inc. .......... $ 15,000 $ 26,140
45,000 Otter Tail Corp. ................. 1,215,287 1,304,100
28,000 PG&E Corp. ....................... 365,349 1,039,360
35,000 PPL Corp. ........................ 669,063 1,029,000
100,000 Progress Energy Inc. ............. 4,292,372 4,392,000
60,000 Public Service Enterprise
Group Inc. ..................... 3,171,922 3,898,200
80,000 SCANA Corp. ...................... 3,331,986 3,150,400
90,000 Scottish Power plc ............... 691,224 841,577
40,000 Scottish Power plc, ADR .......... 1,267,354 1,495,200
24,000 Shikoku Electric Power Co. Inc. .. 473,574 489,422
100,000 Southern Co. ..................... 3,266,525 3,453,000
61,600 Suez SA .......................... 2,025,376 1,916,545
61,600 Suez SA, Strips+ ................. 0 729
110,000 TECO Energy Inc. ................. 1,923,790 1,889,800
140,000 Tohoku Electric Power Co. Inc. ... 2,470,795 2,849,027
32,000 Tokyo Electric Power Co. Inc. .... 782,090 777,377
100,000 Vectren Corp. .................... 2,782,372 2,716,000
375,400 Westar Energy Inc. ............... 8,368,743 8,071,100
90,000 Wisconsin Energy Corp. ........... 3,011,927 3,515,400
65,000 WPS Resources Corp. .............. 3,517,205 3,595,150
210,000 Xcel Energy Inc. ................. 3,728,690 3,876,600
------------ ------------
114,840,938 122,907,472
------------ ------------
ENERGY AND UTILITIES: NATURAL GAS -- 9.5%
110,000 Atmos Energy Corp. ............... 2,971,308 2,877,600
22,000 Cascade Natural Gas Corp. ........ 453,329 429,220
40,000 Chesapeake Utilities Corp. ....... 1,034,330 1,232,000
20,000 Energen Corp. .................... 239,277 726,400
108,000 KeySpan Corp. .................... 4,031,040 3,854,520
48,000 Laclede Group Inc. ............... 1,452,380 1,402,080
95,000 National Fuel Gas Co. ............ 2,516,076 2,963,050
15,000 Nicor Inc. ....................... 388,552 589,650
120,000 ONEOK Inc. ....................... 3,032,879 3,195,600
48,000 Peoples Energy Corp. ............. 2,076,813 1,683,360
50,000 Piedmont Natural Gas Co. Inc. .... 1,197,837 1,208,000
50,000 SEMCO Energy Inc.+ ............... 283,846 281,000
2,000 Snam Rete Gas SpA ................ 10,804 8,222
30,000 South Jersey Industries Inc. ..... 833,463 874,200
75,000 Southern Union Co.+ .............. 1,417,820 1,772,250
201,600 Southwest Gas Corp. .............. 5,077,005 5,322,240
------------ ------------
27,016,759 28,419,392
------------ ------------
ENERGY AND UTILITIES: OIL -- 0.4%
3,000 Cooper Cameron Corp.+ ............ 103,313 124,200
6,000 Murphy Oil Corp. ................. 265,296 323,940
10,000 Transocean Inc.+ ................. 591,805 696,900
------------ ------------
960,414 1,145,040
------------ ------------
MARKET
SHARES COST VALUE
------ ---- -------
ENERGY AND UTILITIES: WATER -- 0.4%
3,000 American States Water Co. ........ $ 75,431 $ 92,400
4,000 Aqua America Inc. ................ 78,190 109,200
1,000 California Water Service Group ... 34,715 38,230
2,000 Consolidated Water Co. Ltd. ...... 40,211 40,580
5,333 Middlesex Water Co. .............. 91,735 92,474
20,000 Pennichuck Corp. ................. 364,494 408,800
7,000 SJW Corp. ........................ 267,511 318,500
2,000 Veolia Environnement ............. 68,803 90,545
1,100 York Water Co. ................... 20,544 28,435
------------ ------------
1,041,634 1,219,164
------------ ------------
ENTERTAINMENT -- 2.7%
50,000 Time Warner Inc. ................. 861,746 872,000
235,000 Vivendi Universal SA, ADR ........ 7,281,673 7,386,050
------------ ------------
8,143,419 8,258,050
------------ ------------
EXCHANGE TRADED FUNDS -- 4.1%
109,000 Utilities HOLDRs Trust ........... 12,541,145 12,426,000
------------ ------------
HEALTH CARE -- 0.0%
4,000 Tsumura & Co. .................... 101,665 110,569
------------ ------------
METALS AND MINING -- 0.1%
10,000 Compania de Minas
Buenaventura SA, ADR ........... 232,653 283,000
------------ ------------
TELECOMMUNICATIONS -- 6.5%
30,000 AT&T Inc. ........................ 745,230 734,700
40,000 BellSouth Corp. .................. 1,122,419 1,084,000
200 Hutchison Telecommunications
International Ltd.+ ............ 163 289
140,000 MCI Inc. ......................... 3,531,615 2,762,200
200 Mobistar SA ...................... 18,055 15,864
200 PT Indosat Tbk ................... 128 113
125,000 Sprint Nextel Corp. .............. 3,208,029 2,920,000
150,000 TDC A/S .......................... 8,850,083 8,985,243
600 Tele2 AB, Cl. B .................. 8,180 6,438
22,000 Telecom Italia SpA, ADR .......... 664,590 642,620
3,000 Telephone & Data Systems Inc. .... 118,920 108,090
4,500 Telephone & Data Systems Inc.,
Special ........................ 177,669 155,745
70,000 Telindus Group NV+ ............... 1,440,175 1,400,547
20,000 Verizon Communications Inc. ...... 710,900 602,400
------------ ------------
20,596,156 19,418,249
------------ ------------
WIRELESS COMMUNICATIONS -- 1.6%
15,000 America Movil SA de CV, Cl. L, ADR 253,766 438,900
17,000 China Mobile (Hong Kong) Ltd., ADR 304,837 408,680
17,000 China Unicom Ltd., ADR ........... 141,622 139,060
See accompanying notes to financial statements.
6
THE GABELLI UTILITIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2005
================================================================================
MARKET
SHARES COST VALUE
------ ---- -------
COMMON STOCKS (CONTINUED)
WIRELESS COMMUNICATIONS (CONTINUED)
2,000 Cosmote Mobile
Telecommunications SA .......... $ 36,556 $ 44,467
2,400 Mobile TeleSystems, ADR .......... 79,902 84,000
190 MobileOne Ltd. ................... 218 242
20,000 SK Telecom Co. Ltd., ADR ......... 423,463 405,800
200 SmarTone Telecommunications
Holdings Ltd. .................. 207 234
4,000 Telefonica Moviles SA, ADR ....... 43,860 41,840
65,000 United States Cellular Corp.+ .... 3,129,169 3,211,000
4,000 Vimpel-Communications, ADR+ ...... 123,051 176,920
1,000 Virgin Mobile Holdings plc ....... 4,222 6,486
------------ ------------
4,540,873 4,957,629
------------ ------------
TOTAL COMMON STOCKS .............. 263,587,424 282,579,021
------------ ------------
CONVERTIBLE PREFERRED STOCKS -- 0.7%
ENERGY AND UTILITIES: INTEGRATED -- 0.6%
800 El Paso Corp.,
4.990% Cv. Pfd. (a) ............ 758,731 881,832
15,000 Mirant Trust I,
6.250% Cv. Pfd., Ser. A+ ....... 432,655 802,500
------------ ------------
1,191,386 1,684,332
------------ ------------
TELECOMMUNICATIONS -- 0.1%
11,400 Cincinnati Bell Inc.,
6.750% Cv. Pfd., Ser. B ........ 477,317 433,770
------------ ------------
TOTAL CONVERTIBLE
PREFERRED STOCKS ............... 1,668,703 2,118,102
------------ ------------
PRINCIPAL MARKET
AMOUNT COST VALUE
------ ---- -------
CONVERTIBLE BONDS -- 0.8%
TELECOMMUNICATIONS -- 0.8%
$ 2,500,000 Nortel Networks Corp., Cv.,
4.250%, 09/01/08 ............... $ 2,370,776 $ 2,356,250
------------ ------------
U.S. GOVERNMENT OBLIGATIONS -- 4.5%
13,549,000 U.S. Treasury Bills,
3.790% to 3.998%++,
01/19/06 to 03/23/06 ........... 13,448,626 13,446,983
------------ ------------
TOTAL
INVESTMENTS -- 99.9% ........... $281,075,529 300,500,356
============
OTHER ASSETS AND LIABILITIES (NET) -- 0.1% ....... 254,935
------------
NET ASSETS -- 100.0% ............................. $300,755,291
============
- ----------------
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At December
31, 2005, the Rule 144A securities are considered liquid and the market
value amounted to $881,832 or 0.29% of total net assets.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR American Depository Receipt
See accompanying notes to financial statements.
7
THE GABELLI UTILITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
================================================================================
ASSETS:
Investments, at value (cost $281,075,529) ............ $300,500,356
Cash ................................................. 1,011
Dividends and interest receivable .................... 535,862
Receivable for Fund shares sold ...................... 1,527,452
Other assets ......................................... 10,621
------------
TOTAL ASSETS ......................................... 302,575,302
------------
LIABILITIES:
Foreign currency, at value (cost $129) ............... 130
Payable for Fund shares redeemed ..................... 1,086,894
Payable for investment advisory fees ................. 254,170
Payable for investments purchased .................... 227,109
Payable for distribution fees ........................ 123,332
Dividends payable .................................... 1,237
Other accrued expenses and liabilities ............... 127,139
------------
TOTAL LIABILITIES .................................... 1,820,011
------------
NET ASSETS applicable to 36,921,352
shares outstanding .................................. $300,755,291
============
NET ASSETS CONSIST OF:
Shares of beneficial interest, each class at
$0.001 par value .................................... $ 36,921
Additional paid-in capital ........................... 281,595,754
Accumulated distributions in excess of net
realized gains on investments and foreign
currency transactions ............................... (302,213)
Net unrealized appreciation on investments ........... 19,424,827
Net unrealized appreciation on foreign
currency translations ............................... 2
------------
NET ASSETS ............................................ $300,755,291
============
SHARES OF BENEFICIAL INTEREST:
CLASS AAA:
Net Asset Value, offering and redemption price per
share ($124,436,861 / 15,171,189 shares
outstanding; unlimited number of
shares authorized) .................................. $8.20
=====
CLASS A:
Net Asset Value and redemption price per share
($81,868,612 / 9,948,047 shares outstanding;
unlimited number of shares authorized) .............. $8.23
=====
Maximum offering price per share (NAV / 0.9425,
based on maximum sales charge of 5.75%
of the offering price) .............................. $8.73
=====
CLASS B:
Net Asset Value and offering price per share
($331,242 / 41,553 shares outstanding;
unlimited number of shares authorized) .............. $7.97(a)
=====
CLASS C:
Net Asset Value and offering price per share
($94,118,576 / 11,760,563 shares outstanding;
unlimited number of shares authorized) .............. $8.00(a)
=====
- -----------------
(a) Redemption price varies based on the length of time held.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
================================================================================
INVESTMENT INCOME:
Dividends (net of foreign taxes of $72,694) .......... $ 6,232,548
Interest ............................................. 794,949
-----------
TOTAL INVESTMENT INCOME .............................. 7,027,497
-----------
EXPENSES:
Investment advisory fees ............................. 2,105,194
Distribution fees - Class AAA ........................ 279,979
Distribution fees - Class A .......................... 108,521
Distribution fees - Class B .......................... 3,363
Distribution fees - Class C .......................... 547,832
Shareholder services fees ............................ 200,051
Shareholder communications expenses .................. 80,229
Registration fees .................................... 67,694
Custodian fees ....................................... 52,601
Legal and audit fees ................................. 39,794
Trustees' fees ....................................... 23,218
Miscellaneous expenses ............................... 66,628
-----------
TOTAL EXPENSES ....................................... 3,575,104
Less: Custodian fee credits .......................... (3,074)
-----------
TOTAL NET EXPENSES ................................... 3,572,030
-----------
NET INVESTMENT INCOME ................................ 3,455,467
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investments ..................... 2,222,716
Net realized loss on foreign currency transactions ... (184,099)
Net change in unrealized appreciation/
depreciation on investments and foreign
currency translations ............................... 5,375,503
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY .................... 7,414,120
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ..................................... $10,869,587
===========
See accompanying notes to financial statements.
8
THE GABELLI UTILITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------
OPERATIONS:
Net investment income ..................................................... $ 3,455,467 $ 1,161,129
Net realized gain on investments and foreign currency transactions ........ 2,038,617 163,412
Net change in unrealized appreciation/depreciation on investments and
foreign currency translations ........................................... 5,375,503 8,946,173
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................... 10,869,587 10,270,714
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class AAA ............................................................... (1,963,834) (1,083,750)
Class A ................................................................. (790,051) (39,396)
Class B ................................................................. (3,476) (5,664)
Class C ................................................................. (608,558) (32,816)
------------ ------------
(3,365,919) (1,161,626)
------------ ------------
Net realized gains
Class AAA ............................................................... (1,248,644) (125,338)
Class A ................................................................. (500,040) (4,556)
Class B ................................................................. (3,806) (655)
Class C ................................................................. (643,511) (3,795)
------------ ------------
(2,396,001) (134,344)
------------ ------------
Return of capital
Class AAA ............................................................... (8,083,619) (5,119,985)
Class A ................................................................. (3,233,617) (186,117)
Class B ................................................................. (27,148) (26,759)
Class C ................................................................. (4,569,578) (155,031)
------------ ------------
(15,913,962) (5,487,892)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ....................................... (21,675,882) (6,783,862)
------------ ------------
SHARES OF BENEFICIAL INTEREST TRANSACTIONS:
Class AAA ............................................................... 46,448,484 34,873,967
Class A ................................................................. 74,821,159 9,616,331
Class B ................................................................. 8,772 255,354
Class C ................................................................. 88,048,211 9,765,972
------------ ------------
NET INCREASE IN NET ASSETS FROM SHARES OF BENEFICIAL INTEREST TRANSACTIONS 209,326,626 54,511,624
------------ ------------
REDEMPTION FEES ........................................................... 20,804 4,853
------------ ------------
NET INCREASE IN NET ASSETS ................................................ 198,541,135 58,003,329
NET ASSETS:
Beginning of period ....................................................... 102,214,156 44,210,827
------------ ------------
End of period (including undistributed net investment income of
$0 and $0, respectively) ................................................ $300,755,291 $102,214,156
============ ============
See accompanying notes to financial statements.
9
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 statutory 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 commenced operations on August 31,
1999. The Fund's primary objective is to provide a high level of total return
through a combination of capital appreciation and current income.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with U.S. 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 or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board of Trustees (the "Board") so determines, by such other method as the Board
shall determine in good faith, to reflect its fair market value. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser").
Portfolio securities primarily traded on foreign markets are generally valued at
the preceding closing values of such securities on their respective exchanges or
if after the close of the foreign markets, but prior to the close of business on
the day the securities are being valued, market conditions change significantly,
certain foreign securities may be fair valued pursuant to procedures established
by the Board. Debt instruments with remaining maturities of 60 days or less that
are not credit impaired are valued at amortized cost, unless the Board
determines such amount does not reflect the securities' fair value, in which
case these securities will be valued at their fair value as determined by the
Board. Debt instruments having a maturity greater than 60 days for which market
quotations are readily available are valued at the average of the latest bid and
asked prices. If there were no asked prices quoted on such day, the security is
valued using the closing bid price. Futures contracts are valued at the closing
settlement price of the exchange or board of trade on which the applicable
contract is traded.
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. Fair valuation
methodologies and procedures may include, but are not limited to: analysis and
review of available financial and non-financial information about the company;
comparisons to the valuation and changes in valuation of similar securities,
including a comparison of foreign securities to the equivalent U.S. dollar value
ADR securities at the close of the U.S. exchange; and evaluation of any other
information that could be indicative of the value of the security.
10
THE GABELLI UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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 Adviser and reviewed by the
Board. 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 102% 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. At December
31, 2005, there were no open repurchase agreements.
FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
included in unrealized appreciation/depreciation on investments and foreign
currency translations. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
exchange contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts. At December 31, 2005, there were no open forward foreign exchange
contracts.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the current exchange
rates. Purchases and sales of investment securities, income and expenses are
translated at the exchange rate prevailing on the respective dates of such
transactions. Unrealized gains and losses that result from changes in foreign
exchange rates and/or changes in market prices of securities have been included
in unrealized appreciation/depreciation on investments and foreign currency
translations. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions, and the difference between the amounts of interest and
dividends recorded on the books of the Fund and the amounts actually received.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial trade date and subsequent sale trade date is
included in realized gain/(loss) on investments.
11
THE GABELLI UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
FOREIGN SECURITIES. The Fund may directly purchase securities of foreign
issuers. Investing in securities of foreign issuers involves special risks not
typically associated with investing in securities of U.S. issuers. The risks
include possible revaluation of currencies, the ability to repatriate funds,
less complete financial information about companies, and possible future adverse
political and economic developments. Moreover, securities of many foreign
issuers and their markets may be less liquid and their prices more volatile than
those of securities of comparable U.S. issuers.
FOREIGN TAXES. The Fund may be subject to foreign taxes on income, gains on
investments, or currency repatriation, a portion of which may be recoverable.
The Fund will accrue such taxes and recoveries as applicable, based upon its
current interpretation of tax rules and regulations that exist in the markets in
which it invests.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 15% of its net
assets in securities for which the markets are illiquid. Illiquid securities
include securities the disposition of which is subject to substantial legal or
contractual restrictions. The sale of illiquid securities often requires more
time and results in higher brokerage charges or dealer discounts and other
selling expenses than does the sale of securities eligible for trading on
national securities exchanges or in the over-the-counter markets. Restricted
securities may sell at a price lower than similar securities that are not
subject to restrictions on resale. Securities freely salable among qualified
institutional investors under special rules adopted by the Securities and
Exchange Commission ("SEC") may be treated as liquid if they satisfy liquidity
standards established by the Board. The continued liquidity of such securities
is not as well assured as that of publicly traded securities, and accordingly
the Board will monitor their liquidity.
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 on the accrual
basis. Premiums and discounts on debt securities are amortized using the
effective yield to maturity method. Dividend income is recorded on the
ex-dividend date except for certain dividends which are recorded as soon as the
Fund is informed of the dividend.
DETERMINATION OF NET ASSET VALUE AND CALCULATION OF EXPENSES. Certain
administrative expenses are common to, and allocated among, various affiliated
funds. Such allocations are made on the basis of each fund's average net assets
or other criteria directly affecting the expenses as determined by the Adviser
pursuant to procedures established by the Board.
In calculating net asset value ("NAV") per share of each class, investment
income, realized and unrealized gains and losses, redemption fees, and expenses
other than class specific expenses, are allocated daily to each class of shares
based upon the proportion of net assets of each class at the beginning of each
day. Distribution expenses are borne solely by the class incurring the expense.
CUSTODIAN FEE CREDITS. When cash balances are maintained in the custody account,
the Fund receives credits which are used to offset custodian fees. The gross
expenses paid under the custody arrangement are included in custodian fees in
the Statement of Operations with the corresponding expense offset shown as
"custodian fee credits".
12
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. Distributions to shareholders
are based on income and capital gains as determined in accordance with Federal
income tax regulations, which may differ from income and capital gains as
determined under U.S. 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 characterizations of distributions made by the Fund. Distributions
made in excess of current earnings and profits on a tax basis are treated as a
non-taxable return of capital. These book/tax differences are either temporary
or permanent in nature. To the extent these differences are permanent,
adjustments are made to the appropriate equity accounts in the period when the
differences arise. These reclassifications have no impact on the NAV of the Fund
and the calculation of net investment income per share in the Financial
Highlights excludes these adjustments. For the year ended December 31, 2005,
reclassifications were made to decrease accumulated net investment income by
$89,548 and decrease accumulated distributions in excess of net realized gain on
investments and foreign currency transactions by $2,047,324 with an offsetting
adjustment to additional paid-in capital.
The tax character of distributions paid during the years ended December 31, 2005
and December 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------
DISTRIBUTIONS PAID FROM:
Ordinary income
(inclusive of gains) ..................... $ 5,314,996 $1,295,970
Long-term gain .............................. 446,924 --
Non-taxable return of capital ............... 15,913,962 5,487,892
----------- ----------
Total distributions paid .................... $21,675,882 $6,783,862
=========== ==========
Since January 2000, the Fund has had a fixed distribution policy. Under the
policy, the Fund declares and pays monthly distributions from net investment
income, capital gains, and paid in capital. The actual source of the
distribution is determined after the end of the year. Pursuant to this policy,
distributions during the year were made in excess of required distributions. To
the extent such distributions were made from current earnings and profits, they
were considered ordinary income or long-term capital gains. The Fund's current
distribution policy may restrict the Fund's ability to pass through to
shareholders all of its net realized long-term capital gains as a Capital Gain
Dividend, subject to the maximum federal income tax rate of 15%, and may cause
such gains to be treated as ordinary income subject to a maximum federal income
tax rate of 35%. The Fund continues to evaluate its distribution policy in light
of ongoing economic and market conditions and may change the amount of the
monthly distributions in the future. The current annualized rate is $0.84 per
share.
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 (the "Code"). It is the policy of the Fund to comply with the
requirements of the Code applicable to regulated investment companies and to
distribute substantially all of its net investment company taxable income and
net capital gains. Therefore, no provision for Federal income taxes is required.
13
THE GABELLI UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
As of December 31, 2005, the components of accumulated earnings/(losses) on a
tax basis were as follows:
Net unrealized appreciation on investments
and foreign payables and receivables ....... $19,122,616
-----------
Total accumulated gain ....................... $19,122,616
===========
For the year ended December 31, 2005, the Fund utilized all of its net capital
loss carryforwards of $1,753,335.
The following summarizes the tax cost of investments and related unrealized
appreciation (depreciation) at December 31, 2005:
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
COST APPRECIATION DEPRECIATION (DEPRECIATION)
---- ------------- ------------ --------------
Investments .............. $281,377,742 $25,424,058 $(6,301,444) $19,122,614
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 its 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 affiliated persons of the Adviser. The
Adviser contractually agreed to waive investment advisory fees and/or reimburse
expenses of the Fund to the extent necessary to maintain the annualized total
operating expenses for Class AAA, Class A, Class B, and Class C at 2.00%, 2.00%,
2.75%, and 2.75%, respectively, of average daily net assets. The Fund is obliged
to repay the Adviser for a period of two fiscal years following the fiscal year
in which the Adviser reimbursed the Fund only to the extent that the operating
expenses of the Fund fall below 2.00%, 2.00%, 2.75%, and 2.75% of average daily
net assets for Class AAA, Class A, Class B, and Class C Shares, respectively. No
expense reimbursements were made by the Adviser during 2004 and 2005 and there
is no amount owed to the Adviser by the Fund at December 31, 2005.
4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the
"Plan") for each class of shares pursuant to Rule 12b-1 under the 1940 Act.
Gabelli & Company, Inc. ("Gabelli & Company"), an affiliate of the Adviser,
serves as distributor of the Fund. Under the Class AAA, Class A, Class B, and
Class C Share Plans, payments are authorized to Gabelli & Company at annual
rates of 0.25%, 0.25%, 1.00%, and 1.00%, respectively, of the average daily net
assets of those classes, the annual limitations under each Plan. Such payments
are accrued daily and paid monthly.
5. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for
the year ended December 31, 2005, other than short-term securities, aggregated
$252,405,989 and $32,673,663, respectively.
6. SHARES OF BENEFICIAL INTEREST. The Fund currently offers four classes of
shares -- Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares.
Class AAA Shares are offered only to investors who acquire them directly from
Gabelli & Company or through selected broker/dealers without a sales charge.
Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class B
Shares are subject to a contingent deferred sales charge ("CDSC") upon
redemption within six years of purchase and automatically convert to Class
A Shares approximately eight years after the original purchase. The applicable
CDSC is equal to a declining percentage of the lesser of the NAV per share at
the date of original purchase or at the date of redemption, based on the length
of time held. Class C Shares are subject to a 1% CDSC for one year after
14
THE GABELLI UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
purchase. Class B Shares are available only through exchange of Class B Shares
of other funds distributed by Gabelli & Company. The Board has approved Class I
Shares which have not been offered publicly.
Effective June 15, 2005, the Fund imposed a redemption fee of 2.00% on Class
AAA, Class A, Class B, and Class C Shares that are redeemed or exchanged on or
before the seventh day after the date of a purchase. (From November 1, 2004
through June 14, 2005, the Fund imposed a redemption fee on shares that were
redeemed or exchanged within the sixtieth day after the date of a purchase.) The
redemption fee is deducted from the proceeds otherwise payable to the redeeming
shareholders and is retained by the Fund. The redemption fees retained by the
Fund during the years ended December 31, 2005 and December 31, 2004 amounted to
$20,804 and $4,853, respectively.
The redemption fee does not apply to shares purchased through programs that the
Adviser determined to have appropriate short-term trading policies in place.
Additionally, certain recordkeepers for qualified and non-qualified retirement
plans that could not collect the redemption fee at the participant level due to
systems limitations have received an extension to implement such systems.
Transactions in shares of beneficial interest were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
CLASS AAA CLASS AAA
---------------------------- ---------------------------
Shares sold ....................................... 8,834,600 $ 75,021,712 6,962,962 $ 55,861,448
Shares issued upon reinvestment of dividends ...... 889,401 7,473,397 577,703 4,627,738
Shares redeemed ................................... (4,301,540) (36,046,625) (3,209,195) (25,615,219)
---------- ------------ ---------- ------------
Net increase .................................... 5,422,461 $ 46,448,484 4,331,470 $ 34,873,967
========== ============ ========== ============
CLASS A CLASS A
---------------------------- ---------------------------
Shares sold ....................................... 9,134,021 $ 78,169,512 1,196,763 $ 9,794,869
Shares issued upon reinvestment of dividends ...... 264,637 2,228,188 13,991 114,955
Shares redeemed ................................... (662,998) (5,576,541) (36,423) (293,493)
---------- ------------ ---------- ------------
Net increase .................................... 8,735,660 $ 74,821,159 1,174,331 $ 9,616,331
========== ============ ========== ============
CLASS B CLASS B
---------------------------- ---------------------------
Shares sold ....................................... 3,513 $ 29,937 37,151 $ 299,078
Shares issued upon reinvestment of dividends ...... 515 4,206 535 4,218
Shares redeemed ................................... (3,109) (25,371) (5,937) (47,942)
---------- ------------ ---------- ------------
Net increase .................................... 919 $ 8,772 31,749 $ 255,354
========== ============ ========== ============
CLASS C CLASS C
---------------------------- ---------------------------
Shares sold ....................................... 10,727,174 $ 89,787,941 1,213,943 $ 9,827,615
Shares issued upon reinvestment of dividends ...... 294,675 2,422,605 12,114 97,528
Shares redeemed ................................... (505,929) (4,162,335) (19,910) (159,171)
---------- ------------ ---------- ------------
Net increase .................................... 10,515,920 $ 88,048,211 1,206,147 $ 9,765,972
========== ============ ========== ============
7. TRANSACTIONS WITH AFFILIATES. During the year ended December 31, 2005, the
Fund paid brokerage commissions of $307,050 to Gabelli & Company. Gabelli &
Company has informed the Fund that it received commissions (sales charges and
underwriting fees) from investors on sales and redemptions of Fund shares during
the year ended December 31, 2005 in the amount of $503,467.
The cost of calculating the Fund's NAV per share is a Fund expense pursuant to
the Advisory Agreement between the Fund and the Adviser. During the year ended
December 31, 2005, the Fund reimbursed the Adviser $45,000 in connection with
the cost of computing the Fund's NAV, which is included in miscellaneous
expenses in the Statement of Operations.
15
THE GABELLI UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
8. CONCENTRATION RISKS. The Fund invests a high percentage of its assets in the
utilities sector. As a result, the Fund may be more susceptible to economic,
political, and regulatory developments, positive or negative, and may experience
increased volatility to the Fund's NAV and a magnified effect in its total
return.
9. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
10. OTHER MATTERS. The Adviser and/or affiliates have received subpoenas from
the Attorney General of the State of New York and the SEC requesting information
on mutual fund trading practices involving certain funds managed by the Adviser.
GAMCO Investors, Inc., the Adviser's parent company, is responding to these
requests for documents and testimony. On a separate matter, in September 2005,
the Adviser was informed by the staff of the SEC that the staff may recommend to
the Commission that an administrative remedy and a monetary penalty be sought
from the Adviser in connection with the actions of two of seven closed-end funds
managed by the Adviser relating to Section 19(a) and Rule 19a-1 of the 1940 Act.
These provisions require registered investment companies to provide written
statements to shareholders when a dividend is made from a source other than net
investment income. While the two closed-end funds sent annual statements and
provided other materials containing this information, the funds did not send
written statements to shareholders with each distribution in 2002 and 2003. The
Adviser believes that all of the funds are now in compliance. The Adviser
believes that these matters would have no effect on the Fund or any material
adverse effect on the Adviser or its ability to manage the Fund.
16
THE GABELLI UTILITIES FUND
FINANCIAL HIGHLIGHTS
================================================================================
Selected data for a share of beneficial interest outstanding throughout each
period:
INCOME
FROM INVESTMENT OPERATIONS DISTRIBUTIONS
------------------------------------------------- ----------------------------------------------
Net
Net Asset Realized and Total Net
Period Value, Net Unrealized from Net Realized
Ended Beginning Investment Gain/(Loss) on Investment Investment Gain on Return of Total
December 31 of Period Income (a) Investments Operations Income Investments Capital Distributions
- ----------- --------- ---------- -------------- ---------- ---------- ----------- --------- -------------
CLASS AAA
2005 $ 8.36 $0.15 $ 0.53 $ 0.68 $(0.15) $(0.09) $(0.60) $(0.84)
2004 8.03 0.15 1.02 1.17 (0.13) (0.02) (0.69) (0.84)
2003 6.96 0.14 1.77 1.91 (0.14) -- (0.70) (0.84)
2002 9.13 0.22 (1.55) (1.33) (0.22) -- (0.62) (0.84)
2001 11.72 0.11 (1.86) (1.75) (0.11) -- (0.73) (0.84)
CLASS A +
2005 $ 8.38 $0.16 $ 0.53 $ 0.69 $(0.15) $(0.09) $(0.60) $(0.84)
2004 8.06 0.19 0.97 1.16 (0.11) (0.01) (0.72) (0.84)
2003 6.96 0.13 1.81 1.94 (0.13) -- (0.71) (0.84)
CLASS B +
2005 $ 8.20 $0.08 $ 0.53 $ 0.61 $(0.09) $(0.09) $(0.66) $(0.84)
2004 7.96 0.08 1.00 1.08 (0.08) (0.01) (0.75) (0.84)
2003 6.96 0.12 1.72 1.84 (0.12) -- (0.72) (0.84)
CLASS C +
2005 $ 8.23 $0.09 $ 0.52 $ 0.61 $(0.09) $(0.09) $(0.66) $(0.84)
2004 7.98 0.11 0.98 1.09 (0.06) (0.01) (0.77) (0.84)
2003 6.96 0.08 1.78 1.86 (0.08) -- (0.76) (0.84)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------
Net Asset Net Assets Operating Operating
Period Value, End of Net Expenses Expenses Portfolio
Ended Redemption End of Total Period Investment Net of Before Turnover
December 31 Fees(a) Period Return++ (in 000's) Income Reimbursements Reimbursements Rate
- ----------- ---------- -------- -------- ----------- ---------- -------------- -------------- --------
CLASS AAA
2005 $0.00(b) $8.20 8.4% $124,437 1.79% 1.50% 1.50% 18%
2004 0.00(b) 8.36 15.6 81,471 1.85 1.82 1.82(c) 17
2003 -- 8.03 29.5 43,526 1.92 2.00 2.00 39
2002 -- 6.96 (15.1) 13,215 2.91 2.00 2.64 41
2001 -- 9.13 (15.4) 9,727 1.02 2.00 2.49 110
CLASS A +
2005 $0.00(b) $8.23 8.5% $ 81,869 1.88% 1.50% 1.50% 18%
2004 0.00(b) 8.38 15.4 10,165 2.30 1.82 1.82(c) 17
2003 -- 8.06 29.9 307 1.67 2.00 2.00 39
CLASS B +
2005 $0.00(b) $7.97 7.6% $ 331 1.01% 2.25% 2.25% 18%
2004 0.00(b) 8.20 14.5 333 1.08 2.57 2.57(c) 17
2003 -- 7.96 28.4 71 1.72 2.75 2.75 39
CLASS C +
2005 $0.00(b) $8.00 7.6% $ 94,118 1.14% 2.25% 2.25% 18%
2004 0.00(b) 8.23 14.6 10,245 1.33 2.57 2.57(c) 17
2003 -- 7.98 28.7 307 1.11 2.75 2.75 39
- --------------------
+ Class A, B, and C Shares commenced operations on December 31, 2002.
++ 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 and does not reflect applicable sales
charges.
(a) Per share data is calculated using the average shares outstanding method.
(b) Amount represents less than $0.005 per share.
(c) Under an expense deferral agreement with the Adviser, the Fund repaid the
Adviser $66,719 during 2004, representing previously reimbursed expenses
from the Adviser. During the fiscal year ended December 31, 2004, had such
payment not been made, the expense ratio would have been 1.71%, 1.71%,
2.46% and 2.46% for Class AAA, Class A, Class B, and Class C, respectively.
See accompanying notes to financial statements.
17
THE GABELLI UTILITIES FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
===============================================================================
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 schedule of investments, as
of December 31, 2005, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. 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
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (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. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2005, by correspondence with the Fund's
custodian and brokers. We believe that our audits provide 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 at December 31, 2005, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the periods
indicated therein, in conformity with U.S. generally accepted accounting
principles.
/s/ ERNST & YOUNG, LLP
Philadelphia, Pennsylvania
February 14, 2006
18
THE GABELLI UTILITIES FUND
ADDITIONAL FUND INFORMATION (UNAUDITED)
================================================================================
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees. Information pertaining to the Trustees and officers of
the Fund is set forth below. The Fund's Statement of Additional Information
includes additional information about The Gabelli Utilities Fund Trustees and is
available, without charge, upon request, by calling 800-GABELLI (800-422-3554)
or by writing to The Gabelli Utilities Fund at One Corporate Center, Rye, NY
10580-1422.
TERM OF NUMBER OF
NAME, POSITION(S) OFFICE AND FUNDS IN FUND
ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE TIME SERVED 2 BY TRUSTEE DURING PAST FIVE YEARS HELD BY TRUSTEE 4
- -------------- ------------ ---------------- ---------------------- -------------------
INTERESTED TRUSTEES 3:
- ----------------------
MARIO J. GABELLI Since 1999 24 Chairman of the Board and Chief Executive Director of Morgan Group
Trustee Officer of GAMCO Investors, Inc. and Holdings Inc.
Age: 63 Chief Investment Officer - Value (holding company)
Portfolios of Gabelli Funds, LLC and GAMCO
Asset Management Inc.; Chairman and Chief
Executive Officer of Lynch Interactive
Corporation (multimedia and services)
NON-INTERESTED TRUSTEES:
- ------------------------
ANTHONY J. COLAVITA Since 1999 34 Partner in the law firm of --
Trustee Anthony J. Colavita, P.C.
Age: 70
VINCENT D. ENRIGHT Since 1999 14 Former Senior Vice President and Chief Director of Aphton
Trustee Financial Officer of KeySpan Energy Corporation
Age: 62 Corporation (biopharmaceuticals)
MARY E. HAUCK Since 2000 3 Retired Senior Manager of the Gabelli O'Connor --
Trustee Fixed Income Mutual Funds Management Company
Age: 63
WERNER J. ROEDER, MD Since 1999 23 Director of Lawrence Hospital and
Trustee practicing private physician
Age: 65
OFFICERS:
- ---------
BRUCE N. ALPERT Since 2003 -- Executive Vice President and Chief Operating
President and Treasurer Officer of Gabelli Funds, LLC since 1988 and
Age: 54 an officer of all of the registered investment
companies in the Gabelli Funds complex. Director
and President of Gabelli Advisers, Inc. since 1998.
JAMES E. MCKEE Since 1999 -- Vice President, General Counsel and Secretary
Secretary of GAMCO Investors, Inc. since 1999 and GAMCO
Age: 42 Asset Management Inc. since 1993; Secretary of
all of the registered investment companies in the
Gabelli Funds complex.
PETER D. GOLDSTEIN Since 2004 -- Director of Regulatory Affairs for GAMCO Investors, Inc.
Chief Compliance Officer since 2004; Chief Compliance Officer of all of the registered
Age: 52 investment companies in the Gabelli Funds complex;
Vice President of Goldman Sachs Asset Management from
2000 through 2004.
- -------------------
1 Address: One Corporate Center, Rye, NY 10580 1422, unless otherwise noted.
2 Each Trustee will hold office for an indefinite term until the earliest of
(i) the next meeting of shareholders, if any, called for the purpose of
considering the election or re-election of such Trustee and until the
election and qualification of his or her successor, if any, elected at such
meeting, or (ii) the date a Trustee resigns or retires, or a Trustee is
removed by the Board of Trustees or shareholders, in accordance with the
Fund's By-Laws and Agreement and Declaration of Trust. Each officer will hold
office for an indefinite term until the date he or she resigns or retires or
until his or her successor is elected and qualified. Effective November 16,
2005, Mr. Karl Otto Pohl resigned from the Board of Trustees and now serves
as Trustee Emeritus.
3 "Interested person" of the Fund as defined in the Investment Company Act of
1940. Mr. Gabelli is considered an "interested person" because of his
affiliation with Gabelli Funds, LLC which acts as the Fund's investment
adviser.
4 This column includes only directorships of companies required to report to
the SEC under the Securities Exchange Act of 1934 (i.e. public companies) or
other investment companies registered under the 1940 Act.
19
THE GABELLI UTILITIES FUND
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
FAX: 914-921-5118
WEBSITE: WWW.GABELLI.COM
E-MAIL: INFO@GABELLI.COM
Net Asset Value available daily by calling
800-GABELLI after 6:00 P.M.
BOARD OF TRUSTEES
Mario J. Gabelli, CFA Mary E. Hauck
CHAIRMAN AND CHIEF FORMER SENIOR PORTFOLIO MANAGER
EXECUTIVE OFFICER GABELLI-O'CONNOR FIXED INCOME
GAMCO INVESTORS, INC. MUTUAL FUND MANAGEMENT CO.
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
Bruce N. Alpert James E. McKee
PRESIDENT AND TREASURER SECRETARY
Peter D. Goldstein
CHIEF COMPLIANCE OFFICER
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.
- --------------------------------------------------------------------------------
GAB470Q405SR
[GRAPHIC OMITTED]
TRIANGLE ART
THE
GABELLI
UTILITIES
FUND
ANNUAL REPORT
DECEMBER 31, 2005
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report,
has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are
employed by the registrant or a third party, and that relates to any
element of the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are
employed by the registrant or a third party, that relates to one or
more of the items set forth in paragraph (b) of this item's
instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's Board of
Trustees has determined that Vincent D. Enright is qualified to serve as an
audit committee financial expert serving on its audit committee and that he is
"independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$30,500 in 2005 and $20,300 in 2004.
AUDIT-RELATED FEES
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $0 in 2005 and $0 in 2004.
TAX FEES
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $3,600 in 2005 and $3,400
in 2004.
Tax fees represent tax compliance services provided in connection with
the review of the Registrant's tax returns.
ALL OTHER FEES
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are
$0 in 2005 and $0 in 2004.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pre-Approval Policies and Procedures. The Audit Committee
("Committee") of the registrant is responsible for pre-approving (i)
all audit and permissible non-audit services to be provided by the
independent auditors to the registrant and (ii) all permissible
non-audit services to be provided by the independent auditors to the
Adviser, Gabelli Funds, LLC, and any affiliate of Gabelli Funds, LLC
("Gabelli") that provides services to the registrant (a "Covered
Services Provider") if the independent auditors' engagement related
directly to the operations and financial reporting of the registrant.
The Committee may delegate its responsibility to pre-approve any such
audit and permissible non-audit services to the Chairperson of the
Committee, and the Chairperson must report to the Committee, at its
next regularly scheduled meeting after the Chairperson's pre-approval
of such services, his or her decision(s). The Committee may also
establish detailed pre-approval policies and procedures for
pre-approval of such services in accordance with applicable laws,
including the delegation of some or all of the Committee's
pre-approval responsibilities to the other persons (other than Gabelli
or the registrant's officers). Pre-approval by the Committee of any
permissible non-audit services is not required so long as: (i) the
aggregate amount of all such permissible non-audit services provided
to the registrant, Gabelli and any Covered Services Provider
constitutes not more than 5% of the total amount of revenues paid by
the registrant to its independent auditors during the fiscal year in
which the permissible non-audit services are provided; (ii) the
permissible non-audit services were not recognized by the registrant
at the time of the engagement to be non-audit services; and (iii) such
services are promptly brought to the attention of the Committee and
approved by the Committee or Chairperson prior to the completion of
the audit.
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) of this Item that were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) N/A
(c) 100%
(d) N/A
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was zero percent (0%).
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen
by another investment adviser), and any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant for each of the last two fiscal years of
the registrant was $68,600 in 2005 and $68,400 in 2004.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's Board of Trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these
controls and procedures required by Rule 30a-3(b) under the 1940 Act
(17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the
Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) The Gabelli Utilities Fund
--------------------------------------------------------------------
By (Signature and Title)* /s/ Bruce N. Alpert
-------------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date March 8, 2006
----------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Bruce N. Alpert
-------------------------------------------------------
Bruce N. Alpert, Principal Executive Officer &
Principal Financial Officer
Date March 8, 2006
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.